Monthly Archives: March 2013

Why should you worry about asset protection?

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DisasterTrain-e1338163025954Bad things can happen to good people. We work hard, do the right things, and yet things can happen that can ruin everything. Sometimes it’s not our fault, and sometimes it is, but all the same a single mistake can take everything you have. A few things that can destroy everything you have been working for, and leave you and your family with nothing:

    • Simple business transactions that have been entered into time and time again without problem can become disaster due to unexpected changed conditions outside our control.
    • Errors in judgment regarding simple matters that seem unimportant at the time.
    • Business partners that turn out to be untrustworthy.
    • Mistakes committed by family and/or friends (or perhaps even by yourself).
    • Family problems.
    • Driving an automobile (even when you are insured and “protected”).
    • Business transactions with trusted friends executed with a handshake.
    • Just plain bad luck.

I have found that very smart people often don’t like thinking about what can go wrong. This is a big mistake. It is very important that you review the possible risks you face in your personal and business life. It is important that you be realistic about these risks. What are some of the “worst-case” scenarios that could happen to you?

Once this is done it is possible to determine what you need to do in order to protect your assets and insure that you and your family are protected. Not everyone is the same. Not everyone needs the same level of protection. It is for this reason that I created the Wealth Preservation Fortress®. It is modular system so that each person receives the customized care he or she needs and the protection he or she deserves without having to reinvent the wheel each and every time.

If you have any questions please do not hesitate to contact me, or you can simply request a copy of my free ebook “Building Your Wealth Preservation Fortress®.

How and Why an International Privacy Trust can Help You!

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privacyI often advise clients to use an “International Privacy Trust” to own the business entities they form in order to provide them with greater asset protection, tax planning, and financial privacy. But I also tell them, “The only thing you want to do with the International Privacy Trust is to have it passively own the shares in those companies; no bank accounts, no contracts, no financial transactions, etc.”

This seems to cause a lot of confusion, “If the International Privacy Trust is so great, why don’t we use that instead of the US LLC, UK LP, or Belize IBC?”

A good question.

Without going into complicated legal issues it is important to understand that the “Trust” was developed through a totally different legal process than was the “Company”. Trust Law is different than Corporate Law. There are different rules that apply, and things are interpreted differently.

For example: If you set up a Trust, and you name yourself to an important position in the Trust, or in some way just maintain effective control over the officers of the trust, there is a real risk that the entire trust will be set aside as a “grantor’s trust” or worse a “sham entity”. However, if you set up a company, you can be the sole shareholder, sole officer, sole employee, chief bottle-washer, etc. and have no such problems.

Again, this is because a Trust is treated differently than a Company. This does not mean the Trust is not useful; it is very useful. It simply means you must be cautious in how you use the Trust.

A Trust is very helpful in providing arms-length ownership of assets that you want removed from your estate. A Trust is very helpful at providing added privacy and confidentiality. With careful design and execution, the Trust can be a very helpful tool.

In order to avoid the charge that the Trust is a grantor’s trust, which will result in negative tax implications, (at least under “common law” jurisdictions) certain precautions need to be taken. The client cannot be the Trustee, Sole Protector, Beneficiary, etc. of a Trust. The client also needs to be at “arms-length” distance from the Trust in all transactions; that is the client cannot have effective day-to-day control of the Trust despite what the paperwork says. By limiting what the Trust actually does, this risk is lowered, and hopefully eliminated.

Another risk is the accusation that the Trust is just the “alter-ego” of the client, or a “sham entity” which will result in the entire Trust being set aside. Again, this is when the client for one reason or another is deemed to have effective day-to-day control over the actions of the Trust. Again, limiting the actions of the Trust to only passive actions such as holding shares in business entities removes this as a reasonable risk to be concerned about.

So, I advise my clients to have an International Privacy Trust that DOES NOTHING OTHER THAN own the shares of the business entity they establish. The client gets the benefit of having an effective Trust that removes the assets from his or her estate thereby providing legal and legitimate asset protection and tax benefits, but can still take an active role in the business with the business entity which is owned by the Trust. This is often referred to as a “hybrid” entity approach.

If you have any questions, please feel free to contact me.