© Copyright 2000 Wealth International, Ltd.
NOTE: This report is presented with the understanding that the publisher is not engaged in rendering legal or accounting services. Questions relevant to the specific tax, legal, and accounting needs of the reader should be addressed to practicing members of those professions. This information was gathered from sources believed to be reliable but it can not be guaranteed insofar as it applies to any particular taxpayer. Wealth International, Limited specifically disclaims any liability, loss, or risk, personal or otherwise, incurred as a consequence directly or indirectly of the use and application of any of the techniques or contents of this report. No copies of this material may be made or redistributed without the express written consent of Wealth International, Ltd.
Why go offshore?:
Perhaps first and foremost, because you still can. If the economic crisis that we foresee is indeed a reasonably imminent possibility, then you need to insure against its effects before the fact. In particular, its effects could include a prohibition against moving your wealth offshore.
Even if the situation manages to (miraculously) avoid deteriorating into crisis mode, your wealth is coveted by governments or politically-connected groups who seemingly are not guided by any moral principles, in a system that has made it expedient for them to successfully go after it.
You have a deep-seated objection to having your personal financial affairs be an open book to anyone who gets the notion to “take a peek”.
There are two distinct venues used for establishing legal entities such as trusts and companies, or their equivalents:
Domestic: established within the United States or the country in which one is a citizen and/or resident.
Foreign: established outside the legal jurisdiction of the U.S or one’s citizenship/residence country.
“Going Offshore”, in the sense used in this report, means placing a meaningful portion of one’s assets in an offshore legal entity (placing assets offshore in your name offers no essential advantage over leaving them onshore, in our view). Well-structured trusts, companies, and combinations thereof, domiciled in well-chosen foreign jurisdictions have some advantages, including:
No taxes are assessed against income earned by foreign (nonresident alien) owned companies domiciled in the tax haven country as long as the income is from sources without the country. If such income is not subject to U.S. taxes then the income can accumulate tax-deferred until remitted to a taxable U.S. entity.
Secrecy laws protect the records of selected individuals and companies doing business in the country. (Recently the U.S. and other developed country governments have bribed, blackmailed and otherwise forced most former tax haven countries to agree to cooperate more closely with future investigations. Secrecy, to the extent it really existed beforehand, was decidedly diminished. The care and effort required to achieve privacy in the face of this is greater than before. The value of following the rules correctly, never small, has increased.)
Legal judgments from other jurisdictions, such as the U.S., attempting to attach assets located in the country are not recognized by their court systems (in line with the caveat immediately above and previous warnings, this protection is relative, not absolute).
Investment and business opportunities forbidden to U.S. citizens become available.
W.I.L. Trusts are sitused in Belize, an English-speaking country with a modern financial services sector located in northern Central America. Belize does not impose taxes on profits from exempt trusts or corporations. The criteria for exemption are easily fulfilled by nonresidents of Belize. There is no requirement in Belize trust law that a trust be registered in any way for it to be considered legally domiciled in Belize. More information on the virtues of Belize as a trust jurisdiction (and visitor destination!) is provided in Appendix 2.
Threat from judgments, liens and seizures can be diminished or eliminated.
Impounding or freezing of bank and other financial accounts can be avoided.
Greatly enhanced privacy.
Assets can be isolated from domestic economic disturbances and controls.
Tax reduction and/or deferral.
Probate and estate/inheritance taxes can be reduced to the vanishing point.
Shifting or upstreaming business profits from the U.S. to the low/no-tax country becomes possible.
Above can be achieved while continuing to manage and use the assets.
What do you get in exchange for a lifetime of working and paying huge taxes? The statistics are that the majority of all U.S. retirees wind up being dependent on Social Security to stay out of poverty. In this situation Uncle Sam is truly your master. Social Security is not a fund, nor a valid legal contract, but merely a continuing resolution to keep taxing one group of people and to pay the proceeds out to another group. This “guarantee” will continue for exactly as long as it remains politically viable. It is a flimsy foundation for your financial well being. However, if you managed to save only $5,000 in taxes per year and invested it at 15% per year within a tax-deferred vehicle, then your asset base would quickly grow.
$5000 per year in tax savings earning a 15% rate of return and invested using a vehicle that allows for tax deferral grows to $122 thousand in 10 years, while in 20 years the additional accumulation amounts to $594 thousand, as shown in the diagram on the right. And in 25 years there is a total of $1.23 million more than there would have been in the absence of any tax savings. Obviously if you save more and earn still higher investment returns then the numbers look even better. Your cumulative tax savings grow so large so fast because of the power of compound growth in combination with a structure that provides tax deferral. Saving taxes using the vehicles and techniques outlined herein is a simple and effective way to build your family’s wealth. Why is stopping you from starting today?
Going offshore is legal
Just raising the subject of offshore trusts and foreign bank accounts to the typical United States or Canadian resident mechanically calls forth questions of legality and conjures up images of money laundering, drug dealers, shady con artists, and, especially today, shadowy and lethal terrorist organizations. As we know all too well, such people exist. But they are not the dominant players in the offshore arena. The North American governments have obviously been successful at instilling fear, uncertainty and doubt (FUD) in the minds of their citizens. The objective of the casting of suspicion on things offshore is to keep their citizens’ assets where the government can monitor, tax, and grab them. Or to put it more succinctly, to control. But fear and doubt fade when one develops knowledge of the actual laws, begins to think more globally, and starts conducting business with others around the world. As in all of life, what was once novel becomes routine with repeated exposure. Having a bank account or other structure offshore is PERFECTLY LEGAL. The only imperative is that you report those offshore activities where a legal reporting requirement exists. Offshore trusts and other legal entities can be structured and managed so that you end up with very few or no reporting requirements.
Tax avoidance, deferral, and reduction is legal
There is a difference between tax evasion, and tax reduction, tax deferral, and tax avoidance. The IRS and its acolytes try to blur the distinction, and indeed the line can be fine in practice, but understand this well: Tax avoidance is a legal principal, and is engaged in by every business that avails itself of its legal deductions. Tax avoidance is using the rules to your advantage. Tax evasion is to use extralegal means to not pay the tax authorities what you owe (e.g., by intentionally hiding and understating income, or overstating deductions). Setting up your affairs to minimize your taxes and taking every tax deduction that is consistent with the tax code and regulations is 100% LEGAL. Do not be dissuaded. To say otherwise in “mere cant”, as Judge Learned Hand stated in the landmark case of Gregory v. Helvering:
“Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”
Some other cases and citations highlighting the well-documented legal right of every American to structure his or her financial affairs in conformance with the tax code so as to minimize his or her tax liability include:
U.S. taxpayers may also use tax havens for tax planning reasons. Some transactions conducted through tax havens have a beneficial tax result for U.S. taxpayers that is completely within the letter of the U.S. tax laws. [Federal Tax Guide Reports in official IRS Agents Manual]
“Taxpayers are not required to continue that form of organization which results in the maximum tax.” [Raymond Pearson Motor Company v. Commissioner, 246 F 2d 509 (1957)]
“A pure trust is still legal, even if formed for the express purpose of avoiding taxation.” Weeks v. Sibley, (D.C.) 269 F. 155
Supreme Court Justice Louis Brandeis drew an instructive analogy that illuminates the legalities of the difference: “Where I live in Alexandria, Virginia, near the Supreme Court building there is a toll bridge across the Potomac River. When in a rush I pay the toll and get home early. However I usually drive outside the downtown section of the city, and cross the Potomac on a free bridge. If I went over the toll bridge and through the toll without paying I would be guilty of tax evasion. However, if I go the extra mile and drive outside the city of Washington to the free bridge, I am using a legitimate, logical and suitable method of tax avoidance. And, I am providing a useful social service as well.”
Living within the letter of the law is tax reduction, tax deferral, and/or tax avoidance. Pay your taxes, but do not pay more than you are legally obligated to pay!
Asset protection is in your – and everyone’s – best interest
In protecting your assets you ensure that the assets are used productively by serving your voluntarily chosen beneficiaries and purposes. In addition you prevent the assets from being used destructively or counterproductively by a wasteful government, or from being taken by the next person playing the litigation lottery. Unnecessarily ceding your assets to the government or the undeserving litigant is neither virtuous nor patriotic, but rather subtracts from overall social well-being.
Lenin cynically said the capitalist would sell you the rope with which you plan to hang him. In a similar vein, governments – which are well stocked with people who actually still believe in Lenin’s malign theories – will take from you the resources with which they plan to enslave you. Think about that!
The rules may change but the existence of opportunities will remain
Before examining or implementing offshore strategies a good question to ask is whether their effectiveness might be nullified by changing laws. There is certainly no shortage of measures, old and new, attempting to do exactly that. Ultimately we do not know what the future will bring. We do monitor the rule changes ongoingly to see whether we should discard or alter our tactics and strategies. The following reasoning leads us to expect that the savings and protection provided by the strategies will remain available via some mechanism or other:
1.) While the U.S. Government regards its residents and citizens as captive cows to be milked, it cannot be so contemptuous with regard to foreign sources of capital. At this point they finance the huge U.S. trade and government deficits, and thus the (unsustainable, in our opinion) current U.S. consumption level. To nonresident foreigners the U.S. is a low tax jurisdiction, and must remain that way to encourage them to keep financing these deficits. Thus the favorable treatment afforded to foreign entities cannot be summarily withdrawn.
2.) Powerful groups and classes of people and corporations have benefited for decades from the laws underlying the strategies. If their privileged status is to continue, while the pretense that we live under the impartially administered rule of law remains, then the substance, if not the exact letter, of the laws must stay intact.
Finally, we reiterate that however depressing the prospects for achieving true freedom might look right now, doing nothing is a bad alternative to doing something intelligent. The world is a dynamic place and cultivating a proactive mindset brings benefits well beyond the financial.
People who have worked and saved to accumulate what they have and are willing to invest a little effort towards protecting it as well. Specific individuals who benefit from using an offshore structure include:
People seeking international investment opportunities
Artists and Inventors
Holders of copyrights, patents, and trademarks
Families wishing to establish family and charitable trusts
Business Owners and Professionals
People seeking to build an asset base for retirement
People who prefer to keep their financial affairs private
People desiring to reduce or defer tax liabilities
Importers and exporters
Professionals working abroad
In general, anyone who has accumulated assets worth protecting and developing and does not want to sit around like a sheep waiting to be shorn.
Napolean said he would rather have a general who is lucky than one who is smart. So we wish you, and all of us, good luck. We will be needing it.
For specifics on the Wealth International, Limited trust please proceed to Appendix 1.
For more information on Belize and its merits as a trust jurisdiction proceed to Appendix 2.
We have published and will continue to publish periodic short “Asset Protection 101” articles on asset protection issues and philosophy. The subject matter is more general than offshore strategies and topics as such. Those articles are accessible from this page.
We have published several other background technical reports, accessible here. In partular, the article on contracts conveys aspects of the W.I.L. mode of operation vis a vis our clients. The article on offshore myths and misconceptions attempts to deconstruct and eviscerate a few of the claims made with regard to the offshore financial domain.
For details on certain aspects of the W.I.L. Trust’s setup, administration, and ancillary issues proceed to the Questions & Answers page.
To obtain a representative sampling of recent business, tax, legal, privacy, and background articles pertinant to the world of offshore finance, we recommend our W.I.L. Offshore News Digest.
To start educating yourself about the economic and financial opportunities and dangers facing the world today, the W.I.L. Finance Digest is a great place to start!
And of course we would like to be in business with anyone of high integrity and good character. The process of becoming a client begins here.
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