Is most offshore activity illegal?  Hardly.

According to the World Bank, more than half of the world’s personal wealth – over $50 trillion – is stashed in about 60 or so asset and tax havens worldwide.

More than a third of it is in Switzerland.  The rest is stashed away in Hong Kong, the Cayman Islands, Panama, Bermuda, the Isle of Man and other protected havens.

What do all these rich people know that you don’t?

Plenty. But their secrets are finally revealed in a fascinating new book by Erika Nolen and Shannon Crouch of The Sovereign Society. It’s called “Offshore Investments That Safeguard Your Cash: Learn How Savvy Investors Grow and Protect Their Wealth.”

Reasons for Offshore Investing

What legitimate reasons could you have for going offshore with your investments?  Let me count the ways:

1. Are you worried about potential claims against your assets?
2. Are you having troubles with difficult business associates, angry ex-spouses or greedy children?
3. Does the lack of privacy in your personal financial affairs bother you?
4. Are you interested in gaining access to the tens of thousands of publicly-traded securities that are unavailable in the U.S.?
5. Are you interested in creating an ironclad estate plan for your loved ones?
6. Do you want greater asset protection than an American safety-deposit box offers?
7. Are you worried you may not have enough money for retirement?

If you answered yes to any one of these questions – and especially if you answered yes more than once – you should read this book, if only to understand your options.

Let’s say, for example, that you are a physician, businessman or comfortable retiree (or that you will be one day).  In our litigious society, someone can trip over their own feet on your property and have an ambulance chaser on the line before they even get up off the floor.

Even if the “plaintiff” has no case whatsoever, you can spend tens of thousands of dollars defending yourself and your assets.  Or be forced into a settlement.

But as Nolen and Crouch write, “many U.S. lawyers hesitate or refuse to take cases involving defendants who have their cash and assets secured offshore.  They recognize the difficulties – indeed, the impossibility – of gaining access to those offshore assets.”

Some people, out of a misplaced sense of patriotism, refuse to even consider moving assets offshore.  Yet there is nothing illegal or immoral about moving assets offshore.  And there are many, many benefits.

Offshore bank and brokerage accounts offer you a wider selection of investments (especially in stronger currencies than our perpetually weak dollar).  Estate planning is often smarter and more efficient than what your local lawyer can set up.  Business regulations are less cumbersome.  You may even want to consider the advantages of dual citizenship and a second passport.

Sound too good to be true?  It isn’t.

“There are no -we repeat, no – outright and explicit prohibitions against American, British or Canadian nationals engaging in a slew of offshore financial activity.  It is legal and legitimate to invest offshore,” write Nolan and Crouch.  “This book tells you how to obey U.S. tax law and file all the required reports, but ensure that a substantial portion of your assets and investments are located in the place where the best profits are – offshore.”

In the end, only you know whether offshore investing is right for you.  But you can’t be sure until you have all the facts.

Nolan and Crouch’s new book is a great place to start.

Source: Offshore Investing: Smart Ways to Keep Your Money Safe

This from The Sovereign Society:

I urge you to pay close attention because this development could impact your future retirement more than anything I have encountered in the last 20 years.

The government has already turned your banker into a federal agent who can confiscate your assets without warning or cause.

This is why you MUST consider getting at least part of your retirement assets out of the country while you still have the opportunity. Very soon it may be too late.

If you’ve read my articles over the years, you know I’m not a wily reactionary. Nor do I try to scare my readers with my articles. But honestly, today I need to raise a red flag because frankly, this is serious.

I’m more concerned about the markets now than I have been at any other time in my 20 years in the business. And whether you agree that this could be the perfect financial storm or not, it’s time to acknowledge the steps our government is taking to deal with this mess.

Right now, they’re wracking their brains to come up with short-term solutions for this mess. But long-term, the consequences of their actions could have a very serious impact on your retirement savings.

Devil in the Details of Paulson’s Plan

As the saying goes ‘the devil is in the details.’ Well, nothing could be truer for Paulson’s new TARP bailout plan. The following text is buried deep within the bill passed recently by congress:

NECESSARY ACTIONS. -The Secretary is authorized to take such actions, as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation, the following:

Designating financial institutions as financial agents of the Federal Government, and such institutions shall perform all such reasonable duties related to this Act as financial agents of the Federal Government as may be required.

Broad sweeping authority to do whatever they want to do! “Financial agents of the Federal Government,” what does this mean to you and your retirement plan? Well here are a few potential scenarios…

Let’s say foreigners stop buying treasury bonds because they become even more nervous about the uncertainty in our banking system. Face it, we can’t survive without foreigners continually buying up treasuries. If suddenly they stopped buying, the government would have to do something to finance the debt.

Panic Scenario # 1 – The government tells your banker to purchase U.S. Treasuries with 50% of your retirement plan, or worse. (How about 100%?)

But that doesn’t work as well as they want, so they have to figure something else out…

Panic Scenario #2 – The government tells your banker to stop any transfers outside of the U.S., No more offshore accounts! (Highly likely during an Obama presidency.)

Things continue to go downhill and they become even more and more desperate…

Panic Scenario #3 – The government tells your banker to confiscate all gold in retirement plans for the good of the country! (This has already occurred once in American history.)

And finally the “Nuclear Option” we get a president who decides the right thing to do is ‘redistribute’ the wealth…

Panic Scenario #4 (worst case!) – The government tells your banker to confiscate all retirement plans over US$250,000 so we can redistribute the wealth! (But don’t worry we are going to have universal health care and they will take care of us so you don’t need it anyway.)

With a stroke of the legislative pen and passage of the bailout bill, all these nightmare scenarios could be very real possibilities. As government agents, the banks (including yours) will have no means to protect your interests against aggressive ‘redistribution’ or the bold new plans of a welfare state.

As a result, this could be one of the last opportunities you ever get to take urgent action now; before your retirement plan is in jeopardy.

How to Take Your Plan Offshore

There are basically two types of retirement plans, Qualified and Non-Qualified. Non-Qualified include IRAs, SEPs and Keogh’s. Qualified plans cover all of the rest and are handled in a slightly different manner.

IRAs require a U.S. Custodian, so this becomes your biggest challenge. There are very few custodians who allow you to totally self-direct your account including using non-U.S. investments and taking it offshore.

If you want to take your IRA or pension plan offshore you must use a totally flexible self-directed custodian who will allow you to take your account offshore. To find out whether they can help, just ask them - “Can I take my plan offshore?”

So how do you take your plan offshore? The following methods are allowed: A direct purchase of non-U.S. real estate, a foreign bank account, a non-U.S. annuity, a foreign corporation or in some cases even direct investment into a non-US investment.

There are a couple of other custodians who will allow you to use one or more of these options, but I am only aware of one company who allows all of them. This may be important if you want to use several different methods of transfer, or if you want to make multiple kinds of investments through one custodian to keep things simple.

Qualified Plans require a U.S.-based administrator and demand “the indicia of ownership” remain within the United States. These plans are simpler in some cases and more complex in others to deal with than an IRA. I have reviewed hundreds of plans and the language within the plan is critical, as well as your plan administrator.

In my last article for the A-Letter I mentioned a client whose administrator told them they couldn’t invest in property offshore despite the rules laid out in the plan’s language. After a good deal of back and forth on my part with the trustee and record keeper, I was finally able to convince them to allow the investment.

How to Configure Your Offshore Retirement Plan

In both cases, you want to have a foreign bank account in your retirement plan if it is allowed. I am currently aware of three banks, which allow Americans to open retirement accounts with them. You would work with your banker in developing an investment strategy using their expertise and services.

The bottom line is that you need someone qualified to review your plan document and to assist you in structuring the investment in a compliant manner.

Timing doesn’t allow me to discuss in much greater detail the specifics of taking your plan offshore. For now you need to be aware that you can do this regardless of what you have been told. And I am more convinced than ever that there isn’t much time left to take advantage of this incredible opportunity.

Source: Your Banker Has Been Turned Into a Federal Agent With Potentially Devastating Consequences!

More from The Offshore A-Letter:

If you have property that you believe may be at risk for some future expansion of emergency or wartime controls, you can still legally take action to protect it. Here are some ideas:

• Transfer funds outside the United States and outside the U.S. dollar. It’s still possible to legally transfer funds from the United States, but that may not last if the U.S. imposes foreign exchange controls. This could occur in the event of another terrorist attack on the United States, or if the U.S. dollar falls sharply due to a terrorist incident or financial panic. That possibility may seem remote at the moment, because the U.S. dollar has appreciated sharply in the last few weeks in response to the global economic crisis. But this gives U.S. investors a rare opportunity to invest offshore and convert their dollars to foreign currencies – or to gold – at the most attractive exchange rates in more than a year.
• Use offshore structures to hold non-U.S. investments. This strategy may not only provide protection against domestic judgments, but may also provide a legal means to avoid future foreign exchange controls.
• Hold investments that aren’t subject to U.S. jurisdiction. Your investments located within the United States are the most vulnerable. But foreign investments may also be vulnerable, particularly those denominated in U.S. dollars. The least vulnerable foreign investments are foreign real estate and gold, silver or collectibles held outside the United States. Certain contractual relationships, such as insurance contracts and trusts, may also be configured to avoid U.S. jurisdiction.
• Avoid electronic transactions in U.S. dollars through U.S. clearing networks. Most electronic transfers of U.S. dollars clear through a U.S. clearing bank and ultimately the Federal Reserve. U.S. courts have ruled that funds involved in such transactions are subject to U.S. jurisdiction and thus to possible confiscation. A growing number of countries have set up dollar clearing facilities to clear their own domestic U.S. dollar electronic transactions. Such foreign clearing networks are at far less risk from the U.S. legal system than U.S. clearing networks.
• If you’re a foreign investor with U.S. interests, assess your risk to U.S. emergency or war controls. Investors from any country accused of “sympathizing with” or “harboring” terrorists are at particular risk. So are investors in countries or financial institutions through which terrorists have been accused of operating bank and trust accounts.
• U.S. persons not wishing to live under emergency controls are understandably interested in relocating to lower profile jurisdictions. Many countries welcome affluent retirees or other financially self-sufficient persons.

The prospect of emergency financial controls may appear to be remote. But as I said last week, they’ve been imposed many times in U.S. history. And, as this financial crisis deepens, they may be imposed once again.

Source: Economic Emergency Survival Guide Part II

The court order came about because the UBS private bankers may have been stupid enough to advise wealthy Americans on how to evade taxes (at least according to the IRS).The UBS situation was the subject of a series of noisy, demagogic anti-tax haven hearings in the Democrat-controlled U.S. Senate last month.

At the time I wrote: “The big question now is whether UBS, the supposed giant of Swiss banking, will have the guts to take a strong stand based on the Swiss bank secrecy laws and fight for the principle of its clients’ financial privacy…”

“Even if UBS is willing to abandon its American customers to the IRS, I suspect that official Switzerland…[is] going to stand and fight for their basic bank secrecy laws — laws that have been revised and updated to accommodate reasonable law enforcement requirements.”

Well, UBS went beyond abandoning their American clients in one respect. They announced then and there that the Swiss-based UBS is abruptly ending its private banking services to Americans. In other words, if you’re an American banking in Switzerland at UBS, you’re out of luck.

In fact, thousands of Americans with UBS accounts were suddenly left high and dry. Our Swiss banking contacts tell us that other Swiss banks are refusing to accept UBS American clients seeking new banks there. They obviously don’t want to inherit alleged UBS tax evasion problems with the IRS.

U.S. clients are especially nervous because the UBS statement said it would work with the U.S. government to identify the names of its clients who may have engaged in “tax fraud.” (That phrase has special meaning in Swiss law because tax evasion per se is not a crime in Switzerland.)

You Can’t Shake the Swiss Government

But as I predicted, while the spineless UBS bends, the Swiss government is standing firm. That official firmness may be cloaked in the diplomatic Swiss language (that has made Switzerland so famous) but it’s still a firm stance nonetheless.

Example: This week the Swiss government informally asked the U.S. not to pressure UBS for client data located within the Alpine country.

Swiss State Secretary Michael Ambuehl told his U.S. counterparts that any request for client data must be decided by the Swiss government. It’s a government issue because UBS would be breaching Swiss bank secrecy law by voluntarily revealing bank account records.

“I reaffirmed the offer by the Swiss government to cooperate constructively with the U.S.,” Ambuehl said in his Bern office on Aug. 19.

“I underlined, however, that we expect them not to take unilateral steps against UBS to obtain information which is located in Switzerland as long as the agreed, bilateral legal cooperation is ongoing.”

This was undoubtedly a reference to the Swiss-U.S. mutual tax treaty and the mutual legal assistance treaty (MLAT) between the two countries.

Tax Evasion Isn’t a Crime in Switzerland

“UBS is seeking to address these requests with both Swiss and U.S. government authorities within the legal framework for intergovernmental cooperation and assistance established between Switzerland and the U.S.,” a UBS spokesman said in Zurich.

According to Swiss law, bank secrecy can only be lifted in connection with a criminal offense, such as tax fraud or money laundering.

But tax evasion isn’t a crime in Switzerland. Should the finance ministry agree that UBS release the account details, then account holders will be informed before their details are handed over. This gives them the option to go to court to oppose the release, a Swiss official said.

Ambuehl said pressure from the U.S. and the European Union for Switzerland to amend bank secrecy laws hasn’t increased. He also sees no need to revise them, because they include “strict internal rules and good external cooperation.”

No One Is Abandoning Swiss Policy Here

An alarmed Teodoro Cocca, formerly with Zurich University’s Swiss Banking Institute said at the time of the UBS revelations: “This is a direct and coordinated attack on the heart of the Swiss financial system. This is a long-term threat that will not go away, and there is not too much Switzerland can do.”

It appears that the professor was right about the gravity of the situation, but wrong to think that the Swiss government would supinely abandon the cornerstone of their banking success – strict bank secrecy.

There is a great deal the Swiss can do to defend their laws – and they are doing it.

By the way, it’s worth noting that The Sovereign Society has NEVER recommended UBS. We have always thought they were too cavalier with their client’s privacy.

Indeed for the last decade, we have advised U.S. depositors considering Swiss banks to avoid UBS AG and any other Swiss bank with U.S. based branches, affiliates or banking operations, other than a mere “representative office.”

However, that doesn’t mean you should abandon the country of Switzerland altogether. As you can see, Switzerland still has some of the strongest banking laws in the world – and the local Swiss government is even willing to take on American politicians to keep that bank secrecy their policy.

Source: Switzerland Still Has the Guts to Fight for Your Privacy – Even if UBS Doesn’t

When you set up an asset protection plan, there needs to be other reasons for your plan to exist other than just asset protection. If you can prove that these other reasons actually exist, then the asset protection part of the plan has a much better chance of holding up in court.

Here’s an example. Let’s say that you decide you want to set up an “asset protection trust.” You consult with a trust company in, say, the Cook Islands, and the company obligingly sets up a Cook Island international trust.

What have you accomplished? Yes, you now have a trust in the Cook Islands, with one of the world’s strongest asset protection laws. But it also looks like you set up a standalone structure that screams “deadbeat” to U.S. judges.

To force “deadbeats” to pay their bills, judges have a variety of tools at their disposal, including jailing a debtor. This last remedy isn’t common, but it does exist most notably, in situations where a debtor or the debtor’s legal advisors have made serious planning errors.

Understanding and Avoiding the “Anderson Fiasco”

One of the most famous examples of jailing a debtor happened in the Anderson case. Mr. and Mrs. Anderson were allegedly engaged in a Ponzi scheme. The Federal Trade Commission (FTC) sued the Andersons in federal court and obtained a US$20 million judgment.

When the Andersons claimed that they couldn’t pay the judgment, the FTC obtained a court order requiring the couple to repatriate US$8 million in assets from their Cook Islands trust.

The Andersons failed to obey this order and the judge jailed the couple for civil contempt. A federal appeals court affirmed this decision.

The judge released the Andersons from jail only after they:

• Appointed a company controlled by the FTC as the new trustee for their trust
• Amended the trust to remove the FTC from the definition of “excluded persons” under the trust deed
• Resigned as their own trust protectors

However let me put you at ease. The Anderson case was a phenomenon, not the rule. They experienced these problems because there were serious errors in their trust. The Andersons’ biggest mistake was they named themselves as both the trust’s co-trustees and co-protectors. They only gave up that position once their trial began.

It Doesn’t Have to Be This Way

Let me assure you: This was truly the worst case scenario. You don’t have to go to jail to protect your assets. There are plenty of perfectly legal domestic and offshore plans you can use to shield your assets. But the most important thing to remember is: Make sure asset protection isn’t transparently the sole purpose of your plan.

Returning to your example, let’s say after consulting with a qualified attorney in the United States, you jointly decide that a Cook Islands trust should be part of your asset protection plan.

Only, instead of having the trust being the only element of the plan, your trust exists as part of a larger structure that accomplishes other goals.

For instance, an integrated structure that includes a Cook Islands trust might also contain your last will and testament, a living trust, and possibly a domestic limited partnership. At your death, your residual assets “pour over” from the will into the living trust.

Properly structured, this configuration serves several purposes that are completely unrelated to asset protection:

• Provides convenient access to non-U.S. investments
• Doubles the estate tax exemptions for a married couple
• Provides the opportunity for valuation discounts for gift tax purposes through gifts of limited partnership interests
• Serves as the primary estate planning device after your death

Depending on your particular needs, many other elements can be brought into this structure.

The important point, though, is that asset protection is no longer the only exclusive purpose for your plan. Asset protection is simply a byproduct of a more diversified plan, because the assets will be safely tucked away offshore, safe from creditors.

In this way, you’re getting what I call “asset protection by stealth.” It’s not obvious to anyone looking at your plan, but it’s a useful, undisclosed perk of your overall plan.

Don’t Wait! Take Action Now Before It’s Too Late

The time to set up this type of plan isn’t after you’ve received notice of a lawsuit. You should form it when there are no pending claims against you, or that you even know about.

If you wait until after you have claims against you or a pending lawsuit, then a court can later declare your plan was intended to “hinder, delay or defraud” creditors. This makes the asset transfer a voidable “fraudulent conveyance” in the eyes of the law.

Please make sure you speak to a qualified asset protection attorney to find out if this is the best time for you to set up this type of plan. This way you can ensure your actions won’t constitute a “fraudulent conveyance.”

Bottom line: It’s not hard to avoid an Anderson-type fiasco. Simply make sure your plan has other legitimate purposes besides asset protection. Plus, by properly structuring your plan this way, you can secure additional perks like investment diversification and estate planning while getting the asset protection you desired all along.

Source: Stealth Wealth Protection: What It Is and How to Get It