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OFFSHORE AND ASSET PROTECTION GUIDE 1
Disclaimer
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TABLE OF CONTENTS
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A Proper Strategy Can Cut Your Taxes Up To 50% And Keep You
From Losing Your Family Nest Egg
In this report you will learn how a proper strategy can help you:
1. REDUCE YOUR SMALL BUSINESS INCOME TAXES UP TO 50%!
2. REDUCE SELF EMPLOYMENT TAXES!
3. ENJOY TAX FREE COMPOUND GROWTH OF INVESTMENTS!
4. SELL PROPERTY AND DEFER YOUR CAPITAL GAINS TAX!
5. PROTECT YOUR HOME, cash, investment real estate, stocks and
bonds, life insurance, gold and silver, commodities and virtually
anything of value!
6. REDUCE OR ELIMINATE EXPENSIVE LIABILITY INSURANCE
PREMIUMS!
7. AVOID ESTATE TAXES, death taxes, and inheritance taxes, also avoid
costly probate!
8. PROTECT A BUSINESS OR OTHER EXPENSIVE ASSETS FROM
DIVORCE!
9. BECOME A MILLIONAIRE THROUGH TAX SAVINGS ALONE.
10. PASS ON EVERY PENNY OF FAMILY NEST EGG TO YOUR HEIRS!
11. Run your business in COMPLETE PRIVACY, without registering the
directors or shareholders with any state agency if your business is
organized as a Business Trust.
Trust Introduction
Many of these strategies utilize trusts, not alone, but in combination with
corporations, limited liability companies, etc. You most likely know what a
corporation is, but what is a trust?
To state it in the simplest terms, "A trust is a right of property, real or
personal. held by one party for the benefit of another."
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But the Business Trust described in this book is not the same as the
traditional "Massachusetts-type" business trust. Due to changes in the tax laws
since the 1930's, and due to the rise of a great deal of statute law regulating
many aspects of both the corporation and the traditional Massachusetts
business trust, the use of the Business Trust described in this book has required
several modifications in order to achieve all of the desired benefits. A properly
constructed Business Trust of the type described in this book, established for the
purpose of operating an on-going business, must possess several
characteristics.
A Business Trust must
be a non-grantor trust
formed under the common-
law and Constitutional right
of contract. Most trusts
formed by attorneys today
are statutory in nature and
mainly fall in the category
of Grantor Trust, primarily
because most attorneys
and accountants do not
receive training in Business
Trusts and therefore do not
understand them. As I
mentioned before, the last
known school course
covering common law
business trusts was offered
by the University of
Oklahoma in 1954, and no
other known courses have
been offered in the United
States since that time. Good consulting professionals have been able to learn
their business trust skills through personal contact and training with highly
experienced attorney mentors, some of whom have been utilizing the Business
Trust as a tax saving and asset protection tool for their clients.
Today's Pure Business Trust must avoid those "corporate attributes" which
would cause it to be treated and taxed like a corporation under statutory
provisions regulating corporations. The four (4) main "corporation attributes" are:
(1) centralized management; (2) continuity of life; (3) limited personal liability of
trustees; and (4) easy transferability of beneficial interest in the trust. If the trust
possesses any three (3) of these attributes, it will be taxed as a corporation . As
long as a Business Trust established to operate a business does not have the
"attributes "of a corporation (or an old-style Massachusetts-type trust) as
discussed in treasury regulation 301.7701-2 it will not be treated or taxed like a
corporation.
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By taking advantage of legal loopholes you will have a $121,746 nest egg in
10 years. In 20 years you will have $594,050. In 25 years you will have
$1,228,559 or over one million dollars from Invested tax savings alone. If you
save even more, and get even higher investment returns like many of our other
clients you could quickly achieve total financial independence and end up with a
small fortune. Your yearly tax savings grow so large so fast because of the
power of compound growth. Also, investments will grow and compound almost
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Summary
You now know that:
A Business Trust is a LEGAL business entity
A Business Trust can be utilized along with corporations,
partnerships, etc. to: PROTECT ASSETS AND REDUCE TAXES
AND INCREASE PRIVACY
You have also read in this book that TAXES on business profits CAN BE
CUT BY AS MUCH AS HALF (50%) or more, by using a Business Trust along
with other structures to: "GET TAX FREE FRINGE BENEFITS" AND/OR
"SPLIT INCOME" AND/OR "UPSTREAM PROFITS"
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planning. This same professional can instead split this same income between
himself, his wife, his children and even a family corporation using the L.L.C.-trust
combination so that the combined tax burden is reduced to only $19,500.
Business income taxes can sometimes be cut by as much as half with this
strategy.
Self Employment or Social Security Taxes, the largest burden on many
small business persons,
are also reduced
significantly because the
income received by you
and your family members
via the trust is not
considered self
employment income by the
Internal Revenue Service,
therefore no self
employment taxes are
payable on this income. A
instant tax savings of
15.3%.
Tax savings can be
even higher than 50%
when utilizing a tax saving
strategy known as "Profit
Upstreaming". Profit
Upstreaming means to shift
profits from a high tax state
or country to a company in
a low or no tax state or
country. Profit Upstreaming
is most useful when income is high and more significant tax savings is desired,
or the business person does not have very many family members to split income
between. Profit Upstreaming can also provide better asset protection and
privacy advantages.
Many professionals such as physicians, dentists, chiropractors, attorneys,
CPA's, insurance brokers/agents, etc. run their businesses as Professional
Service Corporations. These are usually small to medium sized businesses and
are closely held (i.e., no publicly offered shares). We could include in this group
many other small to medium size professional corporations such as Sub-
Chapter S corporations, that are closely held. In terms of professional liability
protection, estate planning, and tax management, this form of business
organization offers very limited benefits. How could such corporations benefit by
adding one or more business trusts or other structures?
The corporation could divest itself of all real estate and business equipment
by putting any buildings owned into a separate L.L.C.-trust combination business
structure, and then lease the property or business equipment back from the
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L.L.C.. Remember: "They can't take what you don't own!". A physician, dentist,
chiropractor or other medical professional, for example might place all
professional equipment (x-rays, ultra-sounds, microscopes, lab equipment,
examination tables, etc.) into one L.L.C.-trust combination for leasing business
equipment. He might then place all other office equipment (desks, typewriters,
computers, fax machines, filing cabinets, etc.) into a separate L.L.C.-trust
combination for office equipment.
As the beneficiaries of the trust or member/partners of the limited liability
company the corporation, you, or your family members could receive the profits
generated from the leasing operation. Again, Taxes are reduced by splitting
income between family members or companies in low tax or no tax brackets, or
profits can be upstreamed to a company in a low or no tax jurisdiction. If the
property or equipment is owned by a corporation in tax free Nevada, all of the
profits generated by the leasing operation can avoid state income taxes.
Finally the corporation itself could continue to function, receiving payments,
hiring employees, paying bills, etc., but would own few assets (the usual targets
of liability proceedings), leasing its necessary property and equipment from the
various independent L.L.C.-trust business combinations.
Please note that both the business trust and the limited liability company
can be utilized to provide some level of protection to assets, but far better
protection of assets and tax savings result from using the trust and limited
liability company in combination. The numerous asset protection and tax savings
advantages of utilizing business structures that combine trusts with L.L.C.'s, or
even trusts combined with corporations for that matter, can be clarified in your
free initial consultation, which is yours within 30 days of receiving this book.
An individual or company might require only a single L.L.C./trust
combination. But a dry cleaning business with several locations and a small fleet
of vehicles might need to place each location into a separate L.L.C./trust. A hotel,
for example, might consider placing the bar, restaurant, pool area, and even its
parking lot each into separate L.L.C. (a strategy in liability management that has
been very successful) as a means of either protecting an asset or separating
and isolating a potential liability.
Another popular asset protection strategy among clients is to place real
estate into a limited liability company that has a FOREIGN ASSET
PROTECTION TRUST as a member/partner. This strategy is tax neutral
provides no tax savings), but it allows you to maintain legal control and use of
the property, while the majority of legal ownership of the property rests in a
foreign country that does not recognize U.S. judgments, making it very
frustrating and expensive for anyone who desires to take property from you.
Important protection to assets is always added by using a foreign trust or foreign
corporation in your strategy since the right foreign country will not recognize U.S.
judgments.
SHOULD YOU USE A FOREIGN ASSET PROTECTION STRATEGY?: Be
aware that many of your fellow U.S. citizens are rapidly moving a portion of their
assets to the safety of foreign trusts and/or corporations because of the alarming
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increase in property seizures and forfeitures taking place in the United States.
Federal forfeitures alone have taken over $2.5 billion from U.S. citizens since
1985. State and local governments have seized billions more, and it's not just
from drug dealers. Thousands of honest, private citizens have been victims.
According to the nationwide newspaper USA Today, these billions can be taken
without charging or convicting anyone of a crime, which is exactly what happens
in 80% of the cases. Maybe you should play it safe, and have an offshore nest
egg as well!
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or tax free country. State and federal taxes are reduced today and can be
invested on a tax deferred basis worldwide in this manner (when properly done).
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Look at the following three typical family businesses (a married couple with
two children one under 14 and one over 14) that each worked hard and made a
net profit of $50,000.
FAMILY 2: Net Profit = $50,000 (the smarter family - used income splitting)
Profit Paid To: $25,000 paid to husband and wife as self employment
income.
$25,000 split between children in family trust.
Taxes Paid: $3,532 in self employment taxes
$4,076 in federal taxes
$1,085 in state taxes
-$677 earned income credit
$8,016 = Total taxes paid in 1996 (they saved $4,
734 or 37% on taxes)
Profits Paid To: $25,000 paid to husband and wife as self employment
income.
$10,000 split between children in family trust.
$15,000 upstreamed to a private family foundation or a
foreign company to accumulate safe from lawsuits on a tax-
deferred basis.
Taxes Paid: $3,532 in self employment taxes
$2,407 in federal taxes
$641 in state taxes
-$697 earned income credit
$5,883 = Total taxes paid in 1996 (they saved $6,
867 or 54% on taxes)
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Income Splitting is very common, but are the Profit Upstreaming strategies
legal?
Yes! All strategies recommended to clients are 100% legal and safe ways to
reduce taxes and have been used by clients to successfully save hundreds of
thousands of dollars in taxes for years. We can provide you the name and
telephone number of an attorney or accountant who does understand this
complex area of law and who will discuss specific laws, I.R.S. codes, and
relevant court rulings that make these strategies legal and safe.
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records like any good business person. You can even have an expert outside
accountant do routine audits of your books and company minutes to insure that
you have done everything properly.
When you run your affairs properly, the I.R.S. can't touch you.
You can save thousands, or hundreds of thousands of dollars in taxes
every year. Is that worth the small possibility that you might be audited someday
and have to spend a couple of days showing proof of your legal business
deductions with an experienced recommended attorney or accountant at your
side? You decide.
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strategy. Even if your current advisor has been practicing for many years he may
not have specialized training or knowledge in international upstreaming
strategies. He is only human, and may not want to admit his lack of knowledge in
order to protect his credibility and reputation. Instead of admitting his lack of
experience with L.L.C.'s, trusts, and/or profit up streaming, he may just tell you
that it is unsafe or not recommended, without pointing out a specific law that
proves his point. Proper strategies have been reviewed by top tax attorneys and
respected tax accountants, who are available for consultation and legal opinions
that support these strategies. If your advisor cares more about YOU than his
future fees and if he is true to his code of ethics, he will admit that he is not
familiar with these strategies, or admit that one or more of these strategies could
have saved you thousands of dollars year after year on your taxes. Our clients
often ask their advisors "Why didn't you tell me this years ago?"
Conclusion
There is a difference between tax evasion (which we do not recommend)
and TAX AVOIDANCE (which we as professionals recommend highly) TAX
AVOIDANCE is legal and done daily by every business that takes advantage of
it's legal deductions.
Tax evasion: Understating or Hiding Income is illegal
BUT
Tax Avoidance: Setting up your affairs to minimize your taxes, and taking
every legal business tax deduction IS 100% LEGAL.
Every person has the well documented legal right to structure a transaction
so that it satisfies the requirements of the Internal Revenue Code in order to
minimize his tax Liablilty:
1) Judge Learned Hand stated in the landmark case of Gregory V.
Helvering: "Anyone may arrange his affairs that his taxes shall be as
low as possible; he is not bound to choose that pattern which will
best pay the treasury; there is not even a patriotic duty to increase
one's taxes."
2) 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)]
3) "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 I.R.S. Agents
Manual
Exercising this right within the "letter of the law" is "Tax avoidance" and is
100% legal. PAY YOUR TAXES, BUT DO NOT PAY MORE THAN YOU ARE
LEGALLY REQUIRED TO PAY!
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By Keith Anderson
The road to Financial Freedom is not difficult nor can it be easy, but I must
say that it is fun. There are simple yet important steps necessary to retain one's
freedom:
1. Financial Freedom:
To be free means that you own your labor, that you receive your full pay and
you decide how it is spent. It means that you do not report all of your personal
financial information to governmental employee hireling servants who reserve
the right to give your personal financial information to foreign governments if they
choose to do so. The rule of law to follow, is that you owe nothing to the
government as long as you receive nothing therefrom.
Just having a Social Security number is a benefit making you eligible for
benefits from your employee hireling servants and subjects you to their will. A
disgusting thought isn't it? So, if you wish to be free you must be totally and
absolutely free from all privileges offered by the government. That means you
absolutely must close down everything associated with the Social Security
Number, cancel it, and send it back to the source you received it from and never
use the number again for anything. Trusts are great transitional tools to assist
you with this transition.
2. Ownership of property:
Whoever owns the gold makes the rules. In order to be free from licensing
and other regulatory privileges you must learn how to own property and that
means learning how to control property. It is not ownership when someone else
is telling you how you can and cannot use the property and you are required to
pay them a fee to use it. Registration of property paces that property in the
government employee hirelings' trusteeship. You have a right to revoke that
trusteeship if you are free and not a slave. In Washington there is a statute
providing for the termination of trusteeships and power of appointment (ROW
11.95). This statute will be found in the "revised" codes of each state, patterned
from the federal Uniform Commercial code of Washington (ROW's). Your state
will be something different. You will find that statute in your state's version of the
Uniform Commercial Code by doing a word search of: "Powers of Appointment,"
or "Releases."
Use this power to terminate all powers asserted by another to control
property in your use. To be totally free you must own your body and your
property, not just think you own it. The following information is provided to assist
those who wish to move toward the direction of freedom.
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often ignored. To sum it up, statutory law regulates those things government
creates or benefits -- all else is under common law.
Contract Law
"Liberty," as protected by due process in the Fifth Amendment to the
Constitution for the United States of America, has been held to denote not
merely freedom from bodily restraint, but also the right of the individual to
CONTRACT. Article One, Section 10 of the constitution also supports this right.
This protects our God-given Rights to engage in any of the common occupations
of life, to acquire useful knowledge, to marry, establish a home and bring up
children, to worship according to the dictates of one's own conscience, and
generally to enjoy those privileges long recognized at common law as being
essential to the orderly pursuit of happiness of free and natural individuals
moreover, one can rely upon the body of the Constitution for the United States of
America, Article One Section 10, which gives one an unalienable right to enter
into a contract when it states, "No State shall pass any Bill of Attainder, ex post
facto Law, or Law impairing the Obligation of Contracts." Conversely, the Right of
contract also allows us the Right not to contract.
All of the various States of the United States, save and except for the state
of Louisiana, have founded their legal system from the common law of England,
and have adopted its rule of "stare decisis," under which unwritten law is made
through case law decisions. Because the F.E.T. evolved from contract law and
common law, there then must be an unalienable right to use them freely. This
trust does not engage in interstate commerce per the commerce clause, Article
1, Section 8, Clause 3, United States Code.
Advantages of the Free Enterprise Trust
The F.E.T. does not act as agent or bailee, for hire, for owners of property
but owns and controls its assets through its trustees, who keeps controlling
minutes of their actions. These written minutes become part of the trust
indenture. The trust is not, in any sense of the word, under an agency or
bailment agreement, such as those used by banks.
An entity can transfer or sell property, real, personal or mixed, to a F.E.T.
Such property after transfer, is thereby protected from personal liabilities,
probate, and death taxes, if the F.E.T. is properly established, and properly
administered. A F.E.T. owns its assets in "fee simple," Bouchard v First Peoples
trust 148 NE 895, meaning that the whole title, both legal and equitable to all the
Trust Estate shall be vested in the Trustees.
Creation and Application of the Free Enterprise Trust
This type of trust may be established as a foreign, Common Law Trust or
Foreign, Offshore Common Law Trust. The participants of the Free Enterprise
trust typically include a Trustor, Beneficiaries, Trustee(s), and oftentimes
additional officers, treasure/Accountant and Secretary, etc. The Trustor initially
grants or exchanges the Trustor's property (real, personal, or both) for F.E.T.
Certificates. After the initial exchange, the Trustee is under no obligation to the
Trustor. It is agreed by the parties that the Trust transaction is neither a gift or a
sale. The Trustees and their successors as the Board of trustees, are
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1. Introduction
The use of domestic asset protection techniques, such as the family limited
partnership and the
domestic corporation, may he sufficient for some clients, however, the
additional use or the laws of foreign jurisdictions is by far the most advanced
form of asset protection.
In particular, the foreign asset protection trust (FAPT), used alone or in
conjunction with the family limited partnership or the offshore or domestic
corporation, can be an extremely effective asset protection structure. The foreign
asset protection trust is similar to a common law trust in which there is a trustor,
trustee and beneficiaries. With the foreign asset protection trust, the trust is
settled in a jurisdiction which has favorable asset protection legislation, such as
the Cook Islands and the Republic of Mauritius. The foreign asset protection
trust provides an effective fortress around one's assets since the title holder of
the assets is an independent (independent of the trustor/client) foreign trustee
and a lawsuit must be commenced against this trustee in order o begin obtaining
the assets of the client.
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Portuguese civil law a trust may be settled with administrative and trustee duties
maintained in Madeira, while the trusts Proper Law is under the common law of
the Cook Islands.
Only assets that are not necessary to everyday living should be transferred
to a Foreign asset protection trust. For example, cars, checking accounts and
personal items are not proper for a Foreign asset protection trust. However, a
Securities Portfolio Account worth $1.5 million can be transferred to the Foreign
asset protection trust.
It is very important to maintain a certain distance between the trustee and
the settlor, otherwise the settlor may be seen as having to much control over the
trustee. Thus, it may be necessary to insert a protector between the trustees and
the settlor. The protector is a person, other than the settlor, or a committee of
protectors, who is an independent person looking after the interests of the
beneficiaries of the Foreign asset protection trust. The protector does not have
the fiduciary duties, powers and liabilities of the trustee.
The foreign asset protection trust should be irrevocable, otherwise the court
could force the settlor to revoke the trust, thus undoing the trust for the purposes
of asset protection. The Foreign asset protection trust can be irrevocable for a
period of time, for example, 10 years. If the settlor survives the period of
irrevocability, the trust would terminate and all accumulated income and principal
will be returned to the settlor. The trustees may elect to extend the trust.
The foreign asset protection trust is a discretionary trust. A discretionary
trust is one that is settled by the settlor which gives complete discretion to the
trustees as to whom amongst a class of beneficiaries is to receive the income
and/or principal of the trust. A discretionary trust cannot have any restrictions on
the trustee in the exercise of their discretion. The settlor of a discretionary trust
does not have a definable interest. Thus the beneficiaries of a discretionary trust
do not have the right to compel the trustee to make a distribution, since the
beneficiaries, which may include the settlor, have no vested rights.
With a discretionary trust, the settlor does not have a vested interest or
definable interest. if the settlor has no definable interest in the trust, the creditors
has no vested interest either.
The Foreign asset protection trust must provide that the trustee should
distribute income and principal of the trust at the full discretion or the trustee.
The issue of discretion of the trustee has always been a concern to the
client, since the result is that the client looses control over the trust corpus. This
issue can be resolved by the use of a "Letter of Wishes" in which the settlor
writes down certain instructions that the trustee may follow in their discretion.
If the client is a beneficiary as to income and principal, then that client may
be subject to creditors claims. Preferably, the client should only be an income
beneficiary and not a principal beneficiary. if a creditor attacks the clients income
interest in the trust, the trust deed provides for a power of the trust to cease
paying income to the client beneficiary.
The role of the Committee of Protectors is to provide the settlor with a
mechanism to supervise the trustees and to remove the trustees. The client can
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(foreign) corporation. If the client holds title to U.S. real estate, the underlying
corporation would be domestic rather than offshore.
The foreign trustee, as the 100% shareholder of the underlying corporation,
holds a shareholder meeting in which it appoints the board of director(s). The
shareholder appoints the client as the sole shareholder who is responsible to
operate the corporation on a day-to-day basis. Another option is for the client to
enter into a consultancy agreement with the underlying corporation instead of as
a director or perhaps have a power of attorney over the underlying corporation.
Directors fees, management fees or consultancy fees can be arranged between
the client and the underlying corporation.
This structure results in the client regaining control of the assets that are
being protected.
C. The Foreign Asset Protection Trust as Limited Partner in a Family Limited
Partnership (See Diagram 3)
One particular structure that has proven useful is the Foreign Asset
Protection Trust and Limited Partnership. If a client is reluctant to transfer assets
offshore to a foreign jurisdiction which is held by a foreign trustee, that client
could establish a Family Limited Partnership, in which the client is a one percent
general partner with complete management control over the assets. The 99
percent limited partnership interest would then be transferred to a foreign trust.
Under partnership law, a limited partner does not have any right to management
control partnership assets. Therefore, the foreign trustee has a substituted
limited partner is free from any management control over the underlying asset.
This particular structure is excellent for real estate, which, of course, is a non-
movable asset, even though liquid assets such as cash and securities can be
utilized in this particular structure. In fact, what the client has created is a
structure in which he controls and manages the assets to be protected by where
title is held by foreign trustee in a foreign jurisdiction and the assets remain in the
United States. This provides the ultimate control to a client legally the assets are
held by the partnership and not the foreign trustee. All that the foreign trustee
owns is a limited partnership interest in the Family Limited Partnership.
This particular structure is an excellent technique to avoid possible claims
by judgment creditor to foreclose upon the debtor partner's interest in the
partnership. The only client's interest in the partnership, the one percent general
partnership interest.
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Background
(1) Since the inception of taxes, taxpayers have searched for ways to
minimize their tax burden. Creative tax planning in the tax haven area is one of
those ways and, as such, frequently straddles the fine line between tax
avoidance and illegal tax evasion. Following close behind, Congress and the tax
administration have been trying to close tax loopholes and to discourage tax
gimmicks, which violate the spirit of the law and sometimes the tax law itself.
(2) In order to more fully understand the role of tax havens, tax
administrators requested a report on tax havens be prepared, and in January
1981, a comprehensive report titled "Tax Havens and Their Use by United States
Taxpayers--An Overview" was submitted by Richard Gordon. Publication 11 50
(4-81). This report studies various methods of tax abuse in tax havens countries.
A reading of this report will give the examiner greater understanding of tax
havens and the methods used by taxpayers to avoid taxation.
(3) There exists no statutory definition of a tax haven, but certain
characteristics make their identification obvious. A tax haven will have one or
more of the following characteristics:
(a) imposes little or no tax on certain transactions when compared to
developed countries,
(b) provides confidentiality of financial and commercial information,
(c) has modern communications facilities, and
(d) has a treaty network which offers reduced tax rates on income taxable
by its treaty partners.
(4) The use of tax havens knows no boundaries. All types of taxpayers
participate including individuals, trusts, partnerships, small corporations, and, of
course, multinationals. The use of these havens has grown dramatically since
1970. This growth is the result of taxpayers in high tax countries trying to
minimize the taxes paid and to increase their cash flow.
(5) The tax haven countries are seeking to have their economies flourish
with new jobs in areas such as banking, communications, and related services.
In addition, certain other countries, such as Ireland and Singapore, have offered
tax holidays to corporations which set up manufacturing operations using local
labor and exporting the manufactured goods. Most frequently, the marketing
aspect of the operations take place nearer to where the manufactured goods are
consumed or in the United States.
(6) The international examiner should be alert to the many potential issues
which may exist:
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(c) IRC 1 62, which allows a deduction for ordinary and necessary
expenses incurred in carrying on a trade or business.
(d) IRC 269, which provides for the disallowance of a deduction, credit, or
other allowance, if the principal purpose for the acquisition or control of a
corporation or of property of another corporation is the evasion or avoidance of
income taxes.
(e) IRC 269A, which provides for the allocation of income, deductions, etc.,
between a personal service corporation and its employee-owners to clearly
reflect the income of the corporation and its employee-owners.
(f) IRC 367, which is used to prevent the use of recognition provisions of the
Code to transfer appreciated inventories from the U.S. prior to their sale.
(g) IRC 1491, which is used to prevent taxpayers from transferring
appreciated property to foreign entities in order to avoid income taxes in those
cases where IRC 367 does not apply.
(h) IRC 1 248, which taxes the gain recognized on the sale of stock in a
CFC by a U.S. shareholder as ordinary income to the extent of the earnings and
profits of the CFC accumulated after December31, 1962.
(i) IRC 1 249, which treats as ordinary income of a U.S. person, the gain on
the sale or exchange or an intangible asset to a foreign corporation which is
controlled by such person.
(j) IRC 551 through 558 (Foreign Personal Holding Companies), which
includes in gross income of the U.S. shareholder the undistributed foreign
personal holding company income.
(k) IRC 679, which taxes a U.S. person on the income generated by the
transfer of property to a foreign trust which has a U.S. beneficiary.
(I) IRC 897, which provides for taxing the gain recognized by non-resident
foreign individuals and foreign corporations on the dispositions of their United
States Real Property Interest (USRPI).
553 (3-11-85)
Audit Guidelines
(1) As soon as the examiner becomes aware that a U.S. taxpayer has
transactions with a foreign entity located in a tax haven area, he/she must look
through the transaction and examine the business and tax motives. The tax
motive might not be obvious, and the examiner's ingenuity must be used.
(2) If the examiner determines that U.S. real property was purchased from a
foreign entity, the following questions may arise:
(a) is the foreign entity related either directly or through some scheme
whereby the basis of the property may have been artificially increased?
Reviewing the terms of sale, i.e. interest rates charged, payments on principal,
and how funds are transferred, may indicate that further audit techniques need
to be applied, if the above items seem to be out of norm.
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(b) if U.S. real property was sold by the foreign entity, the examiner should
be aware of the provisions under the Foreign Investment in Real Property Tax
Act of 1980 (FIRPTA) This act added IRC 897 and 6039C to the Code. Prior to
FIRPTA, foreign investors were able to dispose of real property located in the
United States with little or no tax liability. FIRPTA was enacted to override the tax
provisions that enable foreign investors to effectively avoid U.S. tax in real estate
and related transactions. Refer to Text 231.(11) of this handbook for discussion
and guidelines on this area.
(3) The tax haven entity may have large salary, rent, and other type
expenses on the profit and loss statement. If so, it must be determined:
(a) if the expetises were allocated from a related U.S. entity, or
(b) if the expenses were charged to the tax haven by some unrelated bank,
insurance company, law firm, or other service company. The above situation may
indicate that the tax haven is not a viable entity.
(4) If a foreign bank is used, try to determine that it is a viable bank and not
just a bank in name only which shares desk space with other banks.
Transactions with these banks should be scrutinized.
(5) Certain tax haven schemes involve the use of multiple trusts. A taxpayer
with a going business has a trust (first trust) created by a resident in a tax haven.
The creator of the trust appoints the taxpayer as the trustee of the trust. The first
trust then forms two or more trusts in another tax haven with secrecy laws and is
designated as the trustee of these two trusts. The second trust acts as a
management consultant to the U.S. taxpayer. The consulting fee virtually
eliminates the profit of the U.S. business. Because this fee is considered U.S.
source income, trust number two files a Form 1040 NR. However, its income is
reduced or eliminated by the payment of a "contingent royalty fee" to the third
trust. Foreign trust number three winds up with the profits originated by the going
business. The profits are then returned to the taxpayer by the trust number three
either in the form of gifts or loans. The foreign trust problem is essentially an
auditing problem.
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The legal process, because of its unbridled growth, has become a cancer
which threatens the vitality of our forms of capitalism and democracy.
Lawrence Silberman, U.S. Attorney General
... The harsh truth is that ... We may well be on our way to a society
overrun by hordes of lawyers, hungry as locusts, and brigades of judges in
Numbers never before contemplated.
- Chief Justice Of The United States Warren Burger
I do not wish to speak ill of any man behind his back, but the fact is that He
is an attorney.
- Samuel Johnson
All sorts of substitute for wisdom are used by the world. When the court
doesn't know, they use precedent. The court that made the precedent guessed
At it. Yesterday's guess, grown gray and wearing a big wig becomes today's
justice.
- Dr. Frank Crane
He saw a lawyer killing a viper on a dunghill hard by his own stable; and
the devil smiled, for it put him in mind of Cain and his brother Able.
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- Coleridge
Lawyers are the only persons in whom ignorance of the law is not
punished.
- Jeremy Bentham
The virtuous need but few laws; for it is not the law which determines their
actions, but their actions which determine the law.
- Theophrastus
Where you find the laws most numerous, there you will find also the
greatest injustice.
Arcesilaus
The more corrupt the state, the more numerous the laws.
- Tacitus
Why a trust?
Why create a living trust? Isn't that something that's only done by rich
People? Can the average citizen create his/her own living trust without the Help
of a lawyer? Why not just pay a lawyer to write a simple will?
There are a number of reasons and answers to these simple questions.
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First, you should know that you have every legal right to create your own
Living trust by yourself, without the help of a lawyer.
In the second place, when you hire a lawyer to write a will, they don't do It
anyway. Their legal secretary does the job and you end up paying an exorbitant
legal fee.
Further, these secretaries really won't do anything more than fill in some
Blank spaces on a pre-designed word processing form and print it double-
Spaced with numbered lines. This type of printed output looks profession,
impressive, and expensive -- that's really what you are paying for. They follow
the same process for divorces, annulments, legal separations, Bankruptcies,
creditor plans, simple contracts, real estate deals, and so on, ad nauseam.
Most of the work done by legal secretaries or paralegals is nothing more
that filling in the blanks. What the majority of the legal profession doesn't
Want you to know is that anyone, yes!, Anyone!, Can do what they do. It is
my honest opinion that the legal profession is in a sad state of Affairs. Any
document drawn up by one lawyer will be challenged by another Lawyer if he is
paid to do so. No matter how correct or exact it is, some Other lawyer will find
fault with it if there is a fee to be made. It is The business of lawyers to make
things so complicated that they cannot be understood. Lawyers are not paid to
fix things or fight for justice, they Are paid to argue, confuse, obfuscate, and
prolong.
They get paid for keeping things from happening. This is only one of the
many reasons why simple trials that should only take hours to decide normally
take weeks, months, and sometimes years.
That, in a nutshell, is the reason for this package of shareware software.
You don't need a high priced (and perhaps incompetent) lawyer to do something
That you can do yourself. anyone with a computer and a word processor or
Text editor can use these pre-designed trust forms to create their own living
revocable trust.
Wills
A will is a legal instrument executed by any competent person according to
The prescribed statutes of the state. Using this instrument the person States
their desired disposition of their property which will take effect on And after their
death.
The existence of a will automatically means that there will be lawyers,
Judges, and the court system involved when a person dies. Because wills must
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be "probated", there will be legal fees, the court may interpret the will as It sees
fit, and the wishes of the deceased are not necessarily followed.
When a will goes to probate court, not only does it get bogged down in the
mire of the ineffective, inefficient, cumbersome, and expensive probate system, it
also becomes a matter of public record. Additionally, it could conceivably be
challenged by a lawsuit.
Trusts
A trust is a legal relationship in which one person transfers property of a
Second person for the benefit of a third person. The person creating the Trust is
the grantor. The person having legal title to the trust property Is the trustee. The
person for whose benefit the trust is created is the Beneficiary. The nifty, magical
part of this arrangement is that one person Can be a grantor, trustee, and
beneficiary all at the same time.
Using a trust, an individual can transfer property from their personal name
To themselves as a trustee of a trust. As the trustee, they can hold the Property
for themselves or for someone else. Under the instructions of a Revocable living
trust, the trustee (or co-trustees) can see to it that when The grantor dies all trust
property is transferred to the beneficiary or Beneficiaries. When the grantor
dies, the trust property automatically is held by any co-trustee or successor
trustee for the benefit of the beneficiary. All of this is accomplished without any
probate process or any other type of court proceedings. You don't need to be
wealthy to take advantage of this either. If you only own your home or
automobiles, you can use a trust to make sure that when you die everything
automatically transfers to anyone you wish.
A revocable living trust is the answer to almost all of the horrible problems
that can be encountered by probate court. It can be entered easily at little Cost
and it can be revoked by the stroke of a pen.
Advantages Of A Trust
The most obvious advantages of a revocable living trust are:
Avoidance of probate and probate administration fees and
expenses.
Avoidance of excessive probate legal fees.
Avoidance of unnecessary delays.
Avoiding publicity concerning probate matters.
Avoiding ancillary (secondary) administration.
Avoiding statutory restrictions on bequests of property.
Avoiding inheritance taxes.
Avoiding will contests.
Property management.
Management uninterrupted by the incapacity of the grantor.
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Real Property
Real property included in a trust should be recorded with the names of the
Trustees of the trust. Normally, this means filing a "quit claim" deed on The
property changing the name of the owners of the property. This usually Is done
at the county recorder's office. The new deed should be similar to:
john doe and jane doe, as trustees under revocable
living trust agreement dated january 1, 1990
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You should contact your county recorder's office for specific information.
Quit claim deeds may be obtained at stationary stores or at local real estate
Offices.
Bank Accounts
Bank accounts and saving & loan accounts should be changed using the
same type of trust language. It is suggested that you contact your bank, saving
& loan, or other financial institution to find out how they prefer it to be done.
Some institutions require a copy of the trust agreement on file. Different
businesses have different methods.
Vehicles
Automobiles, motorcycles, and any other similar types of vehicles should be
Registered using the same trust language. It is a good idea to check with Local,
county, and state offices regarding their specific requirements Regarding transfer
of vehicles to a trust.
Choice of a Trustee
You cannot be too careful when choosing a trustee, co-trustee, or
successor Trustee. It is suggested that an adult family member be selected. Do
not consider a lawyer, trust officer, bank, or trust company for a trustee. This
defeats the entire purpose and objective of the revocable living trust. It Is
imperative that a trustee be chosen who will expressly avoid the needless
expenses, delays, and inconvenience of court appointments.
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BY DAVID JOHNSON
The following article is one of the most informative we have seen on the
subject, particularly when one looks at the enormous amount of mis-information
that has been published by main stream media recently. David Johnson is an
American aiming this piece at US taxpayers. This certainly does not detract from
the value of the article for other nationals. The majority of points discussed apply
equally to most countries and you can be sure that the few that don't, will in the
near future. Big Brother has the nasty habit of spreading bad news as rapidly as
possible...
When you have something to hide, the simple rule of thumb is-do it
offshore. After all, if you are reading this your goal is to keep your financial
business to yourself. The purpose of this article is to give an introductory inside
look at banking and investing overseas, using fiscal tax shelters (havens) to
reduce or eliminate taxes, and foremost, to provide confidentiality in personal
and business matters. Period.
For various reasons, offshore banking has been tagged as "unsafe", "risky",
"illegal" or "for the wealthy", let's separate the facts from the bull! First off, one
must understand that it is normal for those that know little or nothing about
something (besides what they hear from other even less knowledgeable people)
to be afraid and suspicious about it. Misinformed financial planners, attorneys
and accountants may know economics and the law in the United States or their
country of residence, but few know a bout handling business outside their
domicile. Let's tackle these misconceptions one at a time.
Legality
There isn't and will never be a law restricting the sending of funds outside
the USA. How do I know? Simple. As a country dependent on International trade
(billions of dollars a year and counting) the American economy would be
destroyed. How? Since all US global trade is transacted in US dollars, there
would be no exports or imports, due to the fact that the United States would not
be able to buy and sell goods. Make sense?
If you wanted to, you could move or transfer some or all of your money out
of your bank or credit union to anywhere in the world, Legally.
US banks and the IRS disseminate negative propaganda dealing with
offshore banking, making it seem unsafe or some type of criminal act. Why?
Banks just want to keep your money in their institutions to use for their own
profitable purposes. Did you know that most US banks themselves accept
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deposits from people overseas and often invest in foreign stocks and hold
accounts with foreign banks? It's true! As far as the IRS is concerned, they
obviously want your money in US banks where they can tax every dollar you
earn in interest, and keep track of how many liquid assets you have and where
they are.
The confusion with tax legalities is sometimes due to lack of knowledge. In
the US tax evasion is a crime, tax avoidance is not. As you know, there are
zillions of laws on the books in every country. Without a doubt what is legal in
one place may be against the law elsewhere. For example tax evasion is not a
crime in jurisdictions where there is no income tax. Thus, in most cases (except
those with significant political and/or business weight) countries that are not
allies usually don't assist other nation s in enforcing laws that are not laws in
their countries. Further, a country has no legal right to conduct an investigation in
a foreign country without consent of the respective government.
In reality, a country has every right to deny any other nation permission to
make examinations in their territory. Therefore, it is difficult if not impossible for
authorities in the US or elsewhere to obtain financial transaction records of tax
evaders in many foreign-based institutions (outside of those located in areas that
have some type of co-operation treaties). Strict banking secrecy laws also
contribute to this difficulty. Most tax havens impose lengthy prison terms and/or
hefty fines for violations of a client's secrecy.
INTER-FIPOL (The International Fiscal Police) is the tax crime equivalent of
INTERPOL (The International police Organisation), which is a network of law
enforcement authorities in numerous countries which exchange information on
criminals. Many evaders are opening accounts in fictitious names and using mail
forwarding and pick up drops for privacy.
Practicality
Movie-makers and recent international scandals, such as BCCI and Iran-
Contra, have contributed to negative views about offshore banking.
Contrary to popular belief, rich criminals and corrupt government officials
make up a small segment of the total number of customers at any given offshore
institution. Now more than ever the average American blue collar worker and
businessman is using offshore banking as a way to reduce taxes (through legal
avoidance). Many accounts may be opened for the same amount required in the
US (about $100) or less. In some cases, there is no minimum opening deposit at
all. Further, the interest rates are usually substantially higher than in the US
(since federal law sets limits on the amount of interest a bank can pay you). But
by far, the reason most people turn to offshore banks is their confidentiality.
One might ask, "if these banks are so good, why don't they advertise in the
US."? The answer is simple...they are prohibited! Federal law restricts off shore
banks from advertising their services in US magazines and newspapers, unless
they agree to the same restrictions that govern F.D.I.C. institutions. (such as
interest limitation). Why? That's simple too...to keep the competition down.
Opening an account with these banks is as simple as writing a formal letter to
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the institution and requesting information on about their various services and the
appropriate application forms, and returning them to the bank. It really is that
easy! Most banks never really have to see you in person.
Safety
All offshore banks are regulated in one form or another, like their US
counterparts, but minus the limiting federal laws. Less restrictive regulations
abroad allow foreign banks more freedom in locating the best investments
worldwide. Allowing them to pass on and share their profits with their customers.
As for insurance, forget the F.D.I.C. or other private insurance companies! They
usually only allow a liquidity factor (insurance) of about 10% of public deposits.
Many offshore banks are self-insured, meaning they have at least one dollar in
cash to cover every dollar on deposit, that translates to 100% plus insurance.
Also, the majority of the worlds largest and strongest banks (as far as assets go)
are overseas, not in the United States. Call your local library's business and
finance or commercial department and ask the librarian to look up these details.
U.S. Customs
The US Department of Treasury's Currency and Foreign Transactions
reporting Act details which monetary instruments (cheques, money orders etc.)
must, by law be reported to the federal government. A copy of an illustrated
circular which explains the act in full is available for the cost Of $5 from
Worldwide Consultants, 242 West Pratt Blvd., Suite 971, Chicago, IL 60645
U.S.A.
Tax evasion
If you deposit your pay cheque in a US bank, chances are you've already
paid income taxes on it (unless it is a personal cheque). So you have no further
obligations, since taxes were deducted before the cheque even hit your hand.
With a savings or brokerage account, at the end of the year when you get your
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annual statement, you simply add the total amount of interest or profit earned on
your income, and pay taxes on the grand total. The same is only true offshore if
the country the bank is located in imposes a withholding tax. Since I'm on the
subject of taxes, did you know that the United States and the Philippines are the
only two nations in the world that tax income earned outside of their countries?
Anyway ... back to tax evasion. Below are a few examples of ways some
individuals have cheated the taxman.
A lawyer received payment by personal cheque from a client and deposited
it in his offshore account. Since the deposit didn't appear on his business
records, the chances are it would never be found out (even if he was audited).
One couple sold a valuable antique and had the buyer send the payment
directly to their offshore bank account. Later the couple used the money to tour
Europe and the Caribbean.
Another example is the Savings and Loan bank customer who enticed his
"unscrupulous" banker to electronically transfer a large sum of cash offshore
without reporting the transaction to the IRS. The customer then borrowed the
money back from the offshore bank. Since loan proceeds are not taxable, no
taxes were paid.
These types of schemes are no longer used by the rich with extra money to
hide, but by average Americans who don't like to pay taxes on every cent they
earn.
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Tax Havens
Those countries with the lowest taxes in the world are known as Tax
Havens. Every such country is small and relatively under-developed. That is why
they are tax havens: The creation of a climate favourable to business is the only
real chance most of these countries have of becoming prosperous. (One other
way that growth can come to under developed countries is for them to discover
that they have vast deposits of natural resources. They then give industrialised
nations "eternal mining rights", in exchange for their investment in development
and infrastructure. When things are going swimmingly, they then nationalise
everything). Unfortunately, it is true to say that given the chance most
governments will eventually "kill the goose that lays the golden egg." After a free
market has given them a modicum of prosperity they will impose taxes, controls
and regulations. This is why new tax havens appear periodically and old ones
disappear.
There are also marked differences between the theory and practice of tax
law in countries around the world. In the more advanced western countries,
particularly those with an Anglo-Saxon heritage, the tax laws are generally
severely but fairly enforced to the letter of the law. Bribing the tax collector in
developed countries is dangerous. On the other hand, the Latin countries
generally lack the efficiency to track down the evaders, and most citizens
generally don't consider tax evasion to be a crime, but rather as a game that
should be played to win. Taxes are negotiated in a friendly atmosphere; the tax
collector is more often than not treated to a couple of drinks and an envelope
stuffed with small, unmarked bills.
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Other Taxes
Income taxes are the obvious taxes, but they are far from the whole story.
Many countries have import duties of over 100% for many products-effectively
doubling their cost to residents, and reducing their standard of living by a
proportionate amount. These tariffs are justified by many plausible economic
arguments, and their justification also takes advantage of feelings of nationalism.
You are extolled to "Buy American" or "Buy British or whatever" because it's
patriotic, even though it may be to your personal advantage to buy imports. Can
you see why you should limit yourself to buying particular products anymore
than you should limit yourself to buying from companies in your particular area of
residence? I'm sure you can't. The only beneficiaries of this type of stupid
arbitrary discrimination is the local government and local firms. Why is it bad to
discriminate against poor black Americans who make $3,000 a year, but good to
discriminate against far poorer Latin Americans who make $200 a year? Why
should 250 million Americans be forced to pay twice the market price for Italian
shoes so that a few thousand workers at American shoe plants can be kept in
business? Import taxes and other trade barriers only benefit protected industries
at the cost of higher prices for millions and the maintenance of the illusion that
such protected firms are providing an efficient product. Even then the illusory
"benefits" will last only until other governments respond with equally stupid and
arbitrary counter-laws. The net effect is that relatively inefficient firms continue in
their wasteful production of goods that other countries can produce more
cheaply.
A form of tax that has gained great favour with governments the world over
is the Value Added Tax -- or V.A.T. It is favoured because, as a sales tax added
on at each step of the manufacturing process, it is both invisible (i.e. cost rises
are ascribed to producers, not to tax authorities) and very hard to evade, unlike
the income tax. In Europe where it originated, V.A.T. continues to escalate way
beyond what was originally envisioned.
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Avoiding Taxes
The best thing to do about taxes is simply not to pay them. The authorities
don't look with favour upon those who evade taxes, but expatriates are in an
ideal position to avoid them legally. As a general rule you can stay for up to 6
months in most countries before becoming liable for any taxation. Although many
countries tax residents on world-wide income, they do so only if you live there for
over six months a year (calendar or tax, depending on the country). This means
you can have a summer home where it is cool, a winter home where it is warm,
travel a good bit in between, and pay off your mortgage with your tax savings.
It's quite possible to pay no tax at all legally. This is often what some of the
world's richest people do. The US government definitely presents a problem for
Americans, however, since it's unique in taxing all your income wherever you go
regardless of how long you stay out of the US.
Most countries will consider you liable if you are simply physically present
for more than 183 days per year, but others consider you liable if you are
domiciled within them, or own property therein, or have a place of residence.
Note that although most tax residents are on world-wide income, non residents
are only liable for local income; some countries tax only local income, regardless
of residence. The biggest problem for Americans is not avoiding foreign taxes,
but rather avoiding US tax while retaining the freedom to return to the US.
Nonetheless, the old adage "out of sight, out of mind" applies here. If you
don't have any US income it's probably possible to write "deceased" on your tax
form and be stricken from the records. But God help you if The American Secret
Police (the IRS) find out.
If you can solve the problems presented by the US government, you're
nearly home free. Even if the worst happens, very few governments handle non-
payment of taxes in the brutal way the American authorities do. In most
countries, tax evasion is only a civil, not a criminal, offence.
On the whole, however, one should be scrupulous in one's observance of
national tax laws. The wisest course for an expatriate is to keep a low profile.
There's no reason to take a chance on jeopardizing your status when you can
avoid taxes completely by hiring a competent tax advisor, not staying longer than
allowed each year in a given country, and taking advantage of tax loopholes.
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The first kind of return is what you get from your work: salary,
wages, fees for professional services, and the like. The second kind
of return relates, basically, to the return from your investments:
dividends on shares of stock; interest on bank deposits, loans and
bonds; rental income; royalties on patents. It is the second kind of
income, income from an investment portfolio, which tax havens are
useful for. Forming a corporation or trust in a tax haven can make
the second form of income totally tax free, or taxed so low that you
will hardly notice. Certain types of businesses can be effectively
based in a tax haven. If you publish a newsletter, for example, you
might be able to set up the entire operation in a totally tax free
country such as the Bahamas or the Cayman Islands. If your income
comes from copyright royalties, perhaps on the computer program
you invented, the Netherlands is famed as a base for sheltering
royalty income.
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BY DANNY HASHIMOTO
The multiple trust system contains a minimum of three trusts. The Domestic
Trust (DT) generates income in the United States (domestically) and normally
would have a tax liability if it did not distribute its net income. However, DT does
distribute its net income to its beneficiary, the first Foreign Trust (F-1), thereby
leaving no net income to be taxed. Under l.R.C. section 651, this is a legal
deduction against income. Therefore, when DT files its tax return, it has no
income tax liability.
The physical assets (homes, vehicles, etc.) remain in the Domestic Trust.
Only liquid cash (distributable income) moves from one trust bank account to.
another.
The Foreign Trust, F-1 distributes its income, in this case the income it
received from DT, to its beneficiary, the second Foreign Trust (F-2). Once this
distribution is made, F-1 incurs no income tax liability, having disbursed all of its
net income (as DT did).
F-2, the second Foreign Trust, has now received income from another
'foreign" trust income is not taxable as it is not directly connected income from a
United States source. It is analogous, for example, to Russia and China doing
business with no right or authority of the States to intervene. Essentially, the
United States has no taxable authority over the distribution.
Both foreign trusts, F-1 and F-2, are located in what is known as a "tax
haven" country, foreign, of course. A tax haven country is a country that imposes
no tax on those who come to do business by way of the formation of trusts and
various business activities. These tax haven countries have advantageous laws
for financial privacy and have no exchange treaties. Therefore no information of
any kind is given to the United States government about these foreign trust
banking or otherwise. The tax haven country that is chosen for this purpose is
politically stable. Banking is among the finest and safest in the world.
F-2 is not required to file any tax return - not with the United States and not
with the foreign country. Flexibility for the client is now achieved as all the income
in F-2 is now fully utilizable. This foreign trust may now invest in foreign
countries, make non-taxable gifts, make loans and make income distributions. If
it makes income distributions to its beneficiary, a tax liability will result. Usually,
during the lifetime of the client, income distributions from the F-2 are not
necessary as there is enough income being paid out of the trust(s) to the client
who serves as Manager.
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The Trustee (of each trust) receives a nominal annual trustee fee. The
Protector, whom you appoint, has the power to remove the Trustee for any
reason. The day-to-day business affairs of the trusts are managed by you, the
Client, and the Trustee supports your activities as they are in harmony with the
mission of the trust (to preserve, protect and enhance) the assets you placed in
the trust at the outset.
No inheritance taxes or probate fees are incurred at anytime because title
to the assets does not convey when you pass away. Title remains in the trust
and only the identity of the Manager changes along with the beneficiaries as you
have directed. The trusts are irrevocable, giving you the strongest asset
protection capability as well. There are many benefits that accrue with this trust
system -- among them being the capacity to have your trust estate grow much
faster due to the compounding effect of tax dollars saved and your own astute
management, of course!
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Types of Trusts
While we will assist in the establishment of a trust wherein the settlor or
grantor retain absolute direct control of the trust assets by becoming the Trustee
or by some other means, we are reluctant to do so. If the property is not within
the absolute and discretionary control of the Trustee who is not the grantor or
settlor, and the grantor or settlor retains overt control, little is accomplished as
relates to asset protection especially, and to tax avoidance or minimization,
typically.*
Laws in high tax countries specify that if the tax payer controls the property,
then he must pay the taxes on the assets or earnings on the trust property.
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The Discretionary Trust provides for a party to serve as the Settlor, being
himself beyond the jurisdiction of the beneficiaries. The actual property can
come from any place and be any thing. With a Discretionary Trust, the Trustee
can add to the list of beneficiaries or remove beneficiaries. Certainly, in a
Discretionary Trust, the Trustee has control over the property. This type of Trust
is almost exclusively used for asset protection and tax and estate planning.
As already referred to, under current tax laws and regulations in the high
tax or "sophisticated" countries where the Common Law trust is known, if the
beneficiaries are know, there might be a decision to claim taxes due, even
though there has been no distribution. The confidentiality laws of most offshore
jurisdictions take this into account. With the confidentiality feature, there is not
chance that anyone can get information as to who beneficiaries are.
To fill in the gaps where beneficiaries are not named in the Trust Deed or
Trust Instrument, a Letter of Wishes filed with the Trustee to specify the
Beneficiaries and their interest trust property will suffice.
Also, where the Trust Deed does not specify details relative to distributions,
a letter of wishes may be filed at any time by the beneficiary. Laws in most
jurisdictions allow for this while not revoking the irrevocability feature of the trust.
A Letter of Wishes may be filed at the time of initiating the Trust or at any
time thereafter.
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Consulting Services
Holding Intellectual Property
Financial Planning
Holding Assets Confidentially
Why Belize?
Belize offers many attractive advantages among which are:
Political Stability
Modern Democratic Legislative Body
Professional Support For Establishing A Company And Providing
Management
Totally Tax Exempt Income
Easily Accessible By Land, Sea And Air
Prompt Service
Excellent Communications
Friendly English-speaking Population
Vast Untapped Resources
The IBC In Belize
Key features of the Belize IBC are:
Having Only One Shareholder/Subscriber Permitted
Share May Be Held By Corporations Or Trusts
A Single Director Allowed Which May Be A Corporation Or Trust
Non-Disclosure Of Beneficial Owners
Bearer Shares Permitted
Low Fees For Setup And Renewal
No Statutory Accounting Or Auditing Records Need Be Filed In
Belize
No Minimum Capital Requirements
Minimal Restrictions
Cannot Carry On Business With Residents Of Belize
Cannot Own Real Estate In Belize
Cannot Operate As A Bank Or An Insurance Company
Cannot Provide Registered Office Or Serve As Registered
Agent
An IBC must maintain a Registered Agent and a Registered Office in Belize.
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As if FinCEN on its own was not enough, it will soon have access to a new
computer system called AI/MPP (Artificial Intelligence, Massive Parallel
Processing). AI/MPP will link all federal and state government databases with the
entire US banking system. This system will be able to monitor all banking
transactions in real time, cross-reference current transactions with past
transactions and use artificial intelligence to detect suspicious activity as it is
carried out. Perpetrators of financial crimes, whether intentionally committed or
not, will be caught within an hour of the illegal transaction. As shown above, the
government doesn't particularly care if you're innocent or not.
This does not even touch on the need for privacy to deter litigants of
frivilous lawsuits or to avoid creditors. With money hungry, out-of-control
government, North Americans have got their hands full enough already. The
solution to the problem of course is to go offshore and some (like us) would say
that with today's technology it is foolish to keep more money than is necessary
onshore and in plain site of any snoops.
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Aside from the very rich (who all should) and the very poor (who all have no
reason to), tax havens can be beneficial to people who fall into one or more of
the following categories:
1. People with excess money to invest - if you are already maxing out your
RRSP contributions annually, and have some extra money to invest you can
generate much better returns offshore than onshore.
2. People who value financial privacy - Contrary to popular belief, your
financial records are an open book and government snooping is only going to
increase as time and technology marches on. Our forefathers believed in
financial privacy, our modern governments have eroded it in the name of
confiscatory taxes.
3. People who are in danger of being sued - In America, the number of
frivolous lawsuits filed each year is enormous. If you're American, you have a
10% chance of being sued in any given year and a 33% chance of being sued in
your lifetime. Worse, the litigants are winning! Imagine a burglar breaking into
your house, injuring himself in the process and then suing you. Believe it or not,
courts award judgements to those plaintiffs. Creditors and ex-spouses can also
take away most, if not all, of what you own. The best line of defence is to protect
your assets before someone else decides they deserve a slice of your pie. If you
try to hide your assets after someone has won a judgement against you, you'll
be guilty of fraudulent conveyance (trying to fraud your creditors) and will end up
in even bigger trouble.
4. People who want to invest in funds and securities not available in their
home country. Some of the best investments are located offshore, but North
American governments prevent them from advertising on our shores. Why?
Because government knows that people would avoid domestic investments if
they had a choice to do better elsewhere. Being in the offshore arena will gain
you access to these investments.
5. People who are self-employed part-time or full-time in a home business -
If you receive income in the form of cash or cheques paid directly to you, you
can really beef up your privacy by doing your banking offshore. It may even
allow for tax avoidance possibilities - talk to your financial planner about this.
6. People who just want to put money aside for a rainy day - Just in case.
7. People who do a lot of travelling - Many offshore banks offer multi-
currency accounts (single accounts that can be operated in two or more major
currencies). These accounts alleviate the inconveniences and commission fees
of always exchanging money.
8. People who anticipate substantial sums of money - Whether it be through
inheritance, royalties, or the rewards of hard work, the time to set up an offshore
financial plan is before you acquire your wealth, not after.
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9. People who, through technology, are able to work from anywhere in the
world e.g. certain network marketers, 900# operators, freelance writers, mail
order salespeople etc. Refer to our PT Page.
10. People who are just fed up and want to expatriate.
In the end of course, the decision is personal. Certainly, offshore banking is
not for everyone. We invite you to go through our site, learn as much as you can,
and make an informed decision as to whether you can benefit from using tax
havens or not.
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OFFSHORE BANKING
Tax benefits
Liabilities to income tax may be avoided, reduced or deferred.
With a offshore bank account you may pass your wealth along to heirs and
avoid devastating tax consequences. There are no taxes on the account interest
and no filings are made to any government authorities.
Asset Protection
A offshore bank account can help you protect assets from creditors, divorce
settlement and law suits. By opening a joint account you are also able to choose
freely how to divide your assets in case of death. Many countries have laws that
dictates who receives the assets in case of death.
Secrecy
It is not possible for any third party to obtain information about your account,
not even government authorities.
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residence, yet you can access your funds whenever you want. You can also
send checks to the bank for deposit.
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"It is well enough that the people of the nation do not understand our
banking and monetary systems, for if they did, I believe there would be a
revolution before tomorrow morning." - Henry Ford Sr.
Introduction
Did you ever read the fine print on the 'signature card' your bank gets you
to sign when you open an account? It reads: "The undersigned hereby agrees to
abide by all the rules of the bank." Did you ever ask to see those rules?? What
you have actually done is agree to abide by all the administrative rules of the
Secretary of the Treasury (i.e. the Government).
You have in fact signed a contract with the government, voluntarily waived
your right to privacy, and agreed to be accountable to the State. Is that what you
really want? A partnership with the Government??
While it may not be practical for most people to get out of the banking
system altogether, through the use of a TRUST you can minimize this problem,
or even eliminate it entirely by establishing an affordable International Business
Corporation with a private OFFSHORE BANK ACCOUNT. The government then
knows nothing of your banking business and will have no way to find out. Now,
doesn't that sound like a better arrangement?
It is time to move out from under "Big Brother's umbrella", the umbrella that
is costing us all our freedom, our privacy, our financial independence, not to
mention how much it is costing us in terms of real hard cash.
The Government, Tax Collectors, and Bankers know that money held
outside your country of residence is money they cannot control. That is why they
are adamant in their defamation and condemnation - they know it takes money
out of their hands. They would much rather you keep your money in domestic
banks, paying you less and taxing what little you do earn.
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most often encountered in Probate. When the estate goes through Probate, fees
for attorneys and executors (10 - 50% of the fair market value of the estate) are
paid directly from the estate. As a further note, control and confidentiality are lost
when an estate goes through Probate, all proceedings are a matter of public
record. The courts can also force liquidation of assets to pay outstanding debts
and judgements. Heirs are forbidden by law to purchase any assets of the estate
sold through forced liquidations. The estate also becomes subject to federal
estate taxes. Because assets transferred to a Trust are no longer in your
personal estate, you can avoid expensive Probate costs, as well as estate and
inheritance taxes.
Scoff-Law Applications
As the government (any government) writes more and more laws regulating
the personal activities of the citizenry (especially if those laws infringe the
citizen's earning capacity), more and more of the citizens will violate those laws
without compunction, guilt or remorse. As an example: How many people do you
know who have driven faster than 55 miles-per-hour on a Federally funded
highway?
Scoff-laws are, by definition, people who scoff at, or flout, the law. They
have no compunction about violating those petty laws, rules or regulations that
they feel are unreasonable, unrealistic, or infringe their personal right to life,
liberty and the pursuit of happiness.
These people know that a government that writes that many laws can't
possibly expect to catch the vast majority of people who violate them. Besides,
even if they get caught, unless they are a major offender, the penalties aren't that
severe or the power-that-be may simply choose to overlook the offense. As an
example: Most police officers simply overlook people driving faster than 55
m.p.h., but do stop those people driving recklessly at any speed.
Because of the multitude of federal, state, county, city and township tax
laws in this country, the vast majority of people in the U.S. have become tax
scoff-laws. It is physically impossible for any one person to know (or understand)
all of the various and many tax laws, rules and regulations. And, the people all
know that it is impossible to be in 100% compliance with all of those laws and, it
is just as impossible for the government at its many levels to know who is, or
who isn't, paying which taxes under which laws, rules and regulations. So, most
people just report the earnings, and pay the taxes, they absolutely have to, and
feel no remorse if they don't report some of the income they know they should.
Again, we reference the article entitled, "Offshore Tax Havens Lure Main
Street Money," which appeared in the August 1, 1983, issue of U.S. NEWS &
WORLD REPORT, Robert Mirshberger, an assistant regional commissioner for
the I.R.S. in New York was asked about the risk involved in tax cheating. His
answer was, "It would be an unfortunate happenstance if you were caught. You
would be a very unlucky person."
The article continued with some examples of the ways modern-day tax
scoff-laws use Offshore Bank Accounts to cheat the I.R.S. tax collectors:
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A doctor received a payment from a patient and deposited the check in his
Offshore Bank Account. Since the deposit doesn't appear in his business
records, the chances are it would never be found, even if the doctor is audited.
One couple sold a piece of art work and had the buyer send the payment
direct to their Offshore Bank Account. Later, the couple used that money to enjoy
a vacation outside the U.S. Mr. Mirshberger with the I.R.S. said, "There's no way
we would ever discover that."
Another example told of a bank customer who got his "unscrupulous"
banker to transfer large amounts of cash to an Offshore Bank Account without
reporting the transaction to the I.R.S. Then, the customer borrowed the money
back from the Offshore Bank. Since loan proceeds are not taxable, no taxes
were paid.
But, these examples are only the tip of the iceberg. It is no longer just the
wealthy with art works to sell or the professionals and businessmen with extra
income to hide. There are hundreds of thousands (maybe even millions) of blue
collar and middle management white collar workers using Offshore Bank
Accounts to reduce the unbearable tax load imposed by the federal, state and
local governments.
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Conclusion
The Offshore Banking Community is available to you for your use. No
matter how small your ambitions may be, there is a place for you to earn
maximum returns... all you need do, now that you know how Offshore Banking
really works, is find the Offshore situation that will work for you.
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The use of a Trust for asset protection and estate planning dates back
several centuries. Trusts were common in England early in the 11th century.
Developed over time, Trusts have become a seriously effective means of
minimizing taxes, protecting assets and passing wealth along to heirs in privacy
and without devastating tax consequences.
The very wealthy have used the trust approach for many years. With recent
developments in the offshore world where more and more jurisdictions adopt
effective laws, the trust has become an instrument available to people of lesser
means. For nominal costs, minimal formalities and on short notice, a trust can
come into being.
In general, a trust involves:
A Settlor or Grantor: The person, company or other entity placing
property into a trust.
A Trustee: The individual, company, another trust or other entity who
receives the property to be managed for the benefit of those
individuals, companies, trusts, or other entities named as
Beneficiaries.
The Beneficiary or Beneficiaries: The individual(s), company or
companies, trust(s) or other entities named to benefit from the trust
property.
The Trust Document, The Deed or Declaration of Trust is the written
instrument which details the duties of the Trustee, Names the Beneficiaries and
lists the property in the Trust Corpus or body of assets.
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As already referred to, under current tax laws and regulations in the high
tax countries, if the beneficiaries are known, there might be a decision to claim
taxes due, even though there has been no distribution. The confidentiality laws
of most offshore jurisdictions take this into account. With the confidentiality
feature, there is no chance that anyone can get information as to who the
beneficiaries are.
To fill in the gaps where beneficiaries are not named in the Trust Deed or
Trust Instrument, a Letter of Wishes filed with the Trustee to specify the
Beneficiaries and their interest trust property will suffice.
Also, where the Trust Deed does not specify details relative to distributions,
a letter of wishes may be filed at any time by the beneficiary. Laws in most
jurisdictions allow for this while not revoking the irrevocability feature of the trust.
A Letter of Wishes may be filed at the time of initiating the Trust or at any time
thereafter.
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Conclusion
The Common Law Trust has served for centuries as a favorite vehicle in
financial planning and asset protection. The Trust is finding even greater life in
today's increasingly complex society as we see our privacy constantly being
eroded. The Trust is one of the most flexible financial instruments and entities to
ever come about and they should be a part of most everyone's financial plan.
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In the past, the primary reason for incorporating was to limit the liability of
the investors to the amount of assets held by the corporation. Incorporating
offshore can also create certain opportunities for tax avoidance and tax deferral.
As well, they provide anonymity by taking advantage of tax haven secrecy laws.
Many people set up an offshore corporation simply to create a legal entity that
can operate bank accounts, make purchases and invest without having their
personal name tied to it.
Offshore corporations are used outside of the place of incorporation for a
seemingly endless variety of activities including trading, trade financing, holding
assets, manufacturing and tax minimization. They are primarily used for holding
investments and real estate. Equipment may be purchased and leased by an
offshore corporation. They are also used for the ownership and registration of
aircraft and vessels, the holding of patents, trademarks and copyrights,
management and administration, and the collection of royalties and commissions
(assets like these which are difficult or expensive to transfer can be held by a
corporation allowing the owner to transfer the shares in the corporation rather
than the asset itself). In some cases, an offshore corporation, recognized as a
citizen or national of the place of incorporation, may confer a trade advantage or
may help avoid a disadvantage. Offshore Corporations are also commonly used
as an integral part of a trust structure.
Here is a breakdown of potential uses for an offshore corporation:
Investment Holding Company - real estate, stocks, bonds, precious
metals and mutual funds can all be held by an offshore company
allowing for management under one corporate name.
Holding Intellectual Property - royalties and licensing fees for
patents, trademarks and copyrights may he held in a tax-free
environment.
Trading Companies - an organization can trade outside its own
country and, depending on the jurisdictions involved, can have
taxes minimized or completely eliminated.
Consulting Services - setting up a consultant service in an offshore
jurisdiction can increase your earning potential by minimizing taxes
and operating expenses.
Sales / Re-Invoicing Company - an offshore company may act as a
middleman selling goods throughout the world and have the profits
accumulate in a tax-free environment.
Advertising Company - an offshore company acting as an
advertising agency can retain the 15% ad agency commission in a
tax-free environment.
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Shipping - register your ship or boat abroad for minimum tax and
liability. Operation costs are minimized when using personnel from
developing countries.
Leasing Company - capital equipment may be purchased and
leased by an offshore company, taking advantage of deductible tax
write-offs on lease payments.
Set up corporate bank accounts and obtain international corporate
credit cards, no matter what your current credit rating may be.
Spend your money anywhere in the world employing your corporate
or anonymized credit cards and leave no personalized paper trails.
In summary, every businessman, professional practitioner, entrepreneur
and investor should know about and be using offshore corporations. The simple
fact and reality is that properly structured offshore entities and transactions can
give you benefits and advantages you never probably thought were possible,
and probably never knew about. It can all be done very legally and it is no longer
necessary to be a multi-millionaire to use and take advantage of these
structures.
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TAX HAVENS
Tax havens are countries who have designed their laws and banking
practices to help you escape taxes, protect your money from creditors, hide your
wealth from prying eyes and build wealth faster than you can at home. There is
nothing mysterious about tax havens; they are often countries who find
themselves with little or sporadic tourist trade, or without strong industry for
instance, so they intentionally structure their laws to attract foreign money and in
the process create a profitable industry for themselves: international banking. A
modern tax haven will possess the following qualities:
no tax or low tax is imposed
a high level of bank and commercial secrecy
banking and similar financial activities are significant to the country's
economy
modern transportation and communication facilities
lack of exchange controls on foreign deposits
The above attributes allow tax havens to be legally utilized by someone of even
modest means to:
Avoid or defer taxes
eliminate the reporting and paying of income tax on earning,
interest, dividends and investments
protect against high capital gains taxes and reporting requirements
prevent inheritance taxes, estate taxes, executor's fees and probate
fees
earn tax free income through operation of an active business
earn tax free income as a result of intellectual property (patents,
royalties etc.)
Asset Protection
protect assets froms creditors, malpracitce claims, judgements, liens
and bankruptcy
prevent erosion of assets from divorce or separation
deter the initiation of civil litigation
Financial Privacy
prevent any knowledge of your assets from becoming public
protect the privacy of your involvement with investment houses,
brokers and securities markets
protect the privacy of corporate ownership from becoming known
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THE PT PHILOSOPHY
If you want to escape the control over your life and property now held by
modern Big Brother Government become a PT and you break free.
In a nutshell, a PT arranges his or her "paperwork" in such a way that all
governments consider him a tourist - a person who is just "Passing Through".
The advantage is that being thought of by government officials as a person who
is merely "Parked Temporarily", a PT is not subjected to taxes, military service,
lawsuits, or persecution for partaking in innocent but forbidden pursuits or
pleasures. Unlike most citizens or subjects, the PT will not be persecuted for his
beliefs or lack of them. PT stands for many things: a PT can be a "Previous
Taxpayer," "Perpetual Tourist," "Practically Transparent," "Privacy Trained," or a
"Permanent Traveller" if he or she wants to be. The individual who is a PT can
stay in one place most of the time. Or all of the time. PT is a concept, a way of
life, a way of perceiving the universe and your place in it. One can be a full- time
PT or a part-time PT. Some may not want to break out all at once, or become a
PT at all. They just want to be aware of the possibilities, and be prepared to
modify their lifestyle in the event of a crisis. Knowledge will make you sort of a
PT - a "Possibility Thinker" who is "Prepared Thoroughly" for the future.
PT is elegant, simple, and requires no accountants, lawyers or other
complex arrangements. Since the income of most PTs is immediately doubled
(no taxes), and most frustrations of life with Big Brother are instantly eliminated,
the logical question is only: "Can you afford not to become a PT?"
The PT, once properly equipped, operates outside of the usual rules,
gaining mobility and a full slate of human rights. The value of these rights cannot
even be perceived by people who have never experienced them. Tax havens
become an important tool of the PT, because the tax haven corporations and
trusts provide an interface to the more permanently settled world, just as a flag of
convenience does for a ship.
The message of PT is not, however, to encourage greed, lust,
irresponsibility, immorality or any ot the other seven deadly sins. The effect of PT
being popularized will be to release creative souls from the many burdens of
coping with Big Brother.
You don't need to find a new country or displace someone else to make
yourself a sovereign. The PT need not dominate other people. He or she must
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The 5 Flags of a PT
Flag 1: Business Base
These are the places where you make your money. They must be different
from your personal fiscal domicile, the place where you legally reside.
Flag 2: Passport & Citizenship
These should be from a country unconcerned about offshore citizens and
what they do outside its borders, the passport should have good visa free travel
and offer hassle free border crossings.
Flag 3: Domicile
This should be a tax haven with good communications. A place where
wealthy, productive people can be creative, live, relax, prosper and enjoy
themselves. Such a place should not be threatened by war or revolution, low
crime rate, good medical facilities and preferably should enjoy good levels of
banking secrecy.
Flag 4: Asset repository
This should be a place from which assets, securities and business affairs
can be managed anonymously by proxy.
Flag 5: Playgrounds
These are places where you would actually physically spend your time and
enjoying life.
The above outlines the basic concepts of the philosophy of PT.
Before you react negatively and believe there's no possible way you can
attain such a lifestyle, pause for some considered thought.
PT starts by taking root in the mind. It becomes a thought process, that
never leaves you.
Most of the Flags can be attained without you ever having to leave your
home turf. It's simply a matter of modifying business strategies and re-arranging
some personal paperwork.
Get into some serious research to find out whether you qualify for
citizenship of another country. You may qualify by marriage, or descendency
through your parents or grandparents. If you don't have any luck on this one
don't despair. It's possible to buy legitimate and legal citizenship and passports
from a variety of countries. With regard to domicile once again there are many
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BY DR ARNOLD GOLDSTEIN
There are many countries that can be referred to as "tax havens". The
primary reason is that they have different tax laws from the United States, which
allows wise, experienced financial planners to legally delay income taxes
through careful study of the tax laws of various countries.
Bahamas
The Bahamas is made up of 700 islands and 2,000 cays
scattered over 100,000 square miles and is located 50 miles off the
Florida coast. New Providence Island, site of the capital city of
Nassau, has an area of 83 square miles. The second largest city,
Freeport, is on Grand Bahamas island. Its capital is Nassau, and the
commercial center is New Providence.
The climate is moderate and ranges from 70 degrees to 80
degrees F. The population is 250,000. The majority of the population
lives on the island of New Providence and Grand Bahamas. Many of the islands
are uninhabited due to the lack of fresh water. The official and spoken language
is English. The unit of currency is the Bahamian dollar.
The Bahamas has excellent communications. Thirteen airlines fly to the
Bahamas and direct flights are available from most international cities. Miami is
30 minutes away by plane and New York is approximately a three-hour journey.
Seventeen shipping lines connect the Bahamas with important world
markets. Nassau has a major deep-water port and Freeport, on Grand Bahamas
Island, has a fine natural harbor.
Freeport's owners hope the port, which is as close to Miami as it is to
Nassau, can be developed into a major regional hub for container shipments to
North and South America, the Caribbean and Europe. The Bahamas has an
excellent overseas telephone service which includes direct dialing to the United
States and Canada.
Economically, the Bahamas thrive on tourism and the tax haven industry. It
is a popular vacation spot and gambling, shopping and fishing are enjoyed by
tourists and residents alike.
Offshore haven activities dominate the financial world of the Bahamas.
Financial services include international business companies, insurance
companies, banks, personal investment companies, ship registration and trust
services.
Bahamian law is based on British common law but is augmented by
Bahamian statutes. The supreme court is the highest tribunal, the court of
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appeals occupies the middle position and the magistrates court has jurisdiction
in minor civil disputes and criminal offenses. The ultimate court of appeals is the
privy council of the United Kingdom.
The Bahamas were initially settled in 1640 by the Eleutherian Adventurers,
a group of Englishmen who sailed from Bermuda. The Bahamas has had a
representative form of government since the 17th century.
In July 1973, the Bahamas achieved its goal of becoming an independent
country within the British Commonwealth. A Governor-General appointed by the
British government is responsible for defense, external affairs and internal
security. However, the real head of the government is an elected prime minister
who consults with a cabinet of nine ministers chosen from the legislature. The
bicameral legislature has a 49-member house of assembly and a 16-member
senate.
One benefit of setting up a tax haven in the Bahamas are Bahamian
International Business Companies (IBC's). IBC advantages include:
24-hour formation subject to name approval
Limited liability
No minimum capital requirements
Total tax-exemption for 20 years
Minimal compliance work
Director and shareholder anonymity
Companies limited by shares and companies limited by guarantee are the
two basic types of corporations operating in the Bahamas. Companies limited by
shares have fixed, unmodifiable authorized capital. They cannot buy back their
own stock.
Companies limited by guarantee can reduce their share capital by buying
back their shares and canceling them. Therefor, offshore funds are incorporated
in the Bahamas as companies limited by guarantee.
The Bahamas do not have any tax treaties to avoid double taxation
because it does not have any form of direct taxation. The main source of
government revenue comes from customs duties and import taxes.
The Bahamas have no personal, corporate, profit, capital gains, estate,
death or withholding tax.
Hong Kong
The country of Hong Kong is on the southeast tip of China and consists of
a large number of islands and a part of the Chinese mainland totaling
approximately four hundred square miles. The principal areas are the island of
Hong, Kowloon and the New Territories. These areas were ceded to Britain in
perpetuity in 1842 under the treaty of Nankinu. In 1898, the new territories were
leased by Britain from China for period of 99 years and includes all the land
north of Boundary Street in Kowloon to the border with China as well as 235
small islands.
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Hong Kong's subtropical and monsoonal climate produces dry, cool winters
with an average temperature of 59 F. Summers are hot and rainy with an
average temperature of 82 F. Humidity runs high.
The population is currently six million. Hong Kong is one of the most
densely populated areas in the world. The capital and commercial center is
Victoria. The official languages are English and Chinese, with English being used
in the commercial and political context and Cantonese Chinese used widely in
industry and domestic trade. The unit of currency is the Hong Kong dollar.
Hong Kong is a prominent trade and manufacturing center with superb
transportation and communication facilities. Major airlines connect Hong King by
frequent flights to every major city in the world. The British civil service tradition,
coupled with the pressures of demand, makes Hong Kong's airmail, telex and
international telephone and cable services highly efficient, regular and reliable.
Hong Kong is the leading southeast Asian center for both finance and
commerce and ranks as the world's third largest financial center after New York
and London. There are more than 160 licenced banks with 128 foreign banks
having representative offices in Hong Kong and a further 225 licensed deposit-
taking finance companies.
The judiciary operates independently under the direction of the chief justice.
Hong Kong's legal system is based on the principles of England as they existed
in equity in 1843. There has been some modification by the United Kingdom
parliament and the Hong Kong legislature.
Hong Kong has been a British crown colony since 1842. The governor,
appointed by the Queen, presides over the Hong Kong government.
In 1984, an agreement was made on the future of Hong Kong between the
British and Chinese governments. On July 1, 1997, all of Hong Kong will become
a special administrative region of China. For fifty years thereafter, the following
will remain unaltered:
A local government will continue with full authority in executive,
legislative and judicial matters.
The legal, social and economic systems will remain in force.
All forms of property, including inheritance and ownership by non-
residents, will be respected.
The current economic position, including the financial markets and
the Hong Kong dollar, will continue.
The financial system will remain independent, and China will not
seek to raise any taxes in Hong Kong.
Hong Kong will remain independent for customs purposes.
Crown land leases may be granted for up to fifty years after 1997.
The freeport will remain.
Company formation in Hong Kong follows the usual British pattern. A
memorandum and articles of association are required, and they must include the
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Isle of Man
The Isle of Man is located on the Irish Sea, and is close to England,
Scotland and Ireland. The island has a temperate climate and, due to the
influence of the sea, rarely experiences extremes of either heat or cold. The
population is approximately 70,000, with Douglas being the capital and main
commercial center.
The official and spoken language is English. However, owing to the island's
Celtic origins, it also has its own Gaelic language.
The monetary units are the British pound, Scottish currency and the Isle of
Man pound note.
The Isle of Man is served by Ronaldsway Airport in the south of the island
some eight miles from Douglas. There are regular services on at least a daily
basis to most major cities in Great Britain. The island has some five hundred
miles of roads connecting all the major centers of population. Telephone, telefax
and telex services are excellent. The postal services work in very close liaison
with those in the United Kingdom. International courier services are available
with connections via Heathrow.
The Isle of Man, confronted with a decline in its two principal sources of
income, agriculture and tourism, now places greater reliance upon industrial
investment and its financial center activities which now contribute more than
thirty percent to the gross national product.
The government wants 10,000 new residents before the end of the century.
The Isle of Man is the only low-tax financial center in Europe that actively
encourages new residents.
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More than fifty licensed banks, including many international banks, are
present on the island. Their services are comprehensive, discreet and
confidential, comparing favorably with the banking sectors of Switzerland and
Liechtenstein.
Isle of Man law is based on British common law and much of the civil-law
legislation is modeled on United Kingdom acts of parliament. The island has its
own courts and the heads of the judicial system are known as "deemsters."
Advocates of the Manx Bar have the combined role of both solicitors and
barristers and are able to appear in both the lower and higher courts. The
ultimate court of appeals is the English privy council.
The Isle of Man is a dependency of the British crown. However, it has never
been part of the United Kingdom or its colonies. The government dates back to
Viking times, and its own independent parliament, Tynwalk, has existed for more
than one thousand years. While the Isle of Man is tied closely to the United
Kingdom, which insures the island's defense and presides over international
affairs, Tynwald is responsible for all aspects of domestic legislation, including
taxation.
To support the government's decision to become a leading European tax
haven for offshore funds, the Isle of Man subsequently adopted an industrial aid
and incentive package which is considered to be one of the most attractive in the
western world.
Isle of Man resident and non-resident companies can engage in any activity
worldwide, but exempt companies can only be used for insurance, shipping,
property investment, investment holding, commodity dealing or the holding of
patents, royalties, copyrights, licences and trademarks.
The Isle of Man offers several investment vehicles, each providing its own
advantages:
Exempt companies -- If granted exempt status, a company's offshore
income and dividends will be exempt from island income tax.
Non-resident companies -- A company may be incorporated on the island
but remain non-resident. As such, it will be exempt from income tax, although it
will have to pay an annual non-resident duty. A non-resident company could be
used for protecting assets owned by an individual resident in another country.
Trading companies -- Various companies in the manufacturing and service
sectors enjoy advantages because of the island's relationship with the EC,
existence of a freeport, low costs, tax structure and a generous range of grants
and incentives offered by the island's government.
Banks -- As the island's government continues to encourage foreign
investment, it is likely that the growth of the financial sector will continue, adding
many opportunities for banks.
Apart from the limited treaty with the United Kingdom, the Isle of Man is not
party to any double-taxation treaties. Isle of Man residents pay income tax only
on their worldwide income at a rate of fifteen percent for the first chargeable
amount and twenty percent thereafter.
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Along with these many advantages, the Isle of Man offers an attractive tax
structure. The major features are well worth noting:
No capital gains tax
No estate or inheritance taxes
Tax free holidays for industry
Exempt Offshore
Value added at fifteen percent
Liechtenstein
The financial condition of Liechtenstein is excellent -- no national debt,
stable political conditions and an absence of political tensions.
Liechtenstein is located between Switzerland and Austria. The capital and
commercial center is Vaduz. The population of 29,000 enjoy a climate similar to
that of the northeastern United States, and speak German and Alemanni. The
unit of currency is the Swiss Franc. Communications are excellent.
Tax legislation is extremely favorable for holding companies. It is a highly
industrialized nation with a healthy economy and a firm belief in the principles of
free enterprise. Its banks provide secrecy regarding foreign accounts, and all tax
matters are treated with a high degree of confidentiality. This is not to say,
however, that Liechtenstein provides an atmosphere of "wheeling and dealing"
for individuals and families seeking tax avoidance.
On civil law, Liechtenstein conforms in part to both the Austrian ans Swiss
systems. Liechtenstein codified a company law in 1926 that is highly regarded
as one of the most modern in Europe. Many regulations on legal procedure
guarantee the impartiality and fairness of the law.
The government of Liechtenstein is a constitutional monarchy based on
democratic and parliamentary procedures that encompass all the principles and
practices of a modern government. Liechtenstein governs on the principle of
separation of powers where legislation, administration and court actions are
concerned.
Liechtenstein recognizes a variety of enterprises and company forms. The
most suitable forms to be used as holding companies are the anstalt
(establishment,) the akteigesellschift (company limited by shares,) and the
registered trust. Liechtenstein has designed legislation that is particularly
favorable to the protection and administration of financial structures.
Liechtenstein tax legislation defines holding companies as enterprises that
exclusively administer capital or assets such as shares or bonds of other
enterprises.
If a holding or domiciled company is formed as a legal personality and is
entered into the public registry, it will have special tax privileges:
Tax exemptions on all assets and income
Reduction of the capital tax
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Nevis
Nevis is located in the Leeward Islands, approximately twelve hundred
miles southeast of Miami. The climate is nearly perfect, with tropical vegetation
prominent. The capital and Commercial Center is Basseterre. The population is
8,000. The official language is English. The unit of currency is the Eastern
Caribbean dollar.
Nevis was a British colony from 1628 until 1983 when it became
independent and joined the federation of St. Kitts - Nevis. The federation is an
active member of the British commonwealth. Nevis is a democracy based on the
British parliamentary system, and has an elected local assembly.
Nevis offers excellent communication facilities which include direct dialing
to the U.S., Canada and Europe as well as worldwide telex, facsimile and
telegraph services. Direct airline service is available to most major cities in North
America and Europe.
The 1983 constitution provides for a federal parliament headed officially by
the governor-general. A cabinet in Nevis is lead by the premier as leader of the
majority party in the house of assembly. The legal system in the island is based
on English common law, served by a high court of justice and a court of appeal.
Nevis companies are exempt from Nevis taxes on all income, dividends or
distributions not earned on the island.
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There are two kinds of companies that can be set up on the island but it is
the exempt company that is set up to handle offshore investment. The exempt
company has some very attractive advantages:
There is no minimum authorized capital.
A business license is not required.
Officers, directors and members do not have to be identified.
Incorporations take three days.
There are no requirements that capital be in a certain currency.
Par value is not required for a company purchasing its own shares
and can be set at any sum.
The corporation laws of Nevis simplify stockholding. Registered
stock may be held by just one person who may hold the position of
both director and secretary. Bearer shares are also allowed to be
issued.
Double-taxation treaties are held with Denmark, New Zealand, Norway,
Sweden, Switzerland and the United Kingdom. Offshore companies are exempt
from all forms of Nevis taxation.
Recent changes in the statutes governing trust administration have added
two important provisions:
Any plaintiff bringing a civil suit action against a defendant must post a
$25,000 (US) bond before the case may proceed.
The statute of limitations governing civil suit filings is one year.
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OFFSHORE BANKING
Components of a PIB
Bank Charter & License: Legal framework the bank establishes for the
bank's authority and distinguishes the difference between a financial institution
and a corporation.
Registered Office: Representative office in host country.
Resident Agent: Local liaison
Board of Directors: Usually from one to ten people that hold meetings and
direct bank business.
Shareholders: PIB owners
Clearing Account: An account with a major bank or brokerage house where
physical deposits are held.
Offshore banking centers attract numerous companies because of the
many benefits and planning strategies to be obtained. A few are listed below:
It may have been possible in the days of swashbuckling pirates for the
individual with a few extra bucks to hide his stash in a chest in the ground
beneath a secret palm tree and be reasonably sure that his money was sagely
hidden from other pirates like tax collectors, ex-spouses, blackmailing
mistresses, suing lawyers and others whose life ambition is to make the rich
poor and themselves rich. In today's world with Switzerland down-grading its
secrecy laws and making numbered accounts history and more and more tax
havens being infiltrated by foreign governments and their tax departments
snoopers, a man's (or woman's) hard earned money is no longer his personal
business. Every government's tax-robber-barons want to know all the details so
that they can extort in many cases more than 50% of your assets into their tax
coffers. Everybody today from tax authorities to lawyers has his proverbial nose
up your financial ass." They work with the belief that they can extort gross
amounts of your hard earned money because they have the power to make the
rules. And after all, the golden rule states that those who have the gold, rule.
Authorities today look upon anyone who deals in cash, rather than "paper" -
checks, money orders and electronic transfers, etc., as a tax evader straight and
simple. Walk into most any bank today with a suitcase full of cash and
immediately you are presumed a drug dealer, pimp or tax evader. Even trying to
set up a bank account with a relatively small amount of cash can be a tricky
situation. Cash, because it leaves no paper trail is looked upon the in the
banking industry with the same scorn as a virgin at an orgy as is trying to open
an account without producing high-powered ID, supplying an address for the
record and filling in a detailed questionnaire of employer, marital status, etc.
You can get around some "local" regulations by opening an account by mail
in almost any tax haven in the world without an ID. Sound peachy-cream in that
you can use any name you want but you still usually have to furnish an address.
This requirement isn't a problem to most "worldly, PT type individuals for they will
usually set up a series of "resident" addresses or confidential mailing addresses
through maildrops spread throughout the world. Still the risk of detection by
some tax collecting vermin, judicial or government authority having records of
your account down the line is more than slight unless you are very clever. How
you ask, do they find you? INTERFIPOL!
Most people have heard of Interpol, the international police agency
supported by many governments, but few have heard of Interfipol, "the
International Fiscal Police." This organization is quietly starting to come into its
own. If you happen to have, or someday create, a tax problem in any OECD
country, you can rest assured that you and your money will be hunted prey. It
may take some time, but your money will be taken out of circulation.
Banking As A Contrived-Earthling
To open a bank account you need ID. In your own country usually a drivers
license or national identity card will do. Walk into a bank abroad to open an
account and it usually can be done but you must produce your passport for ID as
well as an address. The bank photocopies the passport, records and your
address before opening the account. In some countries, and in most offshore
banking centers, it is possible to open an account by mail without any photocopy
of your passport of other ID buy you still must provide an address for bank
communications. The address is the weak link if you're seeking secure financial
privacy. Some offshore centers like the Isle of Man require a reference from
another bank or two references form professional people who will swear you are
who you say you are. With any of the above options you are luring yourself into a
false sense of security or have broken more laws than one wants to in trying to
preserve your right to financial privacy.
All PT's are aware of owning a second passport to use for banking
purposes (banking passport). This passport is almost always issued in your "pen
name" and probably has a maildrop address associated with the paperwork
needed to issue the passport. If you use a legally issued 2nd passport, not a
forged or stolen blank, and you use it low profile and remain yourself low profile,
you only have a very slight risk of future ramifications. If you are going to stash
away a considerable amount of your assets, this may be the recommended way
to go. You may obtain legally issued 2nd foreign passports form a broker or
directly from some governments who provide second travel documents because
of some "aid" you have provided to their pet government projects. Be careful
with brokers for 90% of them are crooks - use only recommended or successful
brokers who personally escrow the associated costs until the documents are
delivered. This passport can be used for banking purposes and used in
conjunction with a daisy-chain of banks through "Transit Accounts" to make your
money and you almost untraceable. (Transit Account - Special Report available
at US $20 from Expat World. Airmailed!)
The ins and outs of secret banking can lead to a vicious circle which
eventually leads to YOU unless you are meticulous and careful - - except for "the
world's only untraceable bank account". This untraceable account makes it
possible for people with as little as US $50 or more than US $50 million who
want to keep it secret from EVERYBODY - government snoopers, lawyers,
money-grabbing ex-spouses, etc. - to need not have the cunning of James Bond
in avoiding bankruptcy or capture by Big Brother's of this world.
Opening An Account
Tremendous Advantages, Few Disadvantages
ADVANTAGES: First of all, if you're Austrian you will not need Expat World's
services because any Austrian can simply walk into any bank in Austria, deposit
any amount (by today's practices about US $50) and five minutes later walk out
with a "Sparbuch".
The "Sparbuch" account does not carry a name BUT A CHOICE may be
either in the name of an individual, a corporation, including offshore corporations
or as we have stressed, it may be in no name at all; a so called "Euberbringer"
account or "bearer-passbook". As the names implies, he who brings the books
presumed to be the legal owner. An "Euberbringer-Sparbuch" is the bank
equivalent to company bearer shares. In addition to the secrecy protection built
into this no name, no nothing account, Austrian general bank secrecy laws make
Switzerland and the rest of Europe look like they are partners with the IRS,
Inland Revenue and the rest of the money stealers. With the "Sparbuch"
account, additional security is provided in keeping the wolves from you door by
having them not know what door to look for. No account statements are EVER
mailed to account owners for the bank doesn't require an address to open the
account. It may sound odd, but think of the individuals who have had their lives
upset because tax authorities, ex-spouses, police or other privacy invaders have
intercepted their mail. Instead of statements being sent to "Sparbuch" account
holders, the "Sparbuch" is updated automatically and any interest accrued
added whenever the "Sparbuch" is presented at any branch of the issuing bank.
It is unquestionable impossible to establish just who opened the "Sparbuch"
account (and who owns it) by means of checking available records - - since no
record has been created except the physical "Starbuch" itself and the account
number in the bank computer system. No forms to fill out, no ID to show, no
nothing!
To make a deposit in "Sparbuch" cash in any currency can be hand carried
to the bank and plunk down, no questions asked. It will be converted to Austrian
shillings before being credited to your account. One can mail money orders or
checks to any branch of the relevant bank with a note to credit the "Sparbuch",
account number such and such. SWIFT electronic transfers may be made to
"Sparbuch" by registered mail or courier with and enclosed note stating that you
wish to make a withdrawal and include the "Logungswort" (the code). The bank
will do so provided you pay the applicable charges to have a check made out
and mailed to you along with the "Sparbuch".
It is entirely legal to transfer a "Sparbuch" from one person to another
without giving the bank or anyone else notice about this. In certain countries it
has been made a crime by Big Brother to sell or even give away a passbook.
See, Big Brother want to collect as much data about bank account holders
worldwide as possible. A "Sparbuch" can be sent to someone through the mail to
pay back a debt or left in a sealed envelope with a will as a loophole to beating
immoral probate taxes. You can even donate the "Sparbuch" to the Save the
Whales Foundation if you are so inclined.
Furthermore, the "Sparbuch" is completely safe. Even though it's not strictly
necessary a "Sparbuch" will usually be issued with a code which is needed
whenever withdrawals are made. The code is chosen by the customer himself
(no 007, please!) - the way it should be for the customer knows best what is
easiest for him to remember. If the "Sparbuch" is lost, one quite simply applies to
the bank, gives the name (if any) of the account, the account number and the
code - the so called "Losungswort) - and a new "Sparbuch" is issued, usually
with no charge.
When you do have an Austrian "Sparbuch" account, you have created that
very important first step towards opening bank accounts in other countries in
whatever name you wish. If for example, you want to open an account in some
tax haven where you wish to stash some of the "mother mode", quite simply
write to open an account in a name suitably different from your own and give the
Austrian bank as a reference. In due course you will have little difficulty getting
international credit cards from our tax haven bank with references from an
Austrian bank where you never showed an ID at all.
An enterprising PT friend of mine let me have a peek at his Gold American
Express card made out to "Scrooge McDuckle". Needless to say, it's not
advisable to use this card in English speaking locations. If you wish to keep a
good chunk of liquid funds available that you may stash just about anywhere, or
even bring with you on your travels, the "Sparbuch" account is the perfect
solution.
Another nice feature of the "Sparbuch" account is that you don't have to
fear the local authorities when crossing the border of countries that put a
restriction on the amount of money you may bring in or out with declaration or
confiscation. The "Sparbuch" is not considered cash or any other "monetary
instrument". Many big-moneyed clients travel throughout Europe on business
and pleasure with one or two, five-figure "Sparbuchs" in their possession, fully
protected by "Logungswort", to meet any type of deal that may come up. It's only
a quick trip to Austria for instant untraceable cash.
A Few Disadvantages: Being a truly secret bearer passbook account, a
"Sparbuch" usually doesn't offer high interest rates - generally in the 3-5% range
with slightly higher rates for opening an account with a 12 month notice of
withdrawal.
A "Sparbuch" account may only be opened in Austrian shillings which is not
in the EMS (the European Monetary Scam). This may be a blessing in disguise
rather than a slight drawback since the Austrian shilling for the past few years
has been tied to the Deutsche mark. The Austrian shilling has been almost the
most stable and reliable currency in Europe over the last two decades. In the
real world, the Austrian shilling offers a greater degree of stability than the Swiss
franc.
function until you die. Then, the trust operates to transfer your property privately,
outside of the reach of probate, to the specific individuals or organizations to
whom you wish to leave your worldly possessions.
What is probate? Why do people try to avoid it?
Technically speaking, probate is the process by which one proves the
validity of a will in court. If there is no one contesting the will, this should not take
long. If there are complications, probate can take years. For those of you familiar
with the works of Charles Dickens, recall "Bleak House" and the neverending
probate case of Jarndyce vs. Jarndyce.
Probate has come to mean not just proving the validity of the will but the
entire administrative sequence involving the passing of an owner's title to
property after the owner's death. The deceased's property is inventoried and
creditors are identified and paid after the payment is made to the estate's
attorney, executor and tax entities.
The term "probate" also identifies the court which has jurisdiction over the
estate probate and administration. Probate court also has jurisdiction over the
guardianship of minors and mentally incompetent adults. All wills go through
probate.
The average length of the probate process is twelve to eighteen months.
Any estate transactions in that time must be approved by the probate court.
This can create havoc for beneficiaries. Since a living trust replaces a will
and doesn't need validation from the probate court, considerable time and
hassle can be saved.
This, then, is the purpose behind living trusts. The trust is simple to
establish and, when carried out, makes it easy to transfer property. The trust is a
matter of explicit instructions as to who gets what property after the owner dies.
Like a will, the trust should cover all expected and unexpected events that might
occur. The details tell the designated trustee how to use the money and property
in the trust.
A living trust is a capable substitute for a will and a document that more and
more people, disillusioned with the probate system, are turning to in their estate
planning.
Transfers
The purpose of the living trust, as mentioned, is to be able to transfer
property to a designated beneficiary(ies) without the usual hassles associated
with wills and probates.
However, your living trust can't transfer property it doesn't own.
Therefore, the first step in making the trust effective is to transfer ownership,
or title, of a property to the trust's name. It's safer to transfer the title to the trust's
name rather than to the name of the trustee since it is more likely the trust name
will continue even if you change trustees.
For the purposes of transferring title into a trust's name, there are two
classifications of property: that which has an ownership document and that
which doesn't.
Property without ownership documents include the following:
household possessions and furnishings;
clothing and furs
jewelry
Trustees
When you establish a living trust, you must name a trustee. In fact, you
should name both an initial trustee and a successor trustee in the event the initial
trustee becomes incapacitated and cannot serve.
The trustee is the individual who or institution which actually manages the
trust assets that you transfer in, according to the specific instructions you've
given. The appointment is important, as this person or entity will have the
responsibility of honoring your wishes your after death.
The initial trustee is, most often, YOU! That's why it's called a living trust.
Since it's revocable, you can change assets in the trust as circumstances
dictate. While you're alive, the trust can conform to your specific wishes.
It is important to understand this: a living trust does not take the control of
your property from you- until you die. You handle it while you're alive. It's merely
tucked away in a convenient legal vehicle that takes over immediately after you
die and passes the property along to the people you designate without publicity
and without the potential lengthy delay and costs of probate.
If you've set up a marital living trust, usually both spouses are cotrustees.
When one spouse dies, the other spouse continues as the initial trustee.
It is possible to name someone else other than you and/or your spouse to
be the initial trustee. It is uncommon and unnecessarily complicates your trust
arrangements as you must keep separate records of the trust. You should work
with your attorney to select a capable trustee if you wish.
Because something could happen to the initial trustee, it's vital to name a
successor trustee. This is the individual who will be distributing your assets
according to your wishes after you die, or if you become unable to manage the
trust due to injury or illness. For property not held in the living trust, creation of a
durable power of attorney and a health care durable power of attorney can
designate someone else to carry on with the non-trust assets.
If your trust is a marital one, the successor trustee would not take over until
after the second spouse dies.
The successor trustee could also die or become incapacitated, so it's
imperative that you name an alternative trustee, too, to take over as successor in
that circumstance.
What does the successor trustee do? If your instructions are explicit as to
how you want property transferred at your death, then the job is somewhat
easier. However are still things you must do:
Obtain copies of the death certificate of the initial trustee
Present death certificate, copy of the living trust and proof of
successor trustee's identity to the various financial institutions or
organizations that have the property/assets
Prepare documents of title transfer from the trust to the
beneficiary(ies) as appropriate.
Supervise distribution of trust assets where no title is involved.
If necessary, the successor trustee may manage a child's trust if the
beneficiary is a child who has not reached the age at which the
initial trustee designated the property to be transferred. The
successor manages the property for that individual until he or she
reaches the specific age outlined in the original living trust. This may
Wills
A will is a written document detailing instructions as to how you want your
assets divided up after your death. You might also include information as to a
child's guardianship, how (or if) you are to be buried and the appointment of an
executor of your will.
The two main types of wills are:
attested
holographic
The attested will is the most common. It is usually prepared by a lawyer in
typewritten form and signed in front of several witnesses who have no benefit in
the will whatsoever.
The holographic will is made without a lawyer, written on plain paper in your
own handwriting, dated and signed. If your wishes are clear, this should be as
effective as the attested will. It will more likely be disputed than an attested will
and be subject to the interpretation of the courts, where anything could happen.
Attested wills are safer for carrying out your final instructions.
Most people think they should have a will. Many people do, however, do not
have a will because estate planning is generally not a high priority to many
people nationwide. There are many fine estate planners around the country who
work with individuals, but the average person doesn't put much thought, time or
effort into addressing this important financial task of preparing for asset
distribution after death.
Attorneys will be glad to help you do an attested will and may not charge
much to do so. They'll get paid later- when the will goes through probate court.
The payors will be your beneficiaries, who will see assets drain as a result of
legal fees and court costs.
Probate can be lengthy, especially if the will and estate is a complex one.
Not only does a will diminish the value of the property, it may also slow down the
time it takes to actually transfer it to the designated beneficiary.
A will does let you choose your heirs, but the advantages stops there. You
will not avoid probate, estate taxes (if any), death income taxes, privacy of
transfers or incapacitation. These are the primary reasons one should set up a
living trust INSTEAD of a will.
There is a will that is important when establishing a living trust. It's called
the pourover will. This document puts any assets you failed to place in your living
trust during your lifetime into the trust after your death. In effect, it "pours over"
assets from the will to the trust. This document may also name the guardian for
minor or incapacitated children.
The pourover will is a "failsafe" device to ensure that any property left out of
the trust will be placed there. It is also a backup to the living trust in case it's
invalidated for any reason. The pourover will can substantiate the trust simply by
reaffirming its terms. It would be difficult for one or more heirs to challenge
successfully both a living trust and a pourover will if their conditions and
instructions are similar.
Estates
What is an estate? Exactly what are we trying to protect with a living trust?
An estate is essentially all the property you own (your assets) minus
anything that you owe (liabilities). This calculation, assets minus liabilities, will
yield a net worth for you. This is the value of your estate at the time it is
calculated.
The size of your estate is important. More important is the value of your
taxable estate. This will equal, roughly, the value of your estate less property left
to your surviving spouse or to charity.
The other estate calculation of note is the probate estate. This is the portion
of your estate that must go through probate before it can be distributed. Leaving
your assets via a will puts them through probate.
The difference between the taxable estate and the probate estate should be
considerable if you plan your estate properly. For example, let's say your estate
calculation is $400,000. By transferring the title of your house, valued at
$250,000 and your Chrysler stocks, valued at $75,000, to a living trust, you have
reduced your PROBATE estate by $325,000 to $75,000. Your goal should be to
try and reduce the probate estate to zero if possible.
Living trusts will save probate costs. They do not avoid death income taxes.
There are other things you can do, planning wise, to reduce your taxable estate,
but a living trust is not one of those. You can and should, however, reduce or
even eliminate your probate costs.
Proper estate planning, in general, can accomplish all of the following:
select your heirs
choose amount and time of distribution of inheritance to heirs
avoid probate
eliminate or reduce federal estate taxes
eliminate death income taxes
maintain control over your assets
maintain both privacy and flexibility
leave directions and the power to act if you are incapacitated
leave funeral instructions
leave organ transplant instructions
Taking Inventory
To value your estate from both a net worth and living trust planning
standpoint, you must inventory your assets and calculate your liabilities first.
Assets: This is the first calculation. You should list each item and describe it,
indicating whether you own the property outright or the percentage of your
ownership if not. Then list the actual value of the portion you own.
Begin with your liquid assets:
cash
savings
checking accounts
money market accounts
CDs
precious metals
Next, list other personal property:
stocks
mutual funds
bonds
other securities
automobiles
jewelry
furs
art works
antiques
tools
collectibles
life insurance
Then, list your real estate holdings including your own home(s),
condominiums, mobile homes, land, etc.
Finally, list any business personal property including partnership interests,
copyrights, patents, trademarks, stock options, etc.
Add these up and you will have the total amount of your assets.
Then, list your liabilities by name and the amount you owe, including:
personal loans (credit cards, bank)
mortgage loan(s)
taxes due, current or past
life insurance loans
other personal debts
Add all of these numbers up to arrive at your total liabilities. Subtract your
liabilities from your assets to arrive at your net worth.
This allows you to place a value on your estate. You can see how close
your estate is to $600,000. You can inventory property that has to be itemized for
the living trust anyway. You can separate property by titled ownership and
nontitled property.
Summary
Knowing where you are in valuing your estate is an excellent start to your
estate planning program. The use of a living trust is a clear example of using
estate planning to help you (and your heirs) save money and to avoid the
hassles of court and lawyers.
Living Trust Basic Form
This form creates a revocable living trust. A living trust is a testamentary
device, used instead of a will. Popularized by the infamous "How to Avoid
Probate" books, Living Trusts are a type of estate planning which have become
quite popular for many reasons. Although touted as a substitute for traditional
wills, a living trust also requires a pour over will. A pour over will bequeaths any
assets which have not been conveyed to the living trust, into the trust estate.
Virtually all living trusts are "revocable" which means that the terms can be
changed during the lifetime of the settlor. Irrevocable trusts create extensive tax
consequences and are not suitable for regular estate planning. The trusts
provided is revocable.
REVOCABLE TRUST
ARTICLE I
CONVEYANCE OF PROPERTY TO THE TRUSTEE
Settlor herewith assigns and conveys to the Trustee, the property described
in Exhibit "1" hereto. All of said property, together with any income, accessions
and additions herein, shall be held by the Trustee in trust for the purposes set
forth in this revocable living trust.
ARTICLE II
REVOCATION
Settlor hereby reserves the right to revoke this trust at any time, by written
instrument. Revocation shall be effective upon mailing or delivery to the Trustee
of a notice of revocation. Trustee may resign upon 30 days prior written notice to
the Settlor. For purposes of this agreement, notices shall be delivered as follows:
TO SETTLOR
[Write in your (the Settlor's) name and address below]
_______________________________________________
_______________________________________________
_______________________________________________
TO TRUSTEE
[Write in the Trustee's name and address below]
_______________________________________________
_______________________________________________
_______________________________________________
ARTICLE III
SUCCESSORS TO THE TRUSTEE
ADDITIONAL TRUSTEES
The Settlor during his lifetime may from time to time add additional Trustees
by notice to the then existing Trustees. In the event there are multiple Trustees,
the majority shall in any matter in which the Trustees disagree control. In the
event that the Trustees are evenly divided in the actions to be taken, the Trustee
with the longest tenure of service shall cast an additional vote to determine the
matter.
ARTICLE IV
WITHDRAWALS BY SETTLOR
The Settlor may from time to time withdraw any portion of the corpus of the
trust (whether capital or interest) by written notice to the Trustee. The Trustee
shall be acquitted of all further responsibility for any assets so delivered upon
receipt by the Settlor.
ARTICLE V
POWERS OF THE TRUSTEE
The Trustee shall have the power to do all acts, institute all proceedings
and exercise all rights, powers and privileges that an absolute owner of the trust
property would have, subject always to the discharge of Trustee's fiduciary
responsibilities.
I further direct that the Trustee shall act without bond. Further, this Trust
shall be administered without the necessity for an administration thereof to be
through the court system. No entity dealing with the Trustee shall be required to
investigate or to confirm the Trustee's authority to enter into any transaction or to
administer the application of the proceeds of any transaction.
ARTICLE VI
COMPENSATION OF TRUSTEE If the Trustee is an individual, then the
Trustee shall serve without compensation, but with reimbursement for
reasonable and ordinary expenses. Nevertheless, the Trustee if an attorney shall
be entitled to compensation for legal services rendered to the trust, or if an
accountant, for accounting services rendered to the trust.
ARTICLE VI
DISPOSITION OF TRUST PROCEEDS
After paying the necessary expenses incurred in the management and
investment of the trust estate, including compensation as provided for herein, the
Trustee shall accumulate the same during the lifetime of the Settlor. After
Settlor's death the Trustee shall distribute the net income of the Trust in the
following manner:
and is not survived by lineal descendants, the distributions from the Trust shall
be adjusted to pro-rata increase all other shares.
ARTICLES VII
INVASION OF PRINCIPAL
After Settlor's death, the Trustee may apply so much of the principal of the
trust for the use of the beneficiaries at such time or times as in Trustee's
discretion Trustee may deem advisable for their health, education, support or
maintenance. Any amounts so applied to the use of any beneficiary shall be
charged against, or deducted from, the principal of any share then or thereafter
set apart for said beneficiary.
ARTICLE VIII
NON-ASSIGNABILITY OF THE TRUST PROCEEDS The interest of the
beneficiaries of this trust shall not be assignable, and beneficiaries shall not
have the right to pledge, assign, convey, or otherwise transfer, lien or encumber
any portion of the income or principal of the trust. All payments provided for by
the beneficiaries herein shall be made directly to them or their guardians as is
provided herein.
ARTICLE VIII
DISTRIBUTIONS TO MINOR OR INCOMPETENT BENEFICIARIES The
Trustee in his discretion may make payments of income or principal to any minor
or incompetent beneficiary by paying the same to the minor or incompetent's
guardian, or to the person having control over the minor or incompetent, or by
direct expenditure for the benefit of the minor or incompetent. However, the
Trustee may also pay an allowance in such amount as he may see fit from time
to time to the minor or incompetent. Further, in the discretion of the Trustee the
distributions for a minor or incompetent beneficiary may be accumulated and
shall thereupon be paid to the minor or incompetent upon their disability being
removed. Any payment under this Section shall operate as a full discharge of the
Trustee as to such payment.
ARTICLE VIII
ACCOUNTINGS
The Trustee shall, after the death of the Settlor provide a semiannual
accounting to all competent, adult beneficiaries detailing the transactions, if any,
of the trust. The same shall not be required to be audited, although the Trustee
may, in his sole discretion, may cause an audit to be performed from time to
time.
ARTICLE IX
LIQUIDATION OF TRUST
If at any time the total of the principal and income of the trust is less than
$500,000.00, the Trustee, may in his absolute discretion, close out the trust by
paying the proportionate shares of each beneficiary to them. The Trustee shall at
that time deliver a final accounting to each beneficiary. Upon payment, the
Trustee shall be discharged from all further duties.
SECTION X
PERPETUITIES SAVINGS CLAUSE
Notwithstanding anything to the contrary herein contained, the trust created
by this agreement shall cease and terminate as is provided in Sections IX, 21
years after the death of the last survivor of trustors and all issue of trustors living
at the date of this agreement.
SECTION XI
DISTRIBUTION OF DIVISION IN KIND
On any distribution from the trust, whether it be an ordinary distribution or
one of principal, or a final distribution, the Trustee may apportion and allocate the
assets of the trust estate in cash and partly in kind, in Trustee's discretion. The
valuation, whether based on an appraisal, or not, made by the Trustee shall be
binding on the beneficiaries.
SECTION XII
LITIGATION OR COMPROMISE OF CLAIMS
The Trustee may compromise, or abandon, at Trustee's option any claim or
claim against the trust, or subject the same to arbitration. Or, the Trustee, in his
absolute discretion, may litigate any claim in favor of or against the estate.
SECTION XIII
NOTICE OF EVENTS
Until the Trustee receives notice of any death, birth, marriage, or other
event on which the right to receive distributions is based, the Trustee shall incur
no liability for any disbursements or distributions made in good faith. This clause
shall not prevent the Trustee from seeking restitution of any payments made in
error in his discretion.
SECTION XIV
DEFINITIONS - GOVERNING LAW
The words "child", "children", "descendants" and "issue" shall include
children legally adopted and the lawful descendants of such adoptees. This trust
shall be governed by the laws of _________________ [Put State here.]
SECTION XV
SEVERABILITY
If any provision herein is found by a court of competent jurisdiction to be
invalid, the remainder shall govern. Dated:
____________________________________
__________________________________________
Notary Public
My Commission Expires: ____________________
BY WILLIAM G. SCHLAKE
"If you can actually count your money then you are not really a rich man." J.
Paul Getty, American business executive 1892-1976."
To most people having a Swiss Bank Account is something for the super
rich, crooks, dishonest government officials or just a good way of "hiding away
one's ill-gotten gains." That's nothing but fiction and a common plot used over
and over again in a lot of Hollywood's B movies. There's nothing illegal or "fishy"
about wanting, or having a Swiss bank account.
The truth is Swiss banks welcome accounts from foreign residents all over
the world - especially the "West," and a vast number of average Americans have
accounts all over Switzerland. The main reason for wanting a Swiss bank
account has to deal with the legendary privacy such an account provides.
The Swiss have some of the tightest regulations in the entire world as far as
who can gain access to your account. If you're looking for a way to "protect'
assets from snoopy investigators, a Swiss account can be the ideal place.
The "big five" Swiss banks are listed below. All are familiar with foreign
accounts.
The Swiss Credit Bank in Zurich
The Union Bank of Switzerland
The Bank Leu (AG) in Zurich
The Swiss Bank Corporation in Basel
The Swiss Volksbank in Berne
To locate the current addresses of these banks and many others, visit a
Swiss Consulate located in most major US cities, or visit your local library for
further information.
Opening a Swiss account is much the same as with any bank. If you're
making a truly large deposit most people prefer to do so in person. If you decide
to open an account by mail, you'll first have to request the forms needed to open
an account; fill them out, then get your signature verified at a Swiss Consulate or
any of their affiliated banks in this country. This procedure is much like what one
does to open a mutual fund or other securities account and is nothing more than
a bit of red tape any financial institution puts you through and not an invasion of
your privacy.
While we're on the subject, its best to send your deposits by money order
which offers the most privacy. Bank drafts are also acceptable, but avoid using
bearer bonds or securities when making your deposit or you're required to file a
lot of red-tape at tax time. For protection have your lawyer execute a "power of
attorney" over your Swiss account. Unlike American law the Swiss still consider
such legal instruments valid even after a depositor's death.
If you're not comfortable leaving a "power of attorney" with the bank,
discuss options with your legal counsel in case of your disability, or death.
OK, so much for the "how," of opening a Swiss Bank account, now it time
for a little information on the "Why." The main reason for having a Swiss bank
account for most people has to do with keeping one's financial status a secret,
and protecting one's assets from "attack."
Swiss banks offer the same range of services of other banks: checking
accounts, savings accounts, custodial accounts, etc. They also will hold other
valuables like stock certificates, gold, silver, and other property for a fee. Like
other Swiss accounts, they are protected under Swiss law from any snooping
unless you're engaged in criminal activity.
When it's time to make a withdrawal, it can be paid in the currency of your
choice. Swiss francs, American dollars, whatever you would like.
Unlike American law where law enforcement agencies, the judicial system,
and private citizens can gain access to all kinds of financial information under
Swiss law, except for extraordinary circumstances neither the bank's officers or
the bank's employees are allowed to reveal any information, relative to any
account to anyone, including the Swiss government.
No private citizen, or their legal representative can ever receive any type of
information about any one's Swiss bank account under any set of conditions.
That includes all types of legal proceedings that the Swiss classify as "non-
criminal behavior."
The Swiss consider tax evasion and many other "crimes" under US law as
"political offences." Things like divorce, inheritance disputes and bankruptcy
cases are examples of "private matters," and as such the secrecy of the account
is protected from any legal action to verify the presents of, or attempts to seize
any assets.
There are some notable exceptions. Three types of activity which the Swiss
consider illegal, and are bound by treaty with the United States to "open" the
account for possible legal proceedings are: organized crime activities, drug
trafficking, and "insider trading" of securities. In instances of this kind, the Swiss
authorities have the final say on whether or not to reveal any information.
The Swiss currently charge a hefty 35% tax on interest earned in Swiss
accounts but Americans get 30% of that tax refunded by showing that they're not
Swiss residents. To claim the refund there is a catch 22. You must identify
yourself, which of course give up your secrecy.
If you maintain the account in Swiss francs, and the franc increases in value
relative to the American dollar, you may also be liable for a capital gains tax
when you withdraw the money and convert it back to United States dollars. If you
sustain losses from any decrease in value they are usually not deductible.
There are no US restrictions on having Swiss bank accounts, but current
IRS regulations require you tell them what foreign accounts you have when you
file your annual income tax return. If you answer yes, the Internal Revenue
Service requires more paperwork.
Interest earned in a foreign account is still taxable under present US Tax
laws, but you usually get to offset foreign taxes that you may be required to pay.
Consult with a tax expert to learn what present regulations are since they
change frequently and are beyond the scope of this report.
"Let us all be happy, and live within our means, even if we have to borrow
the money to do it with."
Artemus Ward 1834-1867
But let's check it out in more detail: if you refrain from traveling; if you are in
possession of a valid second citizenship for emergency purposes already and
have at least some of your assets stowed away in safety (preferably not in the
country where you are living most of the time, nor at the place where you
actually work); if you are in no need at all of truly anonymous banking - yes, in
that case (and in that case alone!) - it might seem a sheer waste of time and
money to obtain a CP, unless you are into collecting that sort of curios.
However, that will hardly apply to most of us! Plus: you can never actually
know before some nasty streak of events whether you are really in safety or not,
can you? What if your country's regime changes over night? If suddenly you are
victimized for being a Mormon, a Jew, a WASP, a black, a Muslim, a gay, a
communist, a veteran, an environmentalist - or because your spouse holds a
grudge and denounces you as a child molester, a porn fiend, a pervert, a drug
peddler, a mobster? Think of all the possibilities inherent in a social and political
system based on conformist and permanent state controlled brainwashing! And if
that's not enough: how about the IRS or your local equivalent to that agency?
What, if - just IF! - they find out - or ASSUME! - that you haven't filled in the
proper return forms for that kid you hired last year as a baby sitter?
Granted that no one can actually guarantee you the efficacy of a CP when it
comes to planning your escape or actually fleeing a politically oppressive
system. A CP is an emergency document at best. As such, you should keep it for
yourself and resist any temptation to brag with it at parties or when on a drinking
spree with your buddies. Keep in mind that a CP just might make the difference
between life and death when pressed for fast, decisive and - more importantly
yet - effective action. However, there are other, more obvious uses for a CP,
which is why we highly recommend procuring one or more.
What else can I do with a Camouflage Passport?
Ah, now comes the really interesting part!
Granted that one of the most frequent uses CPs are being employed for
these days is "highly unofficial", it is nevertheless of great interest if you want to
anonymize your banking assets. This can be quite critical in a world where the
purported "Drug War" has led to an increasingly restrictive banking practice the
whole world over. While border guards and consular officials are absolute pros
when it comes to recognizing false foreign documents, bank employees usually
aren't. Thus, if your name is "John Smith" and you have a CP from, say, British
Honduras on the name "James Miller" and use it to identify yourself when setting
up a new account with a foreign bank (never do it in the place where you are
actually living or working!), you can insure total anonymity even if that country's
banking laws do not permit of such a thing.
Because the bank will not be aware of your true identity, they cannot give
you away even if they wanted to. (To make this point very clear: most banks,
foreign or domestic, almost never actually want to - they are usually being forced
by law or coerced by other means if they actually do tell on you. Nevertheless,
this will hardly make any difference to you when caught in the mills of the
administrative system. Moreover, you can never be sure when this is going to
happen - most any time could be right, depending on the winds of change and
current political developments - so "watch your ass", as the saying goes!)
Please keep in mind, though, that such a procedure is a criminal offense in
most countries. Obviously, the document alone is not enough, you have to
develop the bearing and behavior to go along with it. On the other hand, a
banker's job consists primarily of relieving you of your money, so the risk of
actually getting caught is pretty slim unless you botch the whole thing by not
adhering to the standard advice of always keeping a low profile. Better to look
and behave like an "average Joe" tourist or businessman from New Grenada
than trying an amateurish spiel at being a VIP of international renown, unless
you need that mask for some very serious reasons!
Are CPs legal?
Certainly, but a lot depends on how you use them. Possession is quite legal
in most countries including the United States and Canada. They are commonly
sold as novelty items and as long as you don't abuse them in an illegal manner,
you will hardly get into any trouble.
However, don't ever try anything illegal like leaving or entering the country
with a CP, never try it out in a traffic control, and most certainly don't ever try to
honk it off to someone else as a genuine item!
Actually, the latter has happened occasionally here and there. We frown
upon such a practice as it only makes life difficult for all bona fide people
involved in using CPs in a discrete, unobtrusive manner where absolutely
necessary, holding it in reserve for hard times i.e. emergencies. May you never
actually need it - but may you never go unprepared, either!
ASSET PROTECTION
SIMPLE SIMON
Creating a trust is simplicity itself. A lawyer usually goes to a "form book" or
these days, to a computer service. His secretary types in the name of his client
and indicates the type of trust document desired. The resulting "hard copy" is
printed out. This trust agreement form costs the lawyer little or nothing; maybe
$10. Which is indication enough that his charges are based, not on real costs,
but on the wealth of the client and the assets involved. That is, he is doing what
most lawyers do, charges his clients for whatever the traffic will bear.
During the period 1980 to 1995, thousands of wealthy people, on average,
spent US$50,000 each on lawyer's fees to accomplish the same results that you
can have by taking out a $99 A.P.O.T.(tm). Why is there such a vast price
difference, or should we call it an apparent discrepancy? In most cases its a
matter of perspective and where your head is.
On the other hand if you look for answers, soon enough you will find them.
Which explains why people who are generally hands-off, and therefore easy
targets, will pay $10 for a certain brand of Aspirin, when the identical product,
turned out by the same manufacturer, can be purchased, possibly with a little
effort and inconvenience, and the right contact, for $1.
In the case of the A.P.O.T. (tm), the effort and inconvenience are marginal,
and your contact is PT Shamrock who is an authorized facilitator of this "no
bullshit" agreement.
BULLET PROOFING
Due to the proliferation of lawsuits, government confiscation's, and new
laws enacted to "protect us" from ourselves, many if not all wealthy people,
especially in the United States, have set up Asset Protection Trusts. By having
title to assets like stock or real property held by foreign corporations or trustees,
these assets can be hidden and protected from creditors. At the same time
ownership benefits (like income) can still be enjoyed as before.
UNSHACKLED
American citizens are forbidden by law from investing their money in at
least 99% of the opportunities of the world. Before most securities can be
purchased by a US citizen, they must be "approved" by the Securities and
Exchange Commission. Gaining such approval is an expensive bureaucratic
procedure. It's much like winning an okay from the Food and Drug Administration
for a life- saving new drug. Most companies never bother. As a result, most of
the world's best performing mutual funds can't be legally sold in the USA or to
US citizens.
The way out of this dilemma is a comparatively simple one, which entails
establishing an offshore trust to hold these forbidden investments. From this
point of advantage you can often do considerably better than you can with the
very limited, legally approved deals for US citizens. Succinctly put, with an
A.P.O.T.(tm) you have the right to choose.
INVISIBILITY
If you are in dispute with a Federal Regulatory Agency, it is very easy for a
low grade bureaucrat to press a button on his PC. He enters your social security
number, and is able to quickly identify your bank accounts, securities, and real
estate. Another few buttons are pressed ... just like that your property is "frozen,"
and your bank and brokerage accounts are transferred to the government.
With your assets held abroad in an A.P.O.T. (tm), it is not possible for a
creditor to locate them with any precision. In fact it is virtually impossible to
confiscate trust assets. Why? The lawyers of bureaucrats and plaintiffs don't like
difficult investigations and long, drawn out court procedures. Especially if
lawsuits must be filed and pursued abroad. As a result, in most foreign
jurisdictions (unless the local governments are collaborating), not even Big
Brother can get at your assets.
While Americans cannot expect any protection in Canada or vice-versa, co-
operation in seizing the assets of Americans in most countries only comes into
play when the issue is involved with serious crime, such as drug dealers, child
porno rings, or bank robbers. Conversely, with an A.P.O.T. (tm) it becomes
possible for you to personally access your funds, instantly, in cash, twenty-four
hours a day, anywhere in the world.
It is also likely that if your A.P.O.T.(tm) assets are earning excellent returns,
you won't simply pull funds out for consumer spending. It is more likely that when
you need cash you will borrow against these offshore assets. In view of this
probability a credit line can be arranged in advance.
SHARK REPELLENT
It is well known that ambulance-chasing lawyers are constantly sniffing out
potential defendants by identifying high net worth individuals. By keeping some
of your assets in an A.P.O.T.(tm) you can lower your visible level of wealth. This
makes you a far less attractive victim. Before a contingent fee lawyer will file suit,
he always gets a full report on his target's assets. Since funds and properties
held in an A.P.O.T.(tm) are invisible (or at least less discoverable) much litigation
can be avoided or favourably settled.
The same reasoning, reducing your visible net worth, goes for repelling
other blood sucking pests and predators who seek an unwarranted share of your
wealth. The list includes burglars, kidnappers, extortionists, ex-spouses, tax-
collectors, disgruntled business associates, crooked cops, insurance sales
people, and bent bureaucrats seeking bribes. The less well heeled you seem,
the more of a repellent you become.
YOUR WORD
Particularly where your heirs are likely to squabble over their inheritance, it
is likely that most of your estate could be eaten up in legal fees. Also, in some
jurisdictions, the "forced heirship" law provides that you must leave all or a
certain percentage of your property to a forgotten separated spouse, or to a child
who detests you (and vice versa).
Assets in an A.P.O.T.(tm) can, upon your demise, be given to any person or
be used for any purpose you designate. Once again you have the right to
choose who gets the benefit of your estate. You don't have to let the State make
those choices for you.
MOBILITY
Many countries have controls on foreign remittances that make it
impossible to move money to where it is needed. Many Chinese-Americans
were criminally charged years ago for simply sending subsistence money to
aged parents on the mainland. Expat Cubans face similar risks today.
Wealth taxes and other taxes eat away at your savings and profits. An
A.P.O.T.(tm) can help you save on taxes, and allow you to spend or invest your
own money as you please. Certain "roll-up" investment funds convert taxable
income into non-taxable, unrealised capital gains.
WHAT IF?
What recourse do you have if a trustee doesn't do his job right? The most
important asset of any money manager or trust administrator is his reputation.
This is why it is important to deal with an established firm that has a good
reputation, in depth management, client references, real offices, real employees,
and good communications with customers. In taking out an A.P.O.T.(tm) you will
have such a trust administrator working in your interests.
Besides all the usual court remedies (which take too long and are too
expensive), your biggest element of control is that you can complain.
E-mail: mailto:CarltonPress@offshore-manual.com
Web site: http://www.offshore-manual.com
North America:
CARLTON PRESS INC.
Empire State Building, Suite 3304, 350 Fifth Avenue,
Europe:
CARLTON PRESS LTD.
St. Georges House, 31A St. Georges Road
Leyton, London E10 5RH, GREAT BRITAIN
Tel: +44 (0)171 681-3167, Fax: +44 (0)171 681-3168
ICQ# 16070169
BY ADAM STARCHILD
Consideration should be given to the acquisition of more than one passport.
The acquisition of multiple passports of course presupposes that you are willing
to accept multiple citizenship-and this is not at all a bad idea for many people.
With terrorism on the rise, international travel can be particularly hazardous to
citizens of certain countries. Hostage-takers and kidnappers who have
commandeered planes and boats have often looked at passports in deciding
who shall live and who shall die.
A second passport may also give you access to travel in countries where
your own passport might not be used because temporary or permanent travel
restrictions. If you think this can't happen to you, consider all the Canadians who
were refused permission to land in Spain a few years ago during a Spanish-
Canadian fishing rights dispute.
For others, the benefits of a second passport may not be quite as pressing,
but dual citizenship does nonetheless convey several advantages. Many nations
have laws which restrict the purchase of real estate properties.
Typically, coastal properties and those in large desirable metropolitan areas
are off-limits to foreigners. Such practices have been widespread throughout
Europe, Asia, South America-even in Mexico. Paradoxically, some of the
available properties have remained unsold for long periods of time, not because
they are outrageously priced but rather because locals could not afford to
purchase them.
The acquisition of a second nationality could be your key to living like a king
or queen in one of the world's most desirable cities. Financial advantages of dual
citizenship include the ability to purchase otherwise restricted shares in
emerging foreign companies. Many foreign stocks and mutual funds are only
available to local citizens. Issuers will require affidavits from potential buyers.
Present the appropriate second passport as proof of citizenship and you are
home free.
GET YOUR MONEY OUT OF THE COUNTRY BEFORE YOUR COUNTRY
GETS THE MONEY OUT OF YOU.
It's legal. It's easy. It's Invisible. Its Offshore. Many years ago I was in a
minor dispute with a government agency.
They were wrong. I was right. No question about it. They thought I owed
them a few thousand dollars in taxes. I knew they owed me considerably more in
rebates and refunds. We figured the case might be heard some years down the
line.
Maybe in some administrative supervisor's office; maybe in court. But more
likely, the odds were, that my high priced Certified Public Accountants would
settle the claim. Probably in my favor. That's what I paid them for.
It was no worry for me at the start. If the accountants couldn't work out
something, it would go to the lawyers. "My team" would insulate me. I was well
insured, and well protected against every contingency. So I thought!
Similar differences of opinion had been resolved by negotiation and
compromise a hundred times before. In those days, I had a sizable business to
run: hoards of employees, rents to pay and a big payroll to meet. There were
projects to complete. I was busy! Couldn't be bothered with giving a lot of
personal attention to a piddling small tax claim amounting to less than a day's
rent for my firm. So maybe I refused to take a call and had staff refer some
squeaky voiced government guy to my accountants. I didn't even remember the
incident. The disputed matter seemed a vary little thing, like a baby leech on your
butt when you're up to your eyeballs in alligators.
DOODOO HITS THE FAN
While at my desk, 9AM one foggy Monday morning, a good, reliable
supplier, "Mrs. Zanadu," burst into my inner office unexpectedly: "How could you
do this to me?" She was waiving my bounced check for $75,000. Her people had
done a good job and I'd authorized full payment for her on the prior Friday. I told
her, "Calm down- let's have a look?" I knew our check was written against a
good account. We had more than enough on deposit to cover this check several
times over. There was a credit line too.
"There's been a mistake," I exclaimed. "You take this downstairs to our
good friend, the Bank Manager, Mr. Moneypenny, He'll set things right!" I was
writing a humorous memo to Moneypenny, my bank manager about not smoking
any more grass. Told him to cash this attached $75,000 check immediately for
Mrs. Zanadu, and to kiss her fine fanny seven times. That was when my ex-wife
the former Morgana De Medici (actually La Fey) burst in screaming:
MORGANA [FIRE BREATHING LADY DRAGON] ENTERS HISSING
"You dirty, low down %$#@#$*. It's enough that you $#@$ me in our
divorce, but how could you do this to your own kid?" Her scenes were nothing
new. "My dear, sweet lady love of my life, what was this itsy bitsy anger all
about?" I asked. Sent Mrs. Zanadu on her way, and gently but firmly told
Morgana the Terrible, "Calm down darling sweetness, have a seat. Have this
cuppa soothing Tizana Tea I made for myself. Tell me what's on your mind.
Please dear. Don't be upset." "$$#@# you + your ^#@$#@!!% your tea"
She blurted, angrily, as my peace offering hit the wall breaking the cup into an
irretrievable archeological artifact. "The G-Men just seized your daughter's
Christmas and birthday money: Two Thousand six hundred thirty six dollars.
And if you, you %$$$#@#$, don't hand it over in cash in the next thirty
seconds, my lawyers, Stabbim Grabit & Ballsqueezer, will make you wish you
were never born." I knew better than to argue with Morgana, so I went into my
petty cash drawer and pulled out $3,000 cash. "No need to threaten me.
You know I love you still, and I love our wee baby. I don't know how this
happened. But I will take your word for it. Here, this three grand is for our little
Snookums. You keep the change and get your pretty hair done up in a Beehive
or whatever you like. You always look so beautiful when you're mad." I said it
(about her looking beautiful when she was mad) even though it wasn't
International Driver Permit is issued under International Law and valid for
five (4) years. International Driver Permit CANNOT be assessed points, revoked
or suspended.
Photo Scan! Your photo and signature are scanned and printed on each
card at Super High Resolution. Includes holographic security seal (not shown) at
no extra cost. Quality is guaranteed or your money back. IDP's are printed in
brilliant colours at high resolution.
IMPORTANT! State issued licenses supersede an international driver
license in the state or country they are being used. Also, an IDP is not valid in the
country of issue. If you do not understand this, DO NOT order the IDP.
PLEASE NOTE: All orders are processed and sent within 24-48 hours from
receipt of you're application forms (normal delivery time is less than one week.)
All personal checks may be held for up to three weeks, in addition to processing
time. Orders paid by cash or money order are sent immediately.
Important! Make all checks and Money Orders payable to Carlton Press.
ONLY US$200.
Forfurther information, visit our web page at http://www.offshore-
manual.com/cp16.html
Mail, fax or e-mail your orders to:
E-mail: mailto:CarltonPress@offshore-manual.com
Web site: http://www.offshore-manual.com
North America:
CARLTON PRESS INC.
Empire State Building, Suite 3304, 350 Fifth Avenue,
New York, NY 10118-0069, USA
Tel: +1 (212) 208-0998, Fax: +1 (212) 214-0438 ICQ# 19921677
Europe:
CARLTON PRESS LTD.
St. Georges House, 31A St. Georges Road
Leyton, London E10 5RH, GREAT BRITAIN
Tel: +44 (0)171 681-3167, Fax: +44 (0)171 681-3168 ICQ# 16070169
right to obtain a second passport (and therefore to travel) if the hapless citizen is
having any of a number of civil disputes with government, including tax disputes.
Even if the citizen is completely in the right he cannot leave. This would have
been inconceivable just ten, fifteen years ago. Unfortunately, things seem to be
getting worse rather than better and many thoughtful observers are becoming
quite concerned for the future of freedom. For the moment our firm is holding
open a window of opportunity that allows one to obtain what many forward
thinking individuals now consider an essential element of insurance against
further loss of freedoms. How long we will be able to keep this window open is
uncertain at this time, but many feel that this is a very appropriate moment to
obtain supplementary citizenship, against some future "rainy day".
Question. Which countries can I visit without visas?
Answer. For St. Kitts/Nevis, a Commonwealth country, the major visa-free-
travel countries are limited to: Bahamas, Bermuda, Denmark, Finland, Hong
Kong, Korea, Norway, Sweden, Thailand, United Kingdom and Venezuela. Visas
are required for all other countries. We do not recommend St. Kitts/Nevis
passports at this time. Regarding the Bahamas, another Commonwealth country,
the major-visa-free-travel countries are more extensive than Belize and St.
Kitts/Nevice. Bahamian documentation is also not recommended at this time due
to the large investment required to get involved. If you already have an excellent
passport, we do however, recommend the Bahamas as a domicile for you to
obtain Permanent Residency. The island lifestyle is superb and the available tax
benefits for Permanent Residents are very advantageous.
The Republic of Ireland, a respected member of the European Community,
offers the best visa-free-travel in the world, plus holders of Irish passports can
live and work without a visa in any EC member country. Effectively if you or your
family are Irish Citizens, you become citizens of the UK, France, Germany, Italy,
Netherlands, Belgium, Luxembourg, Spain, Greece, Denmark, Portugal and
soon Austria, Sweden and Finland. The cost for your entire family to become full
naturalized citizens of Ireland in 90 to 120 working days is substantial. If you can
afford it, then without doubt Ireland is the top of the list. Our next best selection is
Venezuela which provides excellent Visa-free-travel at a fraction of the cost of
Ireland.
Question. Is it difficult to obtain visas?
Answer. All of the Central and South American countries have excellent
diplomatic relations and visas are easily obtainable (while you wait or overnight).
You can apply in your country of "residence". Commonwealth countries require a
longer wait.
Question. Where do I take delivery of my passport?
Answer. Delivery is normally made in Switzerland which is greatly to your
benefit. Switzerland is the easiest country to enter on your present passport and
if you like you can travel out of Switzerland on your new passport. The Swiss do
not stamp visa-free passports either upon entry or exit. Passports that need
visas like St.Kitts/Nevis and the Bahamas will be stamped. Delivery can also be
made throughout the world by courier service. The price includes air courier
delivery from the country of origin to you.
We also offer a personal delivery service (for a minimum of five orders)
whereby the completed documents will be picked up and delivered to you by a
personal courier at a fee of US$300 per passport to North America or US$600
per passport to selected European countries, Asia and the Far East, plus air
travel expenses
Question. Why is there an additional cost for family members?
Answer. A few countries such as Argentina and Bolivia allow additional
family members to be included in the original passport which greatly reduces the
cost to additional family members. However the countries currently on offer issue
a separate passport for each family member and the processing time is the
same for each. Remember a passport is for life, so even if a child is newly born,
he will need a passport to travel and the cost is the same. There are however
reduced rates, in some cases, for children under the age of 18 years. If family
members are processed at a later date than when the original application was
processed then the cost is the same as the original, as the processing
implications are the same.
Question. For how long are passports valid and can they be renewed?
Answer. Most passports are valid for ten years, but may have to be
extended at the end of five years. This is not a formal renewing process requiring
new forms and photographs. Your present passport is simply taken to any
Consulate and is stamped, extending it for a further five years, usually while you
wait. At the end of ten years a new passport will be issued through a Consulate
or Embassy, new forms and photographs are required. The process will take a
few days depending on Consular policy and upon passport traffic at the
particular office.
Question. How is payment made and is my money at risk?
Answer. We are obliged to pay in full, in cash, in advance for your passport
package (which is only of value to you) before your application is even
considered. Your full payment therefore must be placed in an escrow account
with Swiss Bank corporation (SBC), one of five remaining AAA rated banks in the
world or another legal Firm on the consultants choice. The money remains your
property while it is in the account. It takes two signatures (yours and that of our
representative) to release the funds. The money is only released to us when you
receive your passport package. If you do not receive satisfactory delivery by a
specified time then your money (upon your request) is returned to you in full. You
are never at risk. We assume all risk.
Question. Are prices negotiable?
Answer. All prices are fixed. To the best of our knowledge we have the only
reputable organisation offering these services. We have an impeccable record of
delivery, which we are very proud of. We will deliver valid passports, valid ID
cards and valid drivers licenses through the naturalization process in the
specified time, waiving the normal 3 to 5 year residency requirement and under
absolute confidentiality and security, delivered to your door. Our fees are not
expensive for the service offered and you receive a degree of integrity and
reliability that is absolutely without equal.
There are many travel documents of dubious validity being sold by other
firms at the moment, you can be totally confident that those supplied by us are
exactly what they are represented to be.
Question. Are there any countries on offer but that you do not recommend?
Answer. As a last resort, we will offer Paraguay, Chile and Peru. We will not
however accept any responsibility for these countries because of constant
political and legal changes. There are also potential problems related to
customs, immigration and passport renewal procedures.
Question. I am a little sceptical. What else should I avoid?
Answer. Remain sceptical, Investigate thoroughly before you part with your
money. Obtaining a second passport is a major step, and you must choose the
firm with which you deal as carefully as you would choose a surgeon. Avoid any
firm which asks for advance up front consultancy fees. You will never again see
your money or any documents. Your money must go into a protected account
with a reliable bank where it takes your signature to release any funds. This is
the only way your money is safe.
Question. Are my affairs kept confidential?
Answer. We are professionals of many years standing. When you become
our client your secrets and your privacy are absolutely safe. No one and no
other government or any other authority will be notified that you have applied for,
much less obtained, a second passport. It is a private affair.
Question. Is it possible for me to obtain documents under a different name?
Answer. Yes. The question often arises from Middle Eastern clients whose
surname might subject them to terrorism. Therefore once we are satisfied that
your record is free of criminal convictions, it is possible to apply under a different
name, by using a deed-poll legalised name change procedure. We can legally
change your name in the country from where your new passport will be issued.
To do this we must file the documents necessary for a legal name change in the
issuing country, which will then al low us to apply for the passport in the new
name. The name change will only be recorded in the issuing country and
nowhere else. The additional fee is US$7,500 but we must emphasise that
although it is perfectly legal to carry out this task, we must first be satisfied that
your intentions are proper.
Question. What advantages do Latin American passports have over other
passports?
Answer. Legally every Latin American has two last names. Firstly, his or her
father's last name, followed by his or her mother's last name. For example if your
name is John Doe because your father's name was Jacob Doe and your
mother's maiden name was Sarah Smith then your full legal name, carried in
your Latin American passport is John Doe Smith. Legally you may call yourself
John Doe or John Smith or John Doe-Smith, and legally you may travel in any of
these names, open bank accounts in any of the se names, hold assets in any of
these names and maintain credit cards in any of these names. Since most
people (i.e. creditors, friends, associates, tax authorities, and even ex-spouses)
have no idea what your mother's maiden name was this is a perfect opportunity
to protect your assets by using a legal alternative name. And it is 100% legal.
Question. Do you plan to offer any other countries in the future?
Answer. Yes. We do hope to be able to offer other countries in the future
under our expedited naturalization process, including several other EC
countries. For the moment however, the countries that we offer represent the
best choices available in the world today. If there was something better available,
we would have already made arrangements to be able to offer it to our clients.
The vast majority of our business comes from referrals by satisfied clients.
The reasons for this are simple: service, security and satisfaction. Our years of
experience, global research and worldwide contacts keep us instantly informed
of new developments. If we do not offer a particular passport, there is almost
certainly a very good reason.
Question. What is involved in the application process?
Answer. You will submit a completed application form (which we will supply
to you) along with passport photos, a police clearance, a copy of your present
passport and copies of your birth and marriage certificates. We cannot accept an
application if we have any doubt as to the intent or background of our client. In
the interest of time-saving, if you have ever been indicted or charged with a
criminal offence (except for political offences), or if you have ever been
imprisoned for one year or longer , please enclose full details with your
application.
In cases where a police clearance cannot be obtained because of political
instability in your country of origin, your attorneys affidavit, on our affidavit form
may be acceptable under some circumstances.
When you become our client, your application is received in absolute trust
and is covered by the Attorney-Client Fiduciary Privilege of total confidentiality. If
for any reason your application is refused, your entire file will be destroyed, and
your escrowed funds returned to you in full immediately.
Question. How do I start the Process?
Answer. Simply notify us through PT Shamrock Ltd. that you would like to
begin and tell us which country you desire. We will fax you the application form,
a copy of the escrow agreement, together with our final letter of transmittal. You
will then simply complete the application form, along with the other required
documents and a bankers draft in favour of the escrow account. Things will then
get underway immediately. Most of our clients prefer to wire-transfer their funds
directly to the Swiss Bank or other legal Corporation Escrow Account, so we also
provide wire transfer instructions.
After the payment is funded in the Escrow, we will consider your application.
We will inform you when your application is accepted and ready for processing.
At this point all you need do is sit back and wait for your papers to be delivered.
The process is really quite simple and absolutely secure.
Sincerely,
For and On Behalf of
CARLTON PRESS INC.
Dr. K.F.B. Weiss
President & CEO
E-mail: mailto:CarltonPress@offshore-manual.com
Web site: http://www.offshore-manual.com
North America:
CARLTON PRESS INC.
Empire State Building, Suite 3304, 350 Fifth Avenue,
New York, NY 10118-0069, USA
Tel: +1 (212) 208-0998, Fax: +1 (212) 214-0438
ICQ# 19921677
Europe:
CARLTON PRESS LTD.
money to Mr. Baker, who deposits it in Bank C. Bank C lends US$512 of Mr.
Baker's money to Ms. Stickmaker, who deposits it in Bank D, and so on. Notice
what has happened. The bank accounts of all of the parties still reflect the full
balances that they have deposited, even though most of the money was lent out.
As the original US$1,000 works its way through the system, it has multiplied to
almost US$5,000. All of this new money was created by the banks involved.
Because banks have this unique power to create money, the right to start a
bank frequently has been sought by financiers to benefit from their operations
and jealously guarded by the entrenched financial establishment. It is more
difficult to start a bank than to start perhaps any other business. Brains and
money are not enough; political muscle is necessary to overcome the opposition
of the established banks who enjoy their monopoly position and fight to preserve
it. The bank regulators have established a close relationship with existing banks.
Each side benefits from the status quo and no one wants to wee new
competition shake things up. The banks will take money and loan it out but they
resist letting their clients get into the game. The following pages explain how to
start an offshore bank and gain the benefits of banking.
GETTING STARTED
Although it is difficult to start a bank in most of the large bureaucratic
countries, there are many nations whose laws are not as strict. In fact, there are
jurisdictions where people have been able to start banks just by incorporating a
company with the word bank in its name. This has allowed a number of casual to
damage the reputation of other banks. When this happens, the local government
often restricts the issuance of new licenses and tries to clear the deadwood out
from among the old licensed firms. Other jurisdictions, such as the Cayman
Islands, have had reasonable bank regulations for some time and so have
prospered as financial centres.
When just starting out in banking at a low level of capitalisation, the best
strategy is to incorporate the bank in as good a banking environment as one can
afford, then to build up enough of a reputation for keeping commitments to start
doing business in a better location. Most of today's large banks started with one
person or a small group of people who offered nothing but their promises and
reputations.
Bank formation is a very political activity everywhere, so it's impossible to
know what jurisdiction will be best by the time this introduction is printed. Once a
site is selected, a local professional will help obtain the bank license. The local
assistance of a registered agent will be needed, in any case, and a well - known
local professional can open many doors during the organisation process. A
travelling to selected locale to find one. The formation process itself can teach a
great deal about how things are accomplished in the chosen haven and in the
offshore world in general.
A short aside about preparation is in order here. It is important to learn as
much as possible about investing before moving into the international investment
community. Someone uncomfortable doing business with his local bank or
broker will not enjoy overseas dealings. It is essential to put in the preparation
time required by complex ventures, otherwise one may be better off accepting
the services of an established international organisation.
One shortcut is to buy a bank that is already in existence. This saves a
good deal of time and should end up costing about the same as doing it from
scratch. There are companies that make their living by establishing banks and
then selling them to interested buyers. These companies range from clean to
shady and the normal rules apply about knowing what one is buying before
paying. It is a good idea to contact the regulatory authorities in the country where
the bank is located to check on the company's reputation. In addition, contact an
independent local professional in the area to get an opinion on the legitimacy of
the proposed sale.
ORGANIZING THE BANK
Bank organisation will be different for each jurisdiction entered. Many banks
are incorporated in two tax havens to facilitate business continuity in case the
laws (or the government) change in the primary county. The following decisions
are common to most banks and are followed by a typical application process.
CAPITALIZATION
Capital requirements vary from virtually zero to several hundred thousand
US dollars. The lower end applies to countries with no banking laws. The
potential banker merely organises a regular corporation and calls it a bank. The
more sophisticated tax havens, such as Cayman, The Bahamas, and St.
Vincent, have reasonably high capital requirements. This capital need not be
cash. Marketable securities, real estate, bonds, and even personal property may
be used, provided their value can be proven to the authorities. When carefully
structured, most of the money can be borrowed. The borrower must be able to
honour the note, however. In most cases, capitalisation must pass through at
least one other bank in the tax haven to prove that it does exist. A country that
requires the assets to remain there will not remain on anyone's list of desirable
tax havens. A country such as Anguilla couldn't begin to absorb that much
capital.
NAMING THE BANK
The selection of a good name is paramount to a bank's success. One's
good reputation and financial strength will be associated with the bank's name,
which will be difficult to change once business has commenced, both legally and
in the minds of clients and correspondents. The bank can create money only if
others accept its paper as money. this trust is dependent, in part, on the
institution's name.
The name should be clean and distinctive. Avoid long, wordy, difficult to
spell names. Consider selecting a name in another language to reflect
transnational business dealings: Banco de Carib, Banco National de Columbia,
or Bankhaus Caveat.
Other names create the impression that the bank is substantial, such as:
Swiss International Bank Limited, European Pacific Bank Limited, and The First
Bank of North America. European Overseas Bank was derived from European
American Bank and California Overseas Bank, both multimillion dollar banks.
Still other bank names are directly associated with the owner. Some
examples are: Kennedy International Bank and Trust Company, Alexander
Bankcorp Limited, and Banque Peterson. The bank name may also describe the
types of activities it conducts, such as EP International Trade Bank, Financial
Guarantee Bank, and Caribbean Savings Bank.
The international trademarks of other firms must be avoided. Some
corporations will sue anyone with names vaguely similar to theirs. Recently, City
Bank, a multibillion dollar New-York-based bank, filed suit against 4 million dollar
City Bank of San Francisco for having a similar name. While the small bank
could win the suit, it might not be able to afford the legal fees. In addition, this
type of harassment can affect acceptance of advertising by international
periodicals.
BANK DIRECTORIES
Bankers want to deal with other members of their club. There are thousands
of banks in the world, so even major ones may not be familiar to everyone. Two
recognised international bank publications looked to for information on the size
and legitimacy of banks are the International Bankers Directory, (better known as
the Banker's Blue Book), and the World Bank Directory, published by the R.L.
Polk Company.
Entry in one or both of these listings is highly advisable if a bank wants to
do business with organisations that aren't familiar with it or its associates. These
publications are serious about maintaining the quality of their listings. At
minimum, banks have to submit proof of incorporation. A new bank's
incorporator can probably handle the listings.
DIRECTORS
The bank's directors are elected by the shareholders to direct company
policy and appoint the officers of the bank. They are normally the largest
shareholders or their close associates. In some cases, outside directors may be
elected to advise on areas of expertise not available through the owners or
management. Large customers or potential customers may be included both to
add knowledge and cement business relationships. A bank directorship is a
prestigious and profitable position. The directors know that there is at least one
bank where they can get preferred treatment and they also receive a small
annual fee.
The stockholders of a bank sometimes prefer to keep their investment
confidential. For various reasons, they may not wish to appear to be associated
with either the ownership or management of the operation. In most tax havens,
the use of nominee directors will ensure this. These are appointed agents into
whose names the bank stock is transferred by agreement. They are the owners
of record but, per agreement, vote according to the instructions of the true
owners. A nominee will generally charge about US $ 500 per year for this
service.
RESIDENT REPRESENTATIVE OR OFFICE
All tax havens have local accountants, attorneys, bankers, or quasi -
governmental officers who act as local agents for banks or other businesses.
services that major banks cannot or will not offer. The remainder of this
introduction covers various services that have been successfully offered by
major international banks as will as tax haven banks.
DEPOSITS
The key to conventional banking profitability is for the bank to borrow
money at a low rate and lend it out at a higher rate. The least expensive source
of money is deposits: non-interest demand, interest - paying savings, and time
deposits.
The broader the deposit base, the more stable the bank's money costs will
be. The longer the terms of the deposits, the lower liquid reserves need be. One
St. Vincent bank was opened by a large US manufacturing company just to take
advantage of the US - St. Vincent float. The firm estimates that opening a bank
just to pay suppliers added US $ 500,000 to its profits. However, some debtors
are hesitant to accept foreign checks and will not authorise credit until they clear.
Since governments almost always accept these checks, they are an excellent
means of paying tax liabilities.
Another selling tool is the numbered checking account where no signature
is required, only the account number, although the secrecy regulations of most
tax havens do not require banks to even respond to inquiries about depositors.
Since each account has a number for accounting purposes anyway, this service
requires no extra effort. This offers clients the ultimate in confidentiality but
entails a heavy responsibility on the bank's part of protecting the identity of the
account holder. The account holder can have all checks and statements retained
at the bank or sent wherever requested. A post office box is recommended for all
confidential correspondence.
Savings accounts are an offshore bank's most attractive deposit service. A
tax haven bank is not required to report information on individual accounts to any
governmental agency. If the bank's client chooses to evade taxes in his home
country and deposit certain assets in his tax haven bank, he can considerably
increase the investment yield on his savings account. This is the simplest use of
a tax haven bank. It is a use over which the bank has no control.
This tax advantage means that the interest rate paid does not have to be
much higher than major bank rates. For example, the authors know of offshore
banks that paid 9 to 13 percent on US dollars while the Eurodollar rate was 10 to
11 percent. Interest rates vary with the amount and time period of the deposit. As
the offshore bank doesn't have a household name and isn't located in a major
money centre, it does have to pay slightly higher interest than major banks and
provide better, more innovative service. The offshore bank needs impressive
documentation, professional advertising, and an articulate staff. It must present a
substantial appearance so that people will trust it with their money.
Deposits are developed through business associates, family, friends and
the public. When advertising, the bank must consider the banking law of each
country in which it advertises. International publications with a multinational and
sophisticated readership, such as the Economist and the Herald Tribune, are
good vehicles for attracting clients. These ads should not be too pointed, so as
these services can be contrived to increase deposit and loan business. In most
cases, the fees are competitive with those in a particular market. A few telephone
calls can provide the prevailing rates.
The authors have noticed that mere mention of involvement in an offshore
bank sometimes elicits the comment. "Oh, dirty-money laundering." Some
people imagine that a tax haven banker spends most of his time in the back
room counting $ 100 bills.
A banker who does that type of business undoubtedly knew his customers
long before his offshore banking career began and would never talk about them.
The money would be deposited, sent to companies who would lend it to others to
disperse it even more. A convoluted trail is necessary to obscure from various
regulatory authorities the sources and uses of these funds. Corporations are
easily set up in tax havens such as Panama or Honk Kong, where little or no
reporting is required. As long as countries try to impose confiscatory taxes on
their citizens and interfere with free trade, money laundering will continue.
There is a related service field that is easier to enter: moving money out of
blocked-currency countries. Many countries restrict capital outflow. Whatever
reasons may cause a country to block currency will also cause its citizens to
want to get their money out. Offshore banks can help these people control their
own wealth.
There are at least as many ways of circumventing currency laws as there
are countries making them. One technique works like this. A manufacturing
company wishes to convert blocked currency to US dollars, move the US dollars
offshore, then sell the offshore US dollars at a premium. The company arranges
for a letter of credit to be issued by an offshore bank in its favour. The credit is
payable by a Honk Kong company upon shipment of some high-technology
equipment. This credit is taken to a friendly banker who lends the US dollars
ostensibly to buy necessary supplies from the US. The funds are transferred to
the offshore bank and deposited in savings accounts or certificates of deposit.
The company then sells the US dollar funds to nationals at a 25 percent
premium over the official exchange rate. After selling, it repays the loan in
blocked currency at the official rate. The items are never shipped and the letter
of credit expires. The offshore bank gets a fee for the letter of credit as well as
new deposits. The original company makes 20 percent on the exchange rate.
The offshore bank also charge excess prices for goods and services to
entities in these countries and then deposit the excess in their accounts. Here
again, the bank gets fees and deposits. This is known as "over-invoicing'. Over
and under invoicing for currency and tax considerations is, today, Honk Kong's
largest service industry.
Several offshore banks have been successful in providing letters of
accommodation which can aid third parties in obtaining financing for their
projects. This is simply a letter from the bank stating that, upon the deposit of a
specified amount into a "sinking fund", it will issue a letter of credit guaranteeing
the payment of a larger sum in the future. For example, the letter might require a
US $485,000 deposit to guarantee a US $1 million payment in 10 years. The US
carried out. This can be accomplished in almost every instance with proper
structure and transaction planning.
Almost all tax haven bank charters bestow the authority to carry on the
business of a trust company, to receive assets into custody on behalf of clients,
and to manage, administer, and invest them in accordance with their
instructions. Competitive fees are low for this service and the responsibility to the
client is great. All jurisdictions are seriously upset by any violation of the fiduciary
responsibilities of a trust. Trust laws are complicated and competent legal advice
is probably necessary for each situation before a bank gets into this business.
Providing management services for other offshore organisations should be
profitable, particularly if the bank has an office in the tax haven. In the case of
offshore insurance and trading companies, we have already seen that the tax
advantages, particularly when coupled with the back-to-back loans, makes
management easy to sell. The bank earns fees both for setting up these
companies and for managing them.
This can also be true with bank management. If one want a bank without
the added overhead of a walk-in office, anther bank with an office can be the
perfect agent. The managing bank knows the business, can answer questions,
and act as correspondent. Both banks profit, one from lower overhead and the
other from more fee income.
The running of an offshore bank quickly builds valuable experience in
investment, tax, trust, negotiation, and such areas. The bank can sell this
knowledge as a consultant. Since few people in the world have been exposed to
the many types of international services available, the bank can almost always
show clients where potential savings can be made. A reasonable consulting fee
structure helps avoid wasting time with the merely curious. The bank may waive
fees if the client does purchase its services.
However, since service is an offshore bank's best selling point, it will offer
almost anything to keep its clients happy.
RELATED BUSINESS
The broad business charter granted by most offshore banking authorities
enables banks to participate in profitable related financial activities. Each of
these can generate fees as well as new deposit and loan business. Insurance,
investment banking, mortgage banking, title and escrow, and fiduciary services
can all fit into the business plan.
This introduction has discussed how managing captive insurance
companies can generate income. The next logical step is writing one's own
insurance policies.
The organisation can reinsure those captive insurance companies already
under its management, as well as insuring or reinsuring its own (and its
associates') risks. The bank keeps the profits and the investment capital. Until its
reserves have grown enough to pay large claim, it should reinsure at a
comfortable level.
Reinsurance companies keep low profiles but are easy to find in the United
States, Europe, and most island tax havens. It is relatively simple to decide what
areas to insure. Compare premiums for the last five years with claims paid.
Check the most profitable insurance companies to see what lines they sell.
Consult an actuary before reinsuring for others; they keep track of statistical
probabilities of various claims and losses. Actuaries can be found in the
telephone directory of any major city.
An insurance company can also sell annuities, a lump sum payment that
guarantees the client a specified stream of income for life. The cost and payout
are derived from actuarial tables and suitable interest rates. Deposits derived
from annuities are particularly suitable for long-term investments such as real
estate. Accordingly, insurance companies can perform much of the same
investor services that banks do.
Investment banking, a related business which requires sharp financial,
marketing, and negotiation skills, can be quite lucrative. When underwriting a
large project, there are fees for packaging and marketing the issue. The
underwriter may negotiate a percentage of equity ownership or the project as an
added incentive. Deposits are created from the proceeds of the issue and from a
normal banking relationship with the client.
The prospectus is the primary document an investment bank uses to raise
money from the public. It must show a strong professional business plan and
detail a complete description of the venture and its risks. The successful
underwriting of a large project will bring the bank prestige as well as profit.
Mortgage banking is a less exciting but still valuable service. The bank can
invest in mortgages for itself or be an agent for others. Payment collections,
record maintenance, and remittances to the mortgages are an additional source
of fees. Entrepreneurs needing mortgage money can be cross sold such
services as financial guarantees, escrow loans, and tax reduction services.
A title and escrow company associated with the offshore banking and
mortgage banking business provides additional possibilities. The bank lends
money to a client who gives it to the escrow company to deposit back in the
bank. Thus the money never leaves the bank until the escrow closes. The
agreement can be written so that the escrow does not close until the client
resells the property or gets paid back without ever losing control of the money.
The bank receives escrow fees, loan fees and interest on the loan. The client
has tied up a large piece of property with little front money and can make a quick
profit on the sale.
This chapter has shown some of the ways that money can be made with an
international bank. Most of these techniques also apply to international
corporations generally. These techniques have worked for others. How far each
person can go with them or add to them will be determined by his or her
imagination, determination, intelligence, and salesmanship. The authors make
no ethical or legal judgements concerning the application of the techniques to
any specific case. Moral and legal standards vary widely among the jurisdictions
with which a transnational trader will probably do business. Accordingly, these
judgements must be left to the reader and legal counsel.
uncertainty arises from the fact that the ore is made up of complex gold-telluride
compounds that may be very expensive to refine. In spite of these problems, the
owner of Gilt Complex believes that the company's claim can be brought into
profitable production if enough money is raised. A number of social and business
associates have expressed an interest in investing but the funds they could
contribute fall short of what is needed to bring the mines into operation.
Because of the highly variable gold market, the delay inherent in a full-
blown SEC registration is considered unacceptable. As the company is in the
initial stages of development of its mining properties, its funds are already
committed to assessment of the claims, payments on equipment, and salaries.
There are no extra moneys available to pay for an offering of BDRs through
London as described in previous examples. An analysis of Gilt Complex Mining's
situation suggests that a two-stage procedure should be used to raise funds.
Step 1: Raise seed money. The first step is to raise as much money as
possible through domestic private placements. The owner's friends and
acquaintances, (numbering no more than the SEC-approved limit of 35), and
unlimited numbers of sophisticated investors, (those investing more than US $
150,000 in cash), can be approached and persuaded to invest.
Step 2: Seed money funds BDR London offering. This private-placement
seed money is then used to fund a Honk Kong holding company and BDR sales
in London as in the example of Quantum, Inc. These two steps complement one
another. The first phase provides money for the second and the second phase
gives the domestic private-placement investors an easily ascertainable fair
market value for their shares. All that they need do, if they wish to determine
what their shares are worth, is to find out what the BDRs are trading for in
London.
BUSINESS BALANCE SHEET LOANS
Wouldn't it be wonderful it one's business could create net worth just like a
bank? With an accommodating financial institution, it is possible. The case
history that follows shows how small businesses can use these methods to get
the financial help they need.
William Ballast is the owner of a wholesale distribution company. When one
of his suppliers announces a gigantic inventory sale, Ballast is eager to take
advantage of it. He knows that if he can increase his inventory with goods at the
lower price, his average unit cost will be lower and profits would increase
accordingly.
Ballast calls a financial consultant to discuss his problem. Ballast is advised
to submit a current balance sheet reflecting higher cash assets to obtain a more
favourable line or credit. Although Ballast favours such a move, he also wants to
avoid a long-term debt commitment. He fears that the interest payments from
such a debt would wipe out any gains made by buying the additional inventory
on sale.
Step 1: Owner borrows moneys from lender. The consultant suggests that a
personal loan be made to Ballast. The funds from this loan are to be placed in a
savings account in the name of Ballast's company. After the funds are deposited,
the company would have a new balance sheet prepared according to accepted
accounting practices, which would reflect its increased liquidity. With the stronger
financial picture presented, the supplier could be more favourably disposed
toward extending the line of credit. Ballast is convinced that this is a sound
approach and enters into an agreement to implement the plan whereby the
funds would be provided by a lender supplied by his consultant.
Step 2: Deposit loan proceeds in company account. When the funds are
lent to Ballast, he simply endorses the cashier's check to the bank on which it
was drawn. At the same time, a passbook for a savings account, containing an
identical balance and bearing the name of Ballast's company, is issued and
turned over to Ballast.
Step 3: Increase company assets on balance sheet. Based on the updated
balance sheet, the supplier increases the line of credit for Ballast's company.
After the new credit line is established, the funds, no longer needed, are returned
to the lender. The cost of the program was kept to a minimum and the desired
profits realised.
ESCROW LOAN
Robert Jensen knows of a valuable parcel of land that he believes could be
profitably developed. If he could get an option on the property, he could organise
a highly successful joint venture to develop the land. Jensen is afraid that if he
doesn't act quickly, someone else will buy the land from under him. He needs
time to secure funding for the option and line up partners for his joint venture.
Step 1: Secure option on land. Jensen convinces the landowner to give him
90 days to raise the total purchase price of US $2million. In order to hold the
land for 90 days, Jensen needs to deposit 10 percent in an escrow account as a
demonstration of his financial strength.
Step 2: Borrow money to open escrow account. Working with a consultant,
Jensen arranges for a bank to loan him US$ 200,000 and hold it in an escrow
company account on his behalf. After the account is opened, the company
provides Jensen with documents showing that the moneys are on deposit. The
escrow company then writes a series of letters indicating the steps being taken
to assure the successful completion of the transaction. The satisfies the seller
and gives Jensen time to put his investment group together.
Step 3: From joint venture. Potential investors approached by Jensen are
excited by the project and are especially impressed by the fact that Jensen has
already secured an option on the land. They agree to fund the project with
Jensen as equity partner and project manager. Jensen contributes his option.
Step 4: Substitute new escrow account. The joint venture then opens a new
escrow account for US$ 200,000 and substitutes it for the one originally opened
by Jensen. The old account is closed. The funds in the original escrow, having
served their purpose, are returned to the lender.
As a result of the above transaction, Jensen now holds substantial equity in
a commercial real estate development worth several million dollars. His only
costs were a few points for the loan, the escrow account, and the supporting
documents that went to the various interested parties.
If the reader can learn to think about money the way a banker thinks of it -
as a bookkeeping entry - then he can get his balance sheet to work for him. He
can also use this knowledge to provide sophisticated services to others through
his own financial service business. Balance sheet loans and bearer depository
receipts are natural products to sell through an international bank or financial
brokerage business.
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