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More And More Americans Look to Protect Their Wealth Offshore

Tyler Durden's picture




 

Submitted by Frank Suess via Acting-Man blog,

US Losing its Way

A wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.

~ Thomas Jefferson

Every time you think the US establishment can do no more to threaten the freedom and livelihood of the very Americans who contribute the most to the prosperity of the country, they increase the heat in the furnace by a notch with more cheap money and debt, additional laws and higher taxes. America, the land of the free, as it was rightfully referred to in the past, and certainly a beautiful place in so many ways, is in the process of destroying the very foundation it was built on.

 

850_400_cada-vez-menos-ricos-a-pagar-irs

 

It truly appears to have lost its way. The size of debt and unfunded liabilities in America is higher than in any other country in the world. No other country is plagued with the level of litigation that America faces. Nine out of ten lawsuits filed worldwide are filed in the US. The US tax code is so convoluted and extensive that even the highest paid and most qualified tax attorney in America can hardly ever give you a straight yes or no answer when asked for tax advice. Frankly, I sometimes wonder how even the most honest American taxpayer can stay out of jail.

 

global-relative-litigation-index-650x392

Global relative litigation index, via cyberrisknetwork.com

 

It should not come as a surprise that wealthy Americans have learned to protect their wealth from this concentration of risk by jurisdictionally diversifying their assets. In other words, they set up offshore trusts, companies, foundations or insurance structures to legally protect and grow what is rightfully theirs elsewhere. However, in consideration of all the recent IRS scare tactics and the hype in the media, it may come as a surprise that the number of Americans looking offshore is on the rise.

 

The Government’s Desperate Drive for Tax Collection

The US government and its various agencies – with the IRS certainly in the lead – are desperately trying to keep their wealthy taxpayers in check, putting offshore constructions under their regulatory microscope in hope of maximizing tax revenues. This hunt for tax cheats has been loudly publicized and employed to create the impression that every offshore account must be a scam.

The spin is simple: According to the IRS, Americans with assets offshore are trying to dodge taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others employ foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose. The IRS, in its battle for justice, is committed to do whatever it takes to hunt them down.

 

WeNeedATow

 

The IRS even goes so far as to list “offshore tax avoidance” as one of its “Dirty Dozen” tax scams for 2015. Clearly, by doing so, it is lying to the American people. Tax avoidance, contrary to tax evasion, is completely legal. And offshore tax avoidance is as legal as onshore tax avoidance.

FATCA, the ominous Foreign Account Tax Compliance Act, for instance, has been successfully deployed. In essence, it forces financial institutions around the world to become agents of the IRS (and without compensation, by the way). In fact, fiscally challenged states around the world are now more than happy to sign up on the principle and follow America’s lead. In the context of GATCA, which is the next level up from FATCA and where the ‘G’ stands for ”Global”, automatic exchange of taxpayer information between governments is on its way.

Citizen transparency is certainly en vogue, and not just in America. So far, outright capital controls have not been levied and don’t appear to be visible on the horizon. However, watching all this, one wonders how far governments are willing to go.

 

expatriates-us-citizens-renounced-chart-through-2014

Relative to the total US population the number is small, but expatriation has nevertheless been in a steep uptrend for a while now

 

Jurisdictional Diversification – Looking for Safety, not Tax Evasion

In view of all the hype and pressure, one might expect wealthy Americans to be frightened and keep their assets in the US. However, that is not the case. Not at all. A rapidly growing number of Americans are trying to protect and invest their wealth outside of US territories. More and more Americans are looking for second passports and are renouncing their US citizenship.

Clearly, the stark increase of financial repression is recognized as such. Contrary to the outcome that authorities wish to achieve, Americans who have the possibility to do so, continue to look for good alternatives to protect and grow their possessions offshore.

 

articlesirsclarifiesoffshoreinvestmentrules-full

 

This is nicely summarized in a research report by Wealth-X, which explains how the US government’s combat against offshore tax havens has actually led to an increase in demand by America’s Ultra High Net Worth Individuals (UHNWIs) for avenues that afford higher wealth protection and reduced tax exposure. So, while the masses might be bamboozled into fearing offshore, rich American families look for safety abroad.

It is hard to obtain firm statistics on this. These matters are typically, and should be, handled in a very private manner. However, based on a variety of surveys conducted by leading legal, accounting and consultancy firms such as the Boston Consulting Group (BCG), the interest for offshore wealth management is growing. According to a US attorney I work with regularly, the demand for offshore asset protection solutions has quintupled over the past ten years. The most recent BCG Wealth Report projects annual growth of 6.8% until the end of 2018.

 

Zucman-offshore-wealth-propensity

Financial wealth held offshore

 

Offshore wealth diversification, defined as assets deposited somewhere other than the investor’s home country, keeps rising, with Switzerland the most popular destination. BCG expects Switzerland to remain the largest single offshore center globally, with about 25% of total offshore wealth by the end of 2017. In particular, institutional investors and family offices look for the solidity of Switzerland. At BFI, we too have noticed an increase in demand, despite (or possibly because of) the IRS’ dogged determination to avert Americans from sending any of their wealth to a foreign jurisdiction.

The primary reason to go offshore is SAFETY. The clients and families I work with, almost entirely, are focused on mitigating US-centric litigation risk and political risk. That is where jurisdictional diversification can make a huge difference. The benefits of offshore diversification are substantial. There are many legitimate reasons for maintaining a portion of one’s wealth abroad. And contrary to popular opinion, the primary reason is not to save on taxes. In fact, there are plenty of tax shelters available in the US.

*  *  *

Beware of US Advisors Without a Passport

A few days ago, I received a call from a client who lives in Boise, Idaho. I will call him George for our purposes here. He was very concerned and informed me that he wanted to immediately undo the offshore trust structure and managed account he had set up with us only in 2013. In fact, he was quite upset with me and questioned whether my team and the legal counsel we had involved had given him ill advice.

I was surprised. The offshore plan implemented for George is solid. It was formulated and implemented carefully. It achieves several objectives. The structure – and I won’t bore you here with the details – affords strong asset protection, global investment flexibility and the legal avoidance of estate taxes upon the passing of George and his wife.

When I asked George why he changed his mind, I quickly understood the context. He had been given the (supposedly) professional advice by his local accountant to unravel his offshore structure. The accountant has been doing corporate accounting work for George for over a decade and has earned George’s trust with his good work. However, in this instance the trusted accountant told George that “it is that kind of offshore structure that gets people into trouble with the IRS”, and that he (the accountant) would not be willing to work with George anymore “unless he resolved this issue promptly”.

It is not the first time I run into this kind of nonsense. I’ve heard many similar stories over the years. It is, unfortunately, not uncommon for local attorneys, accountants and other so-called advisors to shy away from anything that does not originate in the United States of America. This is, of course, a direct result of the IRS’ propaganda and often times unqualified media coverage.

In George’s case, we were able to resolve the confusion and alleviate his – and his “advisor’s” – concerns promptly. No damage was done. George will, from now on, keep his local accountant focused on local matters, while coordinating his international accounting needs with a more knowledgeable professional. Nevertheless, this kind of professional ignorance is frustrating and even somewhat disgusting.

My piece of advice here: Make sure the advisors you let in on the details of your offshore planning have a passport, have left the boundaries of the US and, ideally, speak a second language. Yes, these are possibly not the most reliable indicators. But, seriously, it is paramount that you work with advisors that understand the rules of onshore AND offshore, and that they are active and experienced in the international sphere of wealth management. As Martin Luther King once said: “Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity”.

Granted, offshore planning may entail a few extra nuances and angles. And being compliant with the rules of reporting is paramount. But it is not rocket science. And it is certainly not illegal. Don’t allow ignorant professionals and the overzealous IRS to tell you otherwise!

For Americans looking for improved asset protection and interested in learning about solid and compliant planning options offshore, BFI is organizing an Inner Circle Wealth Forum.

 

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Fri, 03/13/2015 - 19:02 | 5887221 Hohum
Hohum's picture

Because anyone with money is, of course, a "wealth creator."  (Big assumption.)

Fri, 03/13/2015 - 19:16 | 5887260 RafterManFMJ
RafterManFMJ's picture

If by "offshore" you mean, "at the bottom of a lake" then, yes, I've moved my wealth "offshore."

Fri, 03/13/2015 - 19:26 | 5887285 AGuy
AGuy's picture

There is no safely by moving your "wealth" oversea. The rest of the world is in the same boat with enormous debt & corruption. Your just as likely to get your money taken by a foriegn gov't as much as a domestic one. Perhaps with a domestic gov't you may have some better luck shield your assets then having to fly halfway around the world and hope you don't end up with a dodgy foriegn lawyer.

 

Fri, 03/13/2015 - 19:52 | 5887367 daveO
daveO's picture

Yea, I had a grand stolen at Bancomer, decades ago. The account simply disappeared. I never was near stupid enough to buy a timeshare in Mexico, though. Unfortunately, I've met people (yes, more than one) that have.

Fri, 03/13/2015 - 20:14 | 5887436 saveUSsavers
saveUSsavers's picture

mainly to avoid estate taxes legally? WTF? What's my Living Trust for? I've been Successor Trustee twice, laborous but I don't need this advice offshore!

Sat, 03/14/2015 - 11:03 | 5888655 turnoffthewater
turnoffthewater's picture

So where does the Rothschilds wealth belong on the list?

Fri, 03/13/2015 - 19:33 | 5887302 Ignatius
Ignatius's picture

It started with off-shoring manufacturing and globalization and the banking deregulation that went with it.  Add in the endless wars chewing up our capital for very limited interests and we have a formula for failure.  Way to go you rapacious greedy fucks we call "leadership".

Fri, 03/13/2015 - 22:11 | 5887716 one_hundred
one_hundred's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com

Fri, 03/13/2015 - 23:15 | 5887867 barroter
barroter's picture

"Wealth creator?" My eye...wealth EXTRACTOR is more like it.

Fri, 03/13/2015 - 19:05 | 5887228 Skateboarder
Skateboarder's picture

LOL! What wealth? Most of us is fucked if that next paycheck don't come in.

Fri, 03/13/2015 - 19:12 | 5887246 Gambit
Gambit's picture

Yup, it's call being TITS UP. 

Fri, 03/13/2015 - 19:14 | 5887249 FredFlintstone
FredFlintstone's picture

You gutys freak me out changing your avatars

Fri, 03/13/2015 - 19:44 | 5887346 Skateboarder
Skateboarder's picture

No change on my behalf: the picture has always been and always will be the same. I'm thrown off by picture changes too. Maybe another component of ZH website software is busted? I haven't seen the user comments page in a while now - still 403 Forbidden.

Fri, 03/13/2015 - 19:07 | 5887231 Its_the_economy...
Its_the_economy_stupid's picture

wealth is flooding to America for a reason( dollar strength, confiscatory foreign governments, fear, etc)

Fri, 03/13/2015 - 19:09 | 5887238 vegas
vegas's picture

Like this is news? It's a trend that has been growing every year for over 30+ years, and now thanks to the likes of Emperor Goebbels and his crew of socialist dictators, will only get bigger and bigger until one day you wake up and it's over if you haven't escaped. How many times do I have to say this; "It's better to be 10 years too early than 1 day late." Wake the fuck up Sheeple and protect yourself.

 

www.traderzoo.mobi

Fri, 03/13/2015 - 19:14 | 5887251 Gambit
Gambit's picture

Does wearing a condom suit qualify as protecting myself?

Fri, 03/13/2015 - 19:18 | 5887268 Yen Cross
Yen Cross's picture

  Are you in the "Circle of Trust"?

Fri, 03/13/2015 - 19:20 | 5887270 Tinky
Tinky's picture

The more pertinent headline would read:

Fewer and Fewer Americans have any wealth to protect.

Fri, 03/13/2015 - 21:46 | 5887303 Yen Cross
Yen Cross's picture

 My name is; Jon "Horsehead" Kohn, and I can assure you that my Yacht is moored in the Caymens when CONgress is out of session.

 Probably the Grand Bahamas, Easy access to South Amerca.

Fri, 03/13/2015 - 19:47 | 5887335 agent default
agent default's picture

Non sense article.  If the government knows how much you have, they can always get it from you.  This is the point behind FATCA and GATCA.  If tax evasion was the issue, the could have arranged for taxation without exchange of information about the actual persons.  They want names and addresses so that they can extort you.  That's it.  Everything else is TJN (funded by Soros)  Transparency International (also funded by Soros)  bullshit.  Get gold get silver,hide it get out of their system and wait for the fall of the Western Soviet Union.

Fri, 03/13/2015 - 20:41 | 5887491 samsara
samsara's picture

You realize of course that for the ruling (the 1%ers) tax rules are meaningless. Just a minor inconvienence. They have 'people' to take care of that.

  Money isn't an issue.   Those IN the club don't even think about it.  If they are ever bothered by the 'Gov" it is probably a intercene warfare amoung the couple gangs running the operation(Sharks and Jets, Gambinos and Genevieves,  I mean Dems and Reps)

See quote from Frank Underwood from TVs House of Cards.

Here's the quote...

Sat, 03/14/2015 - 18:13 | 5888594 bh2
bh2's picture

Tax evasion usually isn't the "issue". Funds placed offshore are more highly protected from US predatory litigation because US courts have no authority over assets placed outside the US, with the result that opportunistic litigants (including IRS agents on the make) must endure enormously greater cost to pursue trival claims in offshore jurisdictions. Some venerable legal structures offshore aren't vulnerable to penetration even by local courts, making any pursuit of claims against those structures entirely futile.

People who derive income from any source not reported for lawful taxes are tax cheats, regardless of where they put their money. People who report their income for taxes are not tax cheats, regardless of where they put their money. One important safeguard for lawful taxpayers is that American courts cannot arbitrarily freeze a taxpayer's bank funds offshore to extort settlement. That's why the IRS works so hard to create an entirely false narrative that anyone holding offshore assets has an implied intention to cheat.

Moreover, the US is one of the greatest offshore tax havens in the world for persons who are not "US persons". http://www.taxhavenusa.com/

NOTE: anyone thinking to "offshore" financial holdings as great in aggregate value as $10k at any time during any year should engage a tax professional who is FULLY practiced in the bizarre dance of annual filings (particularly FBARs) to avoid visitation under the veritable reign of terror conducted by the USG for failing to timely and correctly report offshore holdings to the Treasury and also report any income of $1 or more to the IRS. Otherwise, rape and pillage of your funds will surely follow if you haven't danced exactly the right steps at exactly the right times.

Fri, 03/13/2015 - 20:13 | 5887433 Atomizer
Atomizer's picture

It only takes a dollar to transfer assets. Ask Lois Lerner of IRS who declared deleted hard drive issues. Hillary claims hacked account and deleted email.


Fri, 03/13/2015 - 20:16 | 5887437 samsara
samsara's picture

And we criticize the Greeks for doing the same things to avoid taxes.

I guess those who can(the $million and up people)

DO.

Those who can't(joe average Working citizens)

CAN'T

And Funny,  In every scenario one  could imagine, it is Never the Rich people with the ARs in the vanguard of a Tax Revolt(say) or any other revolt.

It will be the tide of average people filling that role.  The rich will of course say "We were behind you 100%  "

 

----------------

"Frankly, I sometimes wonder how even the most honest American taxpayer can stay out of jail."

"It should not come as a surprise that wealthy Americans have learned to protect their wealth from this concentration of risk by jurisdictionally diversifying their assets. In other words, they set up offshore trusts, companies, foundations or insurance structures to legally protect and grow what is rightfully theirs elsewhere."

Fri, 03/13/2015 - 21:12 | 5887579 adjudged
adjudged's picture

Just have your financial records catch on fire - twice - like Sharpton.

Fri, 03/13/2015 - 21:19 | 5887602 Omega_Man
Omega_Man's picture

use china's or russia's version of swift and swiftly transfer assets

Sat, 03/14/2015 - 02:28 | 5888109 Harbanger
Harbanger's picture

But Look at the graph.  Most people getting their money out are Russian and Chinese.

Sat, 03/14/2015 - 00:36 | 5888010 Magnum
Magnum's picture

If you have to pay $11k per year after tax income for health insurance, $9k property tax, $50k/yr college tuition for two kids, and your company generates about $200k in taxes for Uncle Sam but after all is said and done you barely get by without saving a penny, well then you feel like a damn sucker. Moving to SE Asia to be unemployed so your kids get way cheaper college rates, you pay no tax, and live like a king on $3k/mo is the best overseas life enhancing gig out there. Why not? Forget about protecting assets, protect your sanity.  And let the lbfm protect your vitality.

Sat, 03/14/2015 - 00:54 | 5888029 69BIGDOG69
69BIGDOG69's picture

Re: "So far, outright capital controls have not been levied and don’t appear to be visible on the horizon."

How long would it take for capital controls to be implemented?  Could Obama do it overnight with an executive order?  Why not? 

Didn't Argentina confiscate the US dollar holdings in bank accounts with a secret, overnight conversion of USD to pesos?  Yes, they did.  People went to sleep thinking that they had USD accounts and woke up with peso accounts at an exchange rate set by the government.

Does the butcher give notice to turkeys as Thanksgiving is approaching?  Don't expect the US government to give prior notice of such a policy when prior notice would give people a chance to front-run the policy.

Sat, 03/14/2015 - 10:53 | 5888623 bh2
bh2's picture

How long would it take for capital controls to be implemented?"

A New York minute.

Sat, 03/14/2015 - 02:29 | 5888111 shouldvekilledthem
shouldvekilledthem's picture

Offshore involves a lot of counterparty risks too.

Sat, 03/14/2015 - 02:41 | 5888118 European American
European American's picture

Yes, set "sail" offshore at 10 knots. (While one still can).

Sat, 03/14/2015 - 09:43 | 5888473 roadhazard
roadhazard's picture

My wealth is offshore... in the lake.

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