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Offshore Asset Protection

Protecting Your Assets

Protecting assets can mean many different things to different people; it can also depend on what country you live in. In general, it means protecting your assets from financial enemies that wish to seize those assets for themselves for varying reasons. They could be private parties or they could be a government agency.

Since it is all too easy in many countries these days to have your assets seized for a multitude of sins of commission or omission, it is important to make sure your assets are protected, not in your personal name, not easy to locate, and ideally in a jurisdiction where the law makes it difficult for your enemies to fish around for information and which does not have any information sharing treaties with other countries nor recognizes foreign judgments.

Top Five Reasons to Protect Your Assets

  1. With very little effort almost anyone (a tax authority, someone who is suing you, a selfish ex-spouse, etc.) can get a clear picture of your personal and financial information.

    How? Simply by tapping into the vast amount of data that is stored on everyone. Detailed records are kept not only by the federal government but also by state and local governments, the census office, the credit bureaus, insurance companies, health authorities, financial institutions, internet companies, and so on. Such records include tax returns, various licenses and registrations, marriage certificates, deeds, court documents, credit reports, medical histories, marketing profiles, insurance applications, etc.  What is worse is that you have little to no control over how this information is collected and disseminated. For instance, under current law, creditors, litigants, or private detectives are often allowed to find out how much money you have in the bank in many countries.
  2. People who stand out as successful, wealthy individuals, may become targets of unwanted lawsuits.

    If your wealth and assets can be easily detected, you may be attracting unwanted lawsuits, be it divorce suits, damage suits, professional negligence suits, and nuisance suits. Once you get involved in a lawsuit such as these, it will not be long before your assets evaporate. According to a credible source, there are currently over one million such lawsuits working their way through the courts in the US alone.
  3. As a director or officer of a corporation, you may lose some or all of your personal assets if the corporation is sued.

    Most lawsuits these days will name the directors of the company in addition to the company itself and most countries courts now make it very easy to penetrate the "corporate veil" and go after the directors of the company as well as the owners.
  4. Retirement does not protect you from malpractice or liability exposure.

    You may be sued for events that took place many years ago, as long as the applicable statute of limitations did not expire.
  5. In certain cases, the courts can allow your creditors to seize assets held in the names of wives and children, as well as retirement funds.

    In the case of wives’ and childrens’ assets they can be deemed to be "fraudulently transferred" if done within at least three years prior to the beginning of the lawsuit. Sometimes this can be as much as five years or, in certain cases, if they are seen as having benefited financially from you over a longer time than even five years, the court can allow your creditors to seize those assets as well. This could happen if the court decided that they benefited from "illegal enrichment".

Conveyance of Assets

The critical element in protecting assets such as real estate, if they are already in a vulnerable position under your personal name, is the ability to move those assets to safety.

If you are already in the middle of a lawsuit that you feel could go badly for you or you anticipate one shortly, the question of moving assets is very critical, because courts in many countries will deem the transfer of title on a property, to be "fraudulent" if done anytime within the prior three years before the time of the filing of the suit. Each country and state have their own time limit to define what is a fraudulent conveyance, but in general three years is the minimum and sometimes it can be as many as five years.

A court can compel the repatriation of assets conveyed within those time periods and, to refuse, can put you in contempt of court. Since things like property deeds show a clear chain of title that is publicly available, there may not be many options available to you if you are already in the middle of a lawsuit.

However, if no lawsuit has been filed yet, the sooner you put in place an asset protection plan for those assets the easier you will sleep at night, even if you are in imminent danger of a lawsuit being filed.

Sometimes your financial enemy’s lawyers are lazy and they may only do a cursory public record check to see if there are any assets held in your name.  This they may do to first see if there are any assets to go after and a search that comes up negative may mean that the lawsuit never gets filed. They may not have any leads to delve deeper into the ownership history on a particular property unless they have done their own investigative work and been furnished with other information about where you were known to have owned property in the past.

Public records are accessible and stored at a local level. Unless that lawyer already has an inkling of where properties may be located and therefore knows what county’s records to look in, it could be like looking for a needle in a hay stack in a country such as the U.S. where there are a thousands upon thousands of counties to potentially search.

Hence, even though if you are within the time limit for a conveyance to be considered "fraudulent" you may still be safe, since public records will show that you do not own any property. In other words, you may not be found out and as a result the lawsuit does not materialize.

If a lawsuit does eventuate and a judgment against you obtained, the court will then require a detailed examination to take place on your assets. Part of that examination would entail the disclosure of any assets sold or conveyed with the previous 3 or 5 years depending on the law of the state or country.

Since this information has to be provided to the court under penalty of perjury, it will put you in a difficult position because to not disclose information that subsequently gets discovered could expose you to criminal prosecution.

Cash and securities conveyed come under the same guidelines and the burden will be put on the transferor to show what was the purpose of the transfer and why they cannot be repatriated.

Asset Protection Solutions

The heart of any asset protection solution will use different types of corporations, foundations and trusts as a way to insulate the original owner from the assets and make it difficult for an enemy to penetrate "the corporate veil". A legal structure under law becomes a different legal entity and separate from an individual.

In certain jurisdictions such as Panama, Belize, Nevis and others, laws have been created to enhance the characteristics and features of a corporation to the greatest extent possible. (The same also applies to foundations and trusts). As an example see Panama Corporation for further details on the flexible features of these types of companies (otherwise known as International Business Corporations or IBC’s for short), which makes their operation convenient and effortless.

So that the entity or entities created do not appear to be an individual’s alter ego, certain minimum standards must be adhered to in the set up of the structure, as well as its operational characteristics. Where applicable this may include the use of nominee directors and third party shareholder solutions that utilize other entities, especially a foundation or a trust.

Offshore Solutions for Protecting Real Estate Assets

For property, the best option is to use a local limited liability company (U.S. and Canada) otherwise known as a limited liability partnership in the U.K. and certain other countries such as Australia, which we can assist in setting up. Other countries have their equivalents which we can advise on.

What we do is set up the LLC or LLP with the foundation as sole member or 99% member if a minimum 2 members are required, such as many U.S. states LLC’s or the U.K. LLP.

For the U.S. we recommend the Delaware LLC which only requires a single member. The president of the foundation is appointed as General Manager of the LLC/LLP who can then be the signatory on the other side of the conveyance transaction. 

The same solution can be used for vessels, vintage or luxury cars and depository storage of paintings, precious metals etc. or any other asset that entails a title record maintained by some governmental or private entity. Obviously assets stored in your own home would be harder to protect this way, because it would be harder to prove that some other entity actually owns the asset rather than yourself.

For this to work the property or other asset would need to be owned free and clear. Therefore if there is an existing mortgage on say the property, the lender is usually not going to be willing to allow you to transfer the property to a corporate entity without the loan first being paid off.

If this is not possible, then another option could be to try and refinance the property to the maximum loan to value amount possible. Even if you do that there is still probably going to be equity that needs to be protected and so another possible solution for that is to file a so-called a "friendly lien" from an offshore company.

This has to be done carefully because courts have become familiar with this type of strategy and may possibly question whether or not you have any type of interest in the company.  For obvious reasons this entity filing the lien needs to be at complete "arms length" from the property owner and not associated in any way.

We can provide so-called "shelf" or "ready-made" companies for this purpose, which been set up for a few years and therefore have a history behind them. Please contact us for more information on using a shelf company for this purpose, as well as current shelf company options and pricing.

Asset Protection Solutions for Liquid Assets

In general the following are the general requirements to consider when considering how "bullet proof" an offshore asset protection strategy will be:

  1. Does the chosen country have information sharing treaties? 

    Panama is an obvious choice as it has none.  A few others like Belize are in a similar league but watch out because many so called tax havens are rushing to sign information sharing agreements to appease the richer Western nations of the world that are demanding these generally poorer nations sabotage a key competitive advantage in their bid to attract capital and assets to their nations, so that they can go after tax scofflaws. Panama’s chosen strategy to appease is to sign far less damaging dual taxation agreements so that the same income is not taxed twice rather than entering into tax information sharing agreements, thereby institutionalizing endless fishing trips for information from the U.S. and other advanced nations and a constant one way flow of information.
  2. Does the chosen country recognize foreign judgments? 

    Panama along with Belize, Nevis and a number of other tax haven nations do not.
  3. Does the chosen country have strict banking secrecy and prohibit "fishing" expeditions (governmental agencies and private investigators being able to hunt down information on assets and their owners)? 

    Again Panama is at the top of this dwindling list.
  4. Does the chosen country publicly disclose corporate shareholder information? 

    Panama and many of the other Caribbean and island tax havens still do keep this information private.
  5. Does the chosen country make it easy for litigators to bring their suits to file in their court system? 

    Once again Panama and a few of other jurisdictions such as Belize and Nevis do not.
  6. Does the chosen strategy provide a comprehensive director and shareholder solution and/or third party managed solution? 

    At a minimum we recommend the setting up of a foundation and one or more companies where it acts as sole shareholder. See more on our foundation owned company strategy and why. Some or all of these companies could be in different jurisdictions from the Panama foundation depending on what else needs to be accomplished besides just the asset protection.

    The general approach is the more "arm’s length" the set up is from the original owner the safer one will be. Therefore a more comprehensive solution could involve the set up of an International Fiduciary Structure and/or involve our professional management and signatory services option which will complete the total distancing of the assets away from their original owner.

Breaking the “Paper Trail”

For protection of liquid assets it is vital to only use countries with strict financial privacy and to employ a means of breaking the paper trail that follows in the wake of a transfer out of your own country. 

The most effective way in dealing with this is using our multi-jurisdictional approach where one or more structures are set up with a bank account in a different country. Transfers out of your country first go to a different company bank account and country where they reside for a few months to keep that bank happy. 

Little by little, some or most of the funds can be then forwarded on to another company in a different country or they could go to a separate brokerage account held in another country such as Panama that has strict financial privacy. The banking secrecy in the first jurisdiction will prevent investigators discovering the ultimate destination of the funds in the second jurisdiction.  

We have created a special package known as the multi-jurisdictional company / banking package that utilizes two different companies, one set up in Panama, the other in Belize, each with their own bank account in those respective countries.

Both companies are owned by the Panama foundation, which also can be a very useful vehicle for the repatriation of funds by the way of gifts to your children for instance as well as to manage and plan your global estate.

Contact us to discuss your specific asset protection needs.