For backround you should have read Going Offshore: Is It For You?, or be familiar with the uses and workings of trusts. If you came to this page from off-site: Our basic service includes an offshore trust sited in Belize that we call the “W.I.L. Trust”.
Contents
W.I.L. Trust Structure, PartiesTrust Types
- Please summarize the nature of the W.I.L. Trust.
- Who are the actual parties to a W.I.L. Trust?
- Did the Settlor actually put any funds into the Trusts?
- How do I know I can really trust the Trustee?
- Please say more about the Beneficiary.
- What about a Protector?
- What, legally speaking, is a client’s relationship to a W.I.L. Trust?
Trust Administration, Operation
- I have heard great things about so-called pure, contract, common law, Constitutional, you-name-it, etc. trusts. Are they really as effective at protecting assets and saving taxes as some advocates suggest?
- Is employing the legal mechanism of a Foreign “non-Grantor” Trust with a charitable beneficiary the most efficient way to achieve basic asset protection and privacy benefits?
Taxes
- How do I transfer funds into a trust? Would this be a reportable transfer?
- In what legal form should a transfer be?
- How do I access moneys due to me from a Trust?
- Would disbursements from a Trust be taxable?
- Is it possible for a WIL Trust to participate in Network Marketing/Multilevel business opportunities or otherwise own or operate an active business?
Offshore Issues
- Can a W.I.L. Trust, or any offshore trust, be used to avoid taxes?
- How can a W.I.L. Trust be used to actually defer taxes, in practice?
- If all that I am really interested in is setting up an offshore nestegg and letting the income accumulate tax deferred, why not just buy an offshore annuity?
Investing Trust Assets
- I have heard about the OECD “Blacklist”. What is this and how does it affect WIL’s ability to service and protect its clients?
- You (and others) mention other offshore structures such as International Business Corporations (IBCs). Where can I get in touch with a supplier of these structures?
- How safe is it to put money into offshore banks and brokerages?
- As a trust advisor, are there any interesting alternative options to investing trust assets in a bank account that I should be aware of?
- I have been considering participation in high yield investment programs (HYIPs) or other forms of offshore investment, some of which accept funding solely via e-currency. Would it be possible to participate in such opportunities via a WIL trust if I am concerned about my personal privacy and do not wish to participate directly?
Note: Links to outside organizations will open a page in a new window.
Q: Please summarize the nature of a W.I.L. Trust.
A: A W.I.L. Trust is a Foreign “non-Grantor” Trust with a charitable beneficiary. It is a private agreement between an offshore settlor and an offshore trustee (see following question), drawn up in conformance with the Belize Trust Act of 1992. Belize is the legal venue of the contract, and the Belize courts would have jurisdiction over disputes involving the contract. W.I.L. trusts are not recorded, thus no public record of the Settlor, Beneficiary, Trustee, other parties to the contract, or trust activity exist.
Q: Who are the actual parties to a W.I.L. Trust?
A: The parties named in the Trust document --
Trustee : Wealth International Management, Inc.
Beneficiary : The New Eden Foundation
Legal domicile of the trust : Belize.
Q: Did the Settlor actually put any funds into the Trusts?
A: The trusts were started with property of nominal value, in accordance with the trust instrument. Subsequent funding can be done by anyone, subject to Trustee approval, as gifts, loans, or other arrangements. Note that one cannot “invest” in a trust the way one could with a stock company (corporation). The concept does not apply to a trust.
Q: How do I know I can really trust the Trustee?
A: This is definitely an issue you should resolve to your reasonable satisfaction prior to becoming a client. Just a quick scan through the news digest items, searching for headline key words such as “scam” and “fraud”, will quickly convince (or remind) you of this. If you were not recommended to us by a source that you already trust then you should do some research. You may contact us via phone or via email, and a W.I.L. representative will call you back, if that is what you request. You can also start by entrusting Wealth International with a small amount of funds until you are comfortable with our service and honesty.
While we believe the legal foundations of our services are exceptionally sound, their practical effectiveness in providing asset protection and other benefits depends critically on our conduct. (It also depends critically on the client’s conduct.) We have seen too many instances where people attempt to protect their assets from legal judgements or the IRS by moving their assets offshore, and end up losing it all to a fraudulent or incompetent operator. They may as well have taken their chances with the onshore thieves -- at least there was not a 100% chance of losing everything.
Q: Please say more about the Beneficiary.
A: The New Eden Foundation is a private non-profit entity, without ties to political or religious organizations. The Foundation is established with the objective of promoting, developing, executing, and administering projects with environmental, social, and public benefits in Panama and other parts of the world, especially those pertaining to agricultural sustainability, sustainable housing and living environments, and the development of new technologies that lend themselves to planetary sustainability.
Q: What about a Protector?
A: It is possible to include a client-specified Protector in a custom trust document. Some caution is definitely called for. Since the Trustee can be fired at will by the Protector, the Protector could be claimed to have substantive control of the trust. This, in turn, could overturn most of the benefits that arise from setting up a trust in the first place. Keep in mind, here and with any offshore financial services provider, that if a trustee or other party who has access to a trust’s funds is truly dishonest then the ability of a protector to step in and assert control of the situation is of limited value. By the time the Protector has effectively fired the dishonest parties and taken control, there will probably not be much left to control.
Q: What, legally speaking, is a client’s relationship to a W.I.L. Trust?
A: Relative to the Trust document, he/she is a nonentity. The Trustee may hire a client as an advisor to a Trust. This would be accomplished using a separate contract and the relationship would not be covered or disclosed in the Trust document itself. Legal structures aside, the basic relationship is between the principals and employees of Wealth International, Limited and the client. This is where one’s attention is appropriately focused.
Q: I have heard great things about so-called pure, contract, common law, Constitutional, you-name-it, etc. trusts. Are they really as effective at protecting assets and saving taxes as some advocates suggest?
A: Some have suggested that since pure, nonstatutory, trusts do not derive from specific acts of legislation, but rather are contracts in trust form, and the right to make contracts is a natural right that precedes the creation of the U.S. government, that they are therefore not regulateable and taxable by the federal government. (Similar reasoning has been applied in other countries as well.) Some argue that Article 1, Section 10 of the Constitution of the United States, which explicitly says that no State shall pass any law “Impairing the Obligation of Contracts”, provides further protection. Article 1, Section 10 also says that no State shall “make any Thing but gold and silver Coin a Tender in Payment of Debts”, and we know how closely that has been followed! Thus point #1; Government employees have shown no particular proclivity towards following “the rules” (Constitution, statutes, regulations, past court rulings, etc.) even when they “swear” that they will.
To those who actually want to try this route, well, we wish them good luck. ... Please let us know how it works out. You can follow whatever legal theory you wish, but we recommend that you consider your available remedies should someone in a position of power disagree with or overtly ignore your theories, however well reasoned. It is prudent to assume that a given judge will not rule in your favor on this type of matter. If your property can be seized or controlled you are starting from a position of weakness, not strength. A domestic U.S. trust, with a tax I.D. for opening bank accounts, that does not file a tax return may eventually come under scrutiny. The scrutinizer may well scoop up whatever assets he/she can first and ask questions, to the trustee or whomever, later. Or, if the existence of the trust, tax I.D. or not, should be discovered during legal proceedings, a court could order a freeze on all trust assets. We advocate using offshore trusts that have no reporting requirements specified in the Internal Revenue Code and where tax consequences can be minimized, as explained here. In the event of a controversy, then at least the assets are not in quick reach of government agents or courts and negotiations can be conducted without the threat of immediate expropriation hanging in the air. In general, consider the idea that legal theories are not something that are “true” or “false”, but rather are or are not able to be efficiently argued and defended. As the classic cynical question asks: “How much justice can you afford?”
Q: Is employing the legal mechanism of a Foreign “non-Grantor” Trust with a charitable beneficiary the most efficient way to achieve basic asset protection and privacy benefits?
A: The “WIL Way” is hardly the only way, given the huge number of laws and available vehicles out there. Some of these will be quite costly and not appropriate for most people. We only think that we have come up with a relatively low-cost approach that will work as presented. For any alternative you consider, ascertain whether it fulfills the following conditions: 1.) Solid legal foundation, 2.) Cost effective, 3.) Assets are legally sited offshore to the extent physically feasible, 4.) Assets are truly insulated from legal judgements against you, 5.) Privacy is maximized through minimal legal reporting and filing requirements, and 6.) Is operationally practical.
Q: How do I transfer funds into a trust? Would this be a reportable transfer?
A: First off, the concept of transferring funds “into” a trust is not quite correct. Think of a trust as a human being and your thinking on the matter will be clearer. A transfer to a trust, as a step in a contract with the trust, is accomplished the same as would a transfer to any other party anywhere in the world. In this case the transfer is to a bank, brokerage, or other account specified by the Trustee and understood by you. Transferring funds to a foreign charitable trust is not generally a reportable event. If you want to avoid having the transfer tracked then you need to use alternatives to checks and bank wires, such as international money orders.
Q: In what legal form should a transfer be?
A: A loan gives you the most protection. With a loan (promissory note) you have a legal agreement from the Trust and Trustee to pay you back your principal and interest earned. An exchange of property, e.g., cash, for a note of equal value would not be a taxable transaction. The loan would be a private agreement, and thus would not be in Big Brother’s databases. Note that making a gift to the trust could have you construed as the trust’s creator in some circumstances, an event that you definitely want to avoid. Making a gift and then later receiving a gift from the same entity would certainly raise a few eyebrows.
Q: How do I access moneys due to me from a Trust?
A: All disbursements from the Trust are completely at the discretion of the Trustee, absent a specific agreement. If you have a compensation-for-services agreement with the trust, or have made a loan to the Trust where a payment is coming due, then, of course, the Trustee must comply with the terms of the contract. Absent such a contractual agreement, you can make a request (not a demand, claim, offer, etc.) to the Trustee for a disbursement from the trust, such as a gift. This can be done via fax, secure e-mail, or post. The operational possibilities that derive from a client’s relationship with a trust is a deep subject. A piece to start the thinking process is presented here.
Q: Would disbursements from a Trust be taxable?
A: This is a conclusion you must formulate based on your own reading of the tax code, and the advice of people you trust. Our nonprofessional opinion is that a U.S. taxpayer should declare all disbursements, except those funds that constitute either a return of principal (from a loan) or a legitimate gift, as income. In countries, unlike the U.S., where income earned from nondomestic sources is not necessarily taxable, the taxability of the disbursement may be contingent on the specifics of the transfer.
Q: Is it possible for a WIL Trust to participate in Network Marketing/Multilevel business opportunities or otherwise own or operate an active business?
A: While it is not theoretically a violation of the trust indenture for a WIL trust to operate a business, it is generally less complicated to run an active business through a corporation rather than a trust, and participation in active business activities is one of the reasons one would form an offshore corporation, as discussed in “To IBC or not to IBC”.
That being said, if the business is based in the United States (as most network marketing businesses are), it is often either difficult or impossible to run the business via a foreign entity, and is not at all tax advantageous to do so. However, it is possible and often advantageous for an offshore entity, whether a WIL Trust or an IBC, to have equitable ownership of a business based in the United States. In such cases the business would normally best be run via an LLC or C-corporation based in one of the 50 States, and the offshore entity would own a percentage of the membership interest or corporate shares in the U.S.-based entity.
If you feel that this strategy might be appropriate for you, please contact us for further information and/or discussion.
Q: Can a W.I.L. Trust, or any offshore trust, be used to avoid taxes?
A: If you are a U.S. taxpayer, it is a good idea to assume that a relationship with an offshore trust will not generate any tax savings in and of itself unless you have definitive evidence to the contrary -- which we cannot supply. If you legally configure your business in certain ways, access to a variety of tax savings devices becomes available, and offshore structures can be used to great effect in this process. In fact, companies that -- sometimes controversially -- make use of just such devices after moving part of their operations offshore have made the news frequently in the last couple of years. However, this would almost always involve using more than just a single offshore trust. Clearly, we believe strongly in the asset protection benefits of offshore trusts and other offshore structures. The reasons for going offshore include the fact that in practice, there is more to consider than just theory.
We think that an alternative question, “Can I use the W.I.L. Trust to create more of what I am committed to providing to the world?”, deserves an affirmative answer. Once a W.I.L. Trust has access to funds, the assets can grow tax free and then be donated to causes of your choice, in a greater amount than would be the case without the trust. This is due to the power of compounding, among other reasons. Going offshore allows new ways of thinking, and focusing on just whether additional money will pass through one’s hands unnecessarily constrains the thought process.
Q: How can a W.I.L. Trust be used to actually defer taxes, in practice?
A: There is more than one way, in practice, to accomplish this. One example is that you make a loan to a trust and the loan document is written such that the timing of interest payments prior to the loan’s maturity is within the discretion of the Trustee, and thus the interest is not taxable until it is actually paid to a taxpayer, to the best of our knowledge. The interest owed and the backing assets can build up untaxed until paid out, similar to some annuity products. We address this question further below.
Q: If all that I am really interested in is setting up an offshore nestegg and letting the income accumulate tax deferred, why not just buy an offshore annuity?
A: As of April 7, 1995 the annual income on a fixed return foreign annuity contract is taxable. Thus, the theoretical benefits of such a strategy have been impaired. A foreign annuity can still provide valuable asset protection benefits, but, if its income is reported every year then, ipso facto, the annuity’s existence is known and the benefits accruing from privacy are certainly compromised.
Q: I have heard about the OECD “Blacklist”. What is this and how does it affect WIL's ability to service and protect its clients?
A: This initiative is important as an example of the ongoing war on financial privacy and freedom. The OECD (Organization for Economic Cooperation & Development) initiative differs in degree but not in kind compared to past attacks on people's privacy and freedom, and has had the effect of essentially removing certain countries, such as the Bahamas, from the offshore financial services industry. There are many links to news items related to this subject on our Offshore News Digest Pages that we suggest you check out to fully acquaint yourself with the issues. The thrust/counterthrust between the parties on the two sides of the issue is ongoing. A comprehensive set of links related to the subject is available at the Center for Freedom and Prosperity’s Tax Competition Information Center.
To summarize: In 2000 the 29 industrial OECD nations released a report titled “Towards Global Tax Cooperation” that claimed that low-tax nations are bad for the world economy and identified 35 nations who are guilty of “harmful tax competition”. The plan was to coerce nations practicing “harmful tax competition” to cease this through various economic means. Strong opposition to the initial plan formulation resulted in its evolution into a battle over “information exchange”, determining conditions under which it is legitimate for governments to suspend financial privacy and divulge confidential information to other governments. In the words of a June 2001 quote of a U.S. Treasury Department spokesperson: “The U.S. reiterated our position about refocusing the project solely on the need for appropriate information exchange in order to prevent tax evasion.” In the aftermath of the September 11, 2001 terrorist attacks the rhetoric against offshore privacy has intensified further, as is amply evident from looking at the stream of headlines on the news digest pages.
The battlefront between the seekers of and aggressors against liberty will never be static. It has not been a good idea for quite some time now to rely on secrecy to keep financial activities private. But if Belize, or any country that has a W.I.L. Trust investment account in its jurisdiction, complies with a request to supply information on an account holder, then what would the requesting agent find out? Trust parties and location, but not the names of WIL clients, with documents and investment accounts have been set up in accordance with existing laws. We do not expect the job of protecting client interests will be getting any easier. If we begin to suspect that the jurisdictions that we now rely upon no longer adequately defend our clients we do have contingency plans. The alternatives would be more expensive to use, and thus are not our first choice.
Q: You (and others) mention other offshore structures such as International Business Corporations (IBCs). Where can I get in touch with a supplier of these structures?
A: We can supply IBC’s or Foundations, upon the request of a client, at a very reasonable price. Other services offered are enumerated on this page.
Q: How safe is it to put money into offshore banks and brokerages?
A: In the business sense of the question, as long as funds are put into large, well-known banks and brokerages, we think that generally it is quite safe. Most instances where funds suddenly (nonfraudulently) evaporate occur when the funds were invested in smaller, more obscure entities. Outside the U.S. there are no insurance funds like FDIC or SPIC, and thus no compensation mechanisms that kick in if, say, a bank or brokerage’s asset values suddenly shrink due to bad loans or investments or a liquidity problem. In the offshore financial arena, one should not act is if there is some agency in the background who will shield one from one’s misassessments -- there is no such agency. That is why we will carefully assess the strength of any financial institutions that we contemplate using for the safekeeping of funds.
We discern a genuine upside to the lack of an FDIC-like entity for offshore banks. If an offshore bank’s management intends that the bank survive and prosper then they must earn the trust of their depositors by prudently managing their balance sheets and businesses, by being careful about to whom they make loans, by effectively managing the maturity of the loan portfolio versus their deposits, and by maintaining liquidity in order to service the cash demands of their depositors. They do not have the dubious benefit of a ready supply of uninformed customers who believe that the government will step in and bail them out if their investment (deposit) proves to have been unwise. In the event of a general financial system liquidity crisis we believe that the FDIC’s reserves would prove to be totally inadequate, while strong foreign banks, who are used to having to live without the back door of last-resort access to goverment funds, would show themselves to be better prepared for such a crisis than their U.S. counterparts.
Q: As a trust advisor, are there any interesting alternative options to investing trust assets in a bank account that I should be aware of?
A: Alternative, higher potential return, investment opportunities will be made available (to the trusts and other offshore entities) as we discover and thoroughly scrutinize different offerings that come to our attention. One thing we promise you from the start is that we will never attempt to earn a high spread for ourselves by investing assets entrusted to us by clients in some high risk venture while only paying bank deposit-like rates back in return. The trust fund reinvestment process will be transparent to trust advisors. We are inclined to be conservative in appraising opportunities. Dreams of big returns that turned to dust, with principal losses of 100% due to mismanagement or fraud, have occurred with sobering frequency. Having said that, we will not treat our clients like children by adopting an SEC-like attitude of forbidding them from crossing the figurative street. We will, however, advise them to “look both ways” first. If we find an investment with a favorable risk/reward ratio, where the funds can be adequately protected from non-investment loss, then we will disclose the opportunity to the advisors, accompanied by as complete an assessment of it as we are able to render.
Q: I have been considering participation in high yield investment programs (HYIPs) or other forms of offshore investment, some of which accept funding solely via e-currency. Would it be possible to participate in such opportunities via a WIL trust if I am concerned about my personal privacy and do not wish to participate directly?
A: The Trustee has accounts at, or the ability to make transfers denominated in, many different e-currencies, including e-Bullion, e-dinar, and Pecunix, and can arrange transfers via these currencies – after conversion of national currencies into the e-currency of choice net of fees. This would obviate the need for an Advisor to establish an e-currency account in his or her own name.
In such cases, however, the trust would be the actual owner of the investment account rather than the advisor, as the trust cannot serve as a mere alter-ego. Further, we strongly advise that when providing investment recommendations to the Trustee, advisors seriously consider these wise investment considerations and be aware of the general rule that if something sounds too good to be true, it probably is.
Disclaimer: We are not legal advisors and do not give legal or accounting advice. We recommend that you consult with a competent professional advisor when appropriate.
