Offshore Asset Protection BLOG - Bob Bauman

Money Mobility Can Be Yours

These days tax hungry governments and their storm trooper tax collectors are doing there very best to impose laws that imprison taxpayers at home where they conveniently can be plucked like a goose. See Obama’s latest taxpayer plucking plans here.

Which Exit?

The richest citizens of the American State of New Jersey, who in the past generated most of the tax revenue, have been fleeing the state, a new university study shows. As reported in The Star-Ledger (Newark), the total aggregate personal net worth of New Jersey's residents fell by $70 billion between 2004 and 2008 -- a sharp reversal of a net $98 billion inflow that had occurred during the previous five years.

Guess why?

New Jersey has some of the highest real estate and income taxes in the nation and its death tax is imposed on estates in excess of $675,000. These rich folks know that many other States don’t tax income or estates at all, and property valuations and tax rates are much less, (just like many offshore tax havens).

Tax Haven Attacks

It’s not a full-scale migration yet, but it appears that many insurers and re-insurers are leaving their sunny southern Atlantic and Caribbean island homes and heading for Europe, often "re-domesticating," as the phrase goes, in Ireland -- which has one of the lowest corporate tax rates in the EU.

XL Group announced that it was leaving the Cayman Islands and setting sail for the Emerald Isle. Last September, the world’s third largest insurance broker, Willis Group Holdings, announced that it was moving from Bermuda to Ireland. Ace Limited, which was the biggest Bermuda-based insurer and reinsurer, jumped ship in 2008 headed for Switzerland. CEO Evan Greenberg was crystal clear about the reason: Switzerland offered more stability and a "network of tax treaties."

The tax free haven of Bermuda long has been home to reinsurers that provided huge pools of liquid capital that backed up the domestic American property insurers when disaster such as 2005’s Hurricane Katrina hit. But now Bermuda is being made into a villain with President Obama’s new populist rhetoric and public anger at huge executive bonuses.

Business Week warns that, "Anti-tax legislation in Washington could limit the ability of U.S. companies located in Bermuda to shelter overseas profits." Obama's trillion dollar deficit budget released on Jan. 31 denies U.S.-based insurance companies a major deduction for certain premiums ceded to their offshore parents.

Why this insurance migration to safer climbes? See above.

Go East

In the last days of the British Labour Party’s waning power, PM Gordon Brown, in radical election mode, is chasing after what remains of wealth in Britain with new confiscatory taxes on income and bonuses.

Under Brown’s direction Customs & Revenue also is hunting down offshore accounts and even trying to impose retroactive taxes on trusts going back decades.

No wonder the talk at the World Economic Forum in Davos, Switzerland last weekend was of the best addresses in Geneva and Zurich. The Swiss real estate industry is preparing to accommodate U.K. bankers and hedge fund managers disgruntled by political and public censure of their pay and bonuses, and the 50% rate of income tax on incomes above £150,000, (US$234,000) which takes effect on April 6.

But it's not only financial sector executives who are viewing homes overlooking the lakes or near the slopes. Highly paid staff at non-financial businesses are also interested in Switzerland's benign tax system. The income tax rate in the canton of Zug, for example, is about 10%.

Singapore, Switzerland of Asia

But Switzerland is not the last stop on the world money movement trail.

With the U.S. IRS attacking Switzerland’s largest bank, UBS, for more than a year now, even many Swiss depositors are beyond nervous.

Rich individuals from Europe and the Middle East are moving money from Switzerland to Asia, says Renato de Guzman, head of private banking at Oversea-Chinese Banking Corp. "It's a favorable trend," Guzman says. "Having a Singapore bank with no ties to Switzerland is an attractive proposition for a lot of them." (And the bank secrecy law is just as good).

Guzman is trying to capitalize on wealthy clients seeking to shift funds from UBS AG and other Swiss banks amid a dispute with the U.S. on disclosing client data to the IRS.

UBS CEO Oswald Gruebel said this month that it's "imperative" Switzerland's biggest bank halt withdrawals. Net redemptions by wealthy clients at UBS accelerated in the third quarter, bringing the total to 182.9 billion francs ($US179 billion) over 18 months and undermining profit at the bank.

On the Move

There are many current threats that logically should prod Americans to move cash, assets and even themselves to other much freer places – places other then Obama’s socialized America.

One scary example: the not so quiet move by radical Democrats to "pull an Argentina" and confiscate all U.S. private pensions.

The news stories I’ve cited above demonstrate how thinking people can stay abreast of many threats, how they and you can react with legal relocation of wealth, assets, investments -- even by moving your business, yourself and your family.

We Are Specialists

All of these offshore personal and financial havens are areas of expertise in which the Sovereign Society has specialized since our founding 12 years ago.

Look around you. What threats do you see? The chances are excellent that we can advise you on what to do – and how it can be accomplished quickly. Act now.

 

The Passport Book

If you are interested in obtaining dual citizenship and the second passport that comes with that enhanced status, you can learn about every aspect of what is required in the latest 2009 edition of my book, The Passport Book.

The Passport Book is one of our most popular publications, also lists almost 100 countries and explains the residence and citizenship requirements of each, along with contacts.

The Sovereign Society also provides its members contact information for qualified professionals who can assist you in acquiring second citizenship based on naturalization, ancestry, marriage, religion, or even past political persecution by some nations -- and they do it the legal way.

Beware of Passport Fraud

The government of South Africa has suspended dozens of immigration officials being investigated for giving South African birth certificates to foreigners, mainly from Pakistan, the government says.

British security and intelligence officials started warning last year of an increasing risk of Islamic extremists using South Africa as a transit point and venue to plot. They said future attacks on Britain could be directed from countries other than Pakistan -- where dozens of Britons with family ties have traveled for terrorist training or have been linked to recent terror plots.

"The fraudulent registration of births of foreigners constitutes a serious threat to the national security of our country," the Home Affairs Minister said in a statement.

The move comes months after Britain started requiring visas from South Africans, charging that would-be terrorists and criminals were exploiting the availability of stolen or forged South African passports to gain access to other countries. South Africa said nearly a year ago that steps had been taken to prevent corrupt officials from issuing bogus passports.

Warnings of Passport Fraud

I reported on the South African passport scandal more than a year ago, mainly as an example to alert you to the possibility of passport fraud, should you be planning to acquire a second passport.

One of most important considerations when evaluating the usefulness of an alternative citizenship and a second passport is that it is legal in every respect.

That fact may seem obvious, but the proliferation of fly-by-night passport fraud operations, especially on the Internet, requires not only this reminder, but strict adherence to laws when making second passport plans and decisions.

The South African case points up that even government officials are implicated in passport fraud and this case is only one of many involving corrupt government officials.

Don't Take a Chance

When you spend a considerable sum of money to acquire a second citizenship, then use that document as your basis for personal international movement, first you should be absolutely certain that the documents and your status are in strict accord with the constitution and laws of the issuing nation.

In this age of instant communication it takes only hours, certainly no more than a few days, before customs and immigration officials worldwide know when a passport is called into question and illegal passport holders can go straight to jail. 

In 1992 official, but illegally issued Dominican Republic passports and, in 1999, official passports issued by Panama were canceled.

In the latter case, a high passport official resigned alleging she had been pressured into issuing passports to various foreign business associates of the outgoing president. When a new Panama president took office he canceled more then 400 official "diplomatic" passports his predecessor had issued, illegally he claimed, to favored foreign friends.

Unknown Underground

The South African news exposes a little known fact; that there is an expansive, lucrative underground black market in forged and faked passports.

Even legal passports can go astray. In 1998, the Samoan Government announced 150 of its official passports simply had been "lost." Since then thousands of official passports have been stolen or lost in France, Australia, Finland and Belgium. In 2005 the United Kingdom admitted that in the prior year over 10,000 of their passports has been lost, stolen or disappeared.

In 2008 U.S. government security agencies uncovered a criminal ring in Thailand that produced counterfeit passports and other travel documents, including hundreds of fake U.S. passports sold on the black market.

A few years ago a U.S. State Department official was indicted for fraudulently helping foreigners obtain preferential treatment under a program that admits wealthy investors to the United States.

The Passport Book

If you are interested in obtaining dual citizenship and the second passport that come with that enhanced status, you can learn about every aspect of what is required in the latest 2009 edition of my book, The Passport Book.

The Passport Book,

one of our most popular publications, also lists almost 100 countries and explains the residence and citizenship requirements of each, along with contacts.

The Sovereign Society also provides to its members contact information for professionals who can assist you in acquiring second citizenship based on naturalization, ancestry, marriage, religion, or even past political persecution by some nations.

The Passport Book - 7th Edition

If you want you want to discover a new, freedom loving place in which to pitch your tent, deposit your cash or protect your assets, the seventh edition of my best-selling publication, The Passport Book, is now available. You can get your copy now. Here's a sample of the contents.

The Sovereign Society is a recognized voice in the complex offshore world.  Join the Sovereign Society and keep informed.

Obama, House Democrats Push Through Radical Plan to Curb Offshore Freedoms

The U.S. House of Representatives voted Wednesday to extend $31 billion in popular tax breaks allegedly to be financed with a tax increase on investment fund managers and, supposedly, with what one leftist congressman, Rep. Richard Neal, D-Mass., called "a crackdown on international tax cheats."

Six weeks after the bill's anti-offshore provisions were introduced as the "Foreign Account Tax Compliance Act" (without hearings or any chance for opponents to be heard), the legislation that I warned you about at the time, was passed by the House.

More Red Tape, Anti-American Reaction

The bill does not alter the fact that under U.S. law it is still legal to bank, invest and do business offshore. But it does add costly and cumbersome layers or new reporting requirements.

The greatest threat to offshore freedoms lies in the very real possibility that many more offshore banks and financial institutions will refuse to accept Americans as clients rather than submit to the highly unusual extension of U.S. laws to foreign financial businesses and advisors which in effect would force them to act as IRS spies.

Extremely Punitive

Under this extremely punitive bill, all foreign financial institutions, banks, foreign trusts, private foundations and foreign corporations could be forced into providing information about U.S. account holders, trust grantors, and American owners associated with these legal entities. As if they did not exist, the legislation totally ignores the current extensive reporting requirements of federal law that already apply to all such entities.

 
Wrapped in Popular Tax Cuts

The anti-offshore provisions were included in a bill that contains 45 tax deductions and credits for businesses and individuals that are scheduled to expire at year's end. The House voted 241-181 to extend them for a year, with only two Republicans voting in favor. The bill now goes to the Senate, which has rejected the tax increase on investment managers in the past.

Yesterday’s House action mirrors the House Democrat’s June 2008 sneaky legislative tactics when they included an onerous "exit tax " on Americans who expatriate as an alleged means to finance a veterans benefits bill.

The anti-offshore provisions were put into the bill allegedly to finance the cost of the continuing tax cuts. In what has to be viewed as pure fiction, the House bill sponsors claim it would raise an additional $7.7 billion from a crackdown on alleged offshore tax evasion by Americans, an issue President Obama has embraced with untruths and demagoguery, both in the White House and as a presidential candidate in 2008.

As it passed the House bill, H.R. 4213:

• Impose a 30% withholding tax on payments to foreign financial institutions and other entities unless they acknowledge the existence of offshore accounts to the IRS and disclose relevant information including account ownership, balances and amounts moving in and out of the accounts.
• Require individuals and entities to report offshore accounts with values of USD50,000 or more on their tax returns.
• Extend the statute of limitations to 6 years when offshore accounts are unreported or misreported (the current statute of limitations on tax audits is 3 years).
• Require advisors who help set up offshore accounts to disclose their activities or pay a penalty.
• Require electronic filing of information reports about withholding on transfers to foreign accounts to enable the IRS to better match reports to tax returns.
• Strengthen rules and penalties with regard to foreign trusts, including rules to determine whether distributions from foreign trusts are going to US beneficiaries and reporting requirements on US transfers to foreign trusts.
• Clarify the definition of outgoing US dividend payments that are received by foreign persons so they cannot be disguised as other types of distributions in an effort to avoid US taxes.

If you want to dig into the anti-offshore details of the bill, you find the text of the bill here and its technical description here. 

 

Offshore Reaction

As a result of numerous anti-offshore policies of the IRS and the Obama administration, as well as the UBS bank scandal, many Swiss and other offshore banks have closed existing accounts of Americans and have turned away new U.S. applicants. This bill may add to that number.

Switzerland's oldest bank, Bank Wegelin in Saint Gallen, was typical in not only confirming its "no Americans" policy, but in announcing it would not longer invest in American investments for itself or its clients.

Another Freedom Destroyed

One can only guess what may be the reaction of offshore bankers to the threat of a 30% tax to force release of client information that would clearly violate Swiss bank secrecy laws, as well as financial privacy laws in many other countries such as Panama, Austria, Singapore and Hong Kong.

If this bill becomes law, it may well block the ability of many Americans to bank offshore, simply because no offshore bank will put up with these unprecedented bullying tactics by the IRS. There are plenty of other people of wealth whose governments do not think they can impose their rule on the entire world.

Stay tuned for developments.

  You can learn all about "going offshore" and about legitimate and legal offshore financial centers in my just published 4th edition of Where to Stash Your Cash Legally: Offshore Financial Centers of the World. Find out how here.

The Sovereign Society is a recognized voice in the complex offshore world.  Join the Sovereign Society and keep informed.

Good News from Panama

I haven’t said much about developments in Panama recently, but one of the best English language sources for current news from the isthmus is Sam Taliaferro’s Panama Investor’s Blog that offers free subscriptions.

Echoing an established theme in the world press, (and here at the Sovereign Society), Panama again made Forbes magazine’s list of the World’s Best Retirement Havens. For those looking for quality of life and low cost of living, no place can beat Panama for retirement.

Martinelli In Action

Panamanian President Ricardo Martinelli (below) has been in office 6-months and he is managing Panama with, as one observers says "the same vision as when he ran the chain of supermarkets that made him one of the country's wealthiest men."

He really has cracked down on corruption and is pushing hard for business and tax reforms. His campaign proposal for a flat tax is to be taken up next year in the National Assembly.

He has also added to the $6 billion expansion of the Panama Canal, (he formerly headed the Canal Commission), many capital intensive public projects such as highway construction, a metro rail system for Panama City, and airport renovations.

Martinelli’s approval ratings are just about the highest in the western hemisphere at over 90%, compared with Barrack Obama's 53%, Hugo Chavez at 46%, and Argentina's Cristina Kirchner at 20%.

Leader in Latin American Growth

Panama is predicted to have the highest GDP growth (an average 6.1%) in Latin America in the five-year period starting in 2010, while Hugo Chavez socialistic Venezuela predictably will have the lowest, according to a Latin Business Chronicle analysis of new forecasts from the International Monetary Fund.

A perhaps more realistic assessment of Panama’s economy can be found in Eric Jackson’s Panama News, and the news is not all good in every sector.

Better Credit Rating

Panama’s debt rating was raised to "positive" by S&P, putting the country on the cusp of an investment-grade rating, as tax increases and faster economic growth help keep the budget deficit in check. This better rating easily allowed Panama to sell US$1 billion of bonds in 10-year notes, yielding 5.224% in overseas markets.

 
And over 17,000 new business corporations have been registered in Panama so far this year, continuing its status as second in the world (after Hong Kong) in total number of incorporations.

Cleaner Finances

Panama gets a bad (and false) rap from the American Left for supposed tax haven abuses, but according to the OECD’s highly demanding Financial Task Force (FATF), Panama is rated just behind the U.S. in compliance with international money laundering regulations. A November FATF report ranked Panama fourth in a list of 44 countries and jurisdictions participating in the evaluation, below only the U.S. Singapore and Belgium.

Meanwhile Banco General has been awarded the "Best Bank in Panama in 2009" status by the financial magazine Latin Finance.

No to Tax Information Exchange

In spite of all the progress, The Economist magazine still takes a dim view of Panama's financial industry. In an article last month they say there is an "unfinished job of cleaning up the country's financial reputation."

The magazine notes that Panama has refused to sign tax-information-exchange treaties. Panama rejects these agreements, arguing that they provide it with no benefit since it only taxes domestic income. Instead, president Martinelli, says he will sign treaties to eliminate double taxation, which both meet the OECD's information-sharing requirement and could attract foreign investment.

For some excellent material on Panama and the OECD, see senior attorney Eduardo Morgan’s views on the hypocrisy of the major nations on tax abuses. Morgan, of the law firm of Morgan and Morgan, has been at the forefront of the battle with the OECD and its attack on Panama as a financial center.

Real Estate

The several year long real estate boom in Panama is slowing, but, as one observers says "given the maturing economic growth engines and massive infrastructure development that is underway, the country is clearly on an upward trajectory. Martinelli's actions are keeping Panama on the right track, and I believe the country will remain a safe long-term bet for investors and residents..."

At a time when countries everywhere are hurting because of government stupidity, Panama is an international stand out, both economically andspolitically. With some satisfaction, after more than 10 years, we can say: "We told you so!"

You can read all about Panama and other legitimate and legal offshore financial centers in my just published 4th edition of Where to Stash Your Cash Legally: Offshore Financial Centers of the World. Find out how here.

The Sovereign Society is a recognized voice in the complex offshore world.  Join the Sovereign Society and keep informed.

Why Switzerland Is Still Free and America Is Not

My guest columnist today is Ron Holland (left), a long time friend of the Sovereign Society and of our founder, the late Bob Kephart. We often talk about expatriation as a way of escaping from the current mess in U.S. government. Ron suggets secession may be the answer. Ron [send him mail] works in Zurich and is a co-editor of the Swiss Mountain Vision Newsletter.

The American Time magazine article headline asks, "Will Switzerland Vote to Ban Minarets on Mosques?"

Swiss citizens are becoming concerned about the threat that Islam presents to their traditional culture, economy and religious institutions. As an American, I know how I would vote were I Swiss but the decision will be made by the Swiss electorate as they have this referendum right on all issues.

In Switzerland, the people still rule and have the ultimate right to decide decisions above the government or parliament. Through the right of referendum they can cancel legislation and with the initiative they can pass or create legislative action on issues parliament refuses to act upon.

The bias and closed statist views shown in the article is business as usual for the U.S. media elites out to protect the American political establishment and are so evident in this headline and article. It isn’t the question they asked but rather the question they didn’t dare ask is the "700-lb gorilla in the room."

Quoting from the article, "Critics say the SVP, the largest party in Switzerland's coalition government, has taken advantage of the country's unique brand of direct democracy to push its populist, anti-immigrant agenda on the Swiss electorate. Citizens have the right to propose new laws in Switzerland – the only thing they need to force a nationwide vote on an initiative is a petition of 100,000 signatures."

The question not asked is why doesn’t the American electorate have oversight over legislation and unpopular government regulations in the United States like in Switzerland?

Imagine if 4% of the American voters signed a petition requiring a nationwide vote "yea or nay" on the banking bailouts, going to war in Iraq, auditing the Federal Reserve, nationalized health care or on the trillions in new Washington debt added because of the financial meltdown. The United States would still be a decentralized republic with limited government had we had the political option to hold back Washington and the special interests.

How America would be different if we had Swiss-style political rights to restrain government where the people rule instead of the special interests. Imagine an America where the billions in graft and political influence that control Congress could still buy legislation but not ultimate control if we as a people could overrule their actions.

What if the will of the people still ultimately controlled the political system and direction with true limited government at the federal, state and local level?

Imagine the American electorate overriding Congress and demanding a strong dollar backed by real gold reserves, an audit of the Federal Reserve, a rollback of the bailouts, a declaration of war for foreign military intervention, the abolishment of the PATRIOT Act and a return to banking privacy.

Yes, a Swiss political party (The Swiss Peoples Party) promotes a nationalist agenda to the Swiss voters and they will ultimately decide in referendum yes or no on the issue. This is currently impossible in the United States but Swiss direct democracy and limited confederation government have worked in Switzerland for hundreds of years.

This is far superior to the two-party monopoly in America where the elites controlling both parties can push their self-serving agendas without restraint. Currently, short of the Tenth Amendment movement, state nullification or outright state secession, there is no real effective way to push back against Washington.

Until the American people can find a way to restrain the Federal government, the bureaucracy and the judiciary, the best place for Americans to secure and safeguard their wealth is outside their own country.

Switzerland is one of the best jurisdictions to consider because their political system has preserved the rights and freedoms we once had as Americans. Still the ultimate problem for Americans is the necessity to restore our liberties at home because history has shown that wealth without liberty is only a temporary condition at best.

I say, it is time to take a real look at direct democracy in the United States or else Americans who value their property and liberties will have little choice but to first transfer their wealth to safety outside the US as it will be lost in the coming crash of treasury debt and the dollar.

Next we must stand and fight the Washington leviathan through the political tools of the Tenth Amendment and John C. Calhoun’s political ideal of nullification both of which the Feds will probably just ignore. Our final democratic political tool is to exercise the political right of state-by-state secession with all the political and historical baggage this entails.

Trust me, Swiss style direct democracy in the United States would be an easier way to control Washington and the special interests, but we only have a few years before the Washington debt and dollar collapse is upon us.

Therefore I’ll close with a question. Is anybody here for secession?

Copyright © 2009 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

The Passport Book - 7th Edition

If you want you want to discover a new, freedom loving place in which to pitch your tent, deposit your cash or protect your assets, the seventh edition of my best-selling publication, The Passport Book, is now available. You can get your copy now. Here's a sample of the contents.

The Sovereign Society is a recognized voice in the complex offshore world.  Join the Sovereign Society and keep informed.

No Way Out -- or an Exit Strategy?

I travel a lot on airplanes, notwithstanding the fact that the very first time I flew, (on an Eastern Airlines DC-3 in 1947) the plane crash landed. (I've written about that interesting experience of my youth before).

I always ask for an exit row seat when I fly, if I can get one, and not just for the extra leg room. If I can't get an exit row, I make sure to notice where the exits are and listen to the now familiar instructions of the staff or the video.

Similarly, from time to time you read about the horrendous loss of life in nightclub fires when exits are locked, or insufficient to allow egress in an emergency. On November 28th 1942, a huge fire occurred at the Coconut Grove Night Club in Boston. 492 people perished because the only exit was one revolving door. In 2003 one hundred people died and 230 were injured in a Warwick, Rhode Island nightclub fire because of lack of exits.

Plan Ahead

Perhaps I am being overly dramatic, but I personally believe the current situation in the United States, politically and economically, is as serious as it has been at any time since the Japanese attack on Pearl Harbor on December 7, 1941.

So serious that reasonable people now should be considering what they might do if things become so dire that an escape from America becomes necessary.

Frankly, in all my years I never thought I would reach the point that I would counsel people on how to move their assets and their selves away from what I still consider to be one of the greatest nations on earth.

But the America I knew as a teenage page in the U.S. House of Representatives and later as member of that body, has changed -- and not for the better.

Foresight

The Sovereign Society was founded by patriotic Americans and citizens of other nations who, more than a decade ago, recognized the growing trend against individual liberty for the very real threat that it was and is. Since then our membership has grown considerably.

I believe much of that growth is attributable to the fact that we offer not only a philosophy of freedom, but concrete plans that can be followed, both now and should implementing an exit strategy become necessary. That day may be closer at hand than we want to admit.

I have traveled all over the world, met thousands of people concerned about their family's future and the ability to avoid stultify taxes and government controls. They often ask: "What can I do?"

Join Me in Los Cabos

That's why I suggest to you that you should be at the Third Annual Offshore Advantage Seminar, a Beginner’s Guide to the Offshore World, November 4, 2009 – November 7, 2009 at the Westin, Los Cabos, Mexico.

There you will find the answers to your questions, as well as that exit strategy.

I'll be there, along our executive director, Erika Nolan, and many professional members of our Council of Experts from all across the offshore world. Attendance already is the largest we have ever had and I can guarantee, along with the valuable education, you'll have a great social time as well.

Where else could you confer, one on one, with so many leading offshore experts?

You'll come away with not just an "exit strategy" but with a whole new understanding of the many possibilities that exist in offshore banking, asset protection, investing and tax deferral.

I hope to see you there. As they say, "Come on down."

All the best and in the name of personal freedom,

 

Offshore Trusts: Now It's In the Book

Last December, B.O. (before Obama), I had a bout of prescience and wrote the following in these pages:

There's a lot of financial uncertainty in America just now, and I'm not referring to the officially declared recession that is now upon us. The recession is bad enough, certainly. But I'm referring to the fact that if president-elect Barack Obama's campaign statements and his past Senate record are any measure of what he will do once he takes office, those concerned about protecting their assets from high taxes and other threats should be very much concerned -- and that well placed concern should prompt immediate action.

In a blog entitled Offshore Trusts for Wealth Protection, I explained how a key element in an asset protection-against-Obama plan for many could well be that old reliable, an offshore asset protection trust (APT).

Over the decade since the founding of the Sovereign Society I have written reams about offshore trusts and the important role they play in sound estate planning. But with the U.S. economy struggling and socialism all the fashion in Washington, now’s definitely the time to act on your offshore trust.

Protection and Taxes

In most cases, while an offshore trust will protect your assets, it won't reduce your U.S. tax bill. However, an offshore APT can incorporate provisions that may reduce some future estate tax liability for your heirs.

Best of all, the APT can protect your wealth, notwithstanding frenzied efforts by the U.S. and other welfare state governments to discourage legal offshore financial transactions, investments and even banking.

Frivolous litigation, expensive legal defense costs, outrageous jury awards, government privacy invasions and asset forfeiture all create a continuing need to protect your personal, family and business wealth.

An APT can do all of that -- and more. Plus -- offshore trusts are beyond the immediate jurisdiction of American courts.

Who Knows the Rules?

 

One of the stumbling blocks when it comes to consulting about an APT is the ignorance of many American lawyers about offshore trusts, especially about the IRS reporting and complex tax rules that govern APTs.

(The recent IRS vs. UBS scandal shows many Americans may be just as dumb about proper offshore reporting, and many will pay a high price).

A great deal has been written by many estate and trust lawyers about the law as it relates to the protection of assets in a foreign trust, but very little has been written about the complex U.S. tax rules that apply to the U.S. settlor/grantor or the U.S. beneficiary of a foreign trust.

The Ultimte Trust Guide

 

Well, be you lawyer or client, you can rest easier now when it comes to U.S. taxes and offshore APTs. Expert help is at hand. Vernon Jacobs CPA, whom I often quote here, and offshore attorney Richard Duke JD, have written a new book entitled U.S. Tax Guide for Foreign Trusts, subtitled, An Income and Estate Tax Compliance Guide for U.S. Grantors and Beneficiaries of a Foreign Trust.

You can find all about this book right here.

Who Needs It?

If you are a U.S. citizen or U.S. resident alien who has (or wants to have) assets in a foreign trust, if you are the beneficiary of a foreign trust, if you are a foreign trustee, an attorney who assists in the formation of foreign trusts, an investment advisor who manages the assets in a foreign trust or an accountant who keeps the books for a foreign trust owned by a U.S. person -- then you need this book.

The Passport Book - 7th Edition

If you you are looking for a new, freedom loving place in which to pitch your tent, deposit your cash or protect your assets, the seventh edition of my best-selling publication, The Passport Book, is now available. You can get your copy now. Here's a sample of the contents.

The Sovereign Society is a recognized voice in the complex offshore world.  Join the Sovereign Society and keep informed.

What's An Andorra?

The British travel web site, Gadling Travel, posed that question on Friday. Since I regularly prowl the Internet looking for tax haven news, I discovered that the provocation for Gading's question was, as they said, "...this spectacular shot (below) from the Incles Valley in Andorra, the tiny 181-square-mile country located in the Pyrenees Mountains between Spain and France."

The Gadling writer added: "Because I don't know a damn thing about Andorra, and this photo has convinced me that I should, I've conducted a very small amount of research about the principality (read: looked it up on Wikipedia).

"Here's what I've come up with: Andorra is well known as a tax haven, which would be useful information if I had any money; Andorra's inhabitants have the highest life expectancy in the world at birth-- 85 years; There are no airports or universities in Andorra. [My note: the first airport opens early in 2010, as I reported last year.]; Andorra's name is thought to be derived from a word which means "shrub covered land."

Yes, You Can Get There

As regular readers know, I've written about Andorra a fair amount, since it is tax haven worthy of consideration.

It is indeed a tiny, mountainous country with no taxes, no army and no poverty. Until 2010 when its first and only airport plans to open, it has been accessible from France or Spain only by motor vehicles over mountainous roads in journeys that take many hours, depending on weather conditions. The country’s standard of living is high, the cost of living relatively low and the scenery delightful.

And even though the government has announced that it will comply with the OECD Article 26 standard on sharing tax information, the principality still has one of the strictest financial privacy laws in the world.

Biblical Moniker

But there's another version of how Andorra got its name.

According to local legend, Charlemagne, Emperor of the Holy Roman Empire,(right) gave Andorra its name. Gazing over the mountain region newly wrested from the Moors of Spain, the Emperor is said to have exclaimed, “Wild valley of hell, I name you Endor!”

It would appear that Charlemagne was a biblical scholar, because the Valley of Endor, at the foot of Mount Thabor in the Holy Land (below), was the campsite of the Israelites during the war against the Canaanites. Who knew?

Read All About Andorra -- and Lots More

In my latest (7th) edition of The Passport Book, you can learn all about residence and living in Andorra, as well as the specific residence and citizenship requirements of nearly 100 countries worldwide that could be your new home place, whether you're American or other nationality. My new book will be "hot off the presses" next week. Click here for more information and advance orders.

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IRS Apartheid Blocks Americans from Swiss Banks

The word "apartheid" means "separateness" in Afrikaans, once the official language of South Africa and the native tongue of many of its minority white citizens. As the world knows, it also describes an official policy of racial segregation formerly practiced in South Africa.

But the meaning of apartheid has broadened over the years and now includes any official government policy or practice of unjustly isolating or segregating groups of people from others.

You may not have experienced it yet, but there are tens of thousands of Americans already suffering under what can best be described as a diabolical "financial apartheid" -- disruptive rules being imposed on Swiss and other offshore banks by the U.S. Internal Revenue Service (IRS) and the U.S. Securities and Exchange Commission (SEC).

These IRS-SEC policies are wrecking havoc among Americans who live or bank offshore. Many justifiably upset Swiss and other offshore banks are closing existing accounts of U.S. persons and refusing new American clients. Unless there is some change, other offshore banks soon may follow suit.

Yankees Go Home

In my opinion, Swiss bankers have concluded they don't need or want Americans any more, with all that costly and legally dangerous U.S. government red tape.

Despite fears, Swiss private banking is in better shape than it looks. Swiss private banks have pulled in a lot of new money over the past two years, despite the recession and controversy over bank secrecy. Most Swiss private banks continued to report inflows even as assets under management lost market value.

Much of the new money coming into Switzerland is from regions such as the Middle East, Russia and Asia, where personal tax rates are low. Obviously foreign clients continue to value Switzerland for its security, political stability and stable currency.

But for Swiss banks the IRS and SEC are making Americans into financial pariahs.

Five Million American Expats

It is difficult to say how many people are affected, but more than 5 million Americans live abroad, including about 30,000 in Switzerland.

The unreasonable U.S. government demands caused UBS and Credit Suisse, Switzerland's two largest banks, months ago to order Americans to move their money into specially created banking units that are SEC registered or located in the U.S. Failing that, the banks closed the accounts. UBS alone has cut loose its 52,000 U.S. clients.

Many smaller private banks, such as the respected Geneva-based Mirabaud & Cie, also are shutting down U.S. accounts.

As part of a U.S. Department of Justice deferred prosecution agreement on charges UBS conspired to defraud the U.S. of taxes, the bank gave limited U.S. client data to the IRS and paid a fine of $780 million. The unappeased U.S. DOJ then sued UBS again, this time demanding 52,000 names of alleged American clients. A hearing on this demand is scheduled in federal court in Miami in a few weeks.

Compounding the nervousness of notoriously conservative Swiss bankers, the IRS is threatening to sue other Swiss banks to obtain their U.S. client records. Apparently the IRS assumes any American with an offshore bank account is a tax evader.

Americans as Typhoid Mary

The IRS also has increased pressure on Americans to disclose offshore accounts, setting a deadline of Sept. 23 for taxpayers to declare all foreign accounts or face possible criminal prosecution that could result in as much as 10 years in prison and $500,000 in penalties.

IRS proposals on new QI rules (see below) will increase the cost of compliance and the risk of violating U.S. laws, says Charles C. Adams, (right) managing partner at the law firm Hogan & Hartson LLP in Geneva.

"American citizens are starting to feel like they’re Typhoid Mary," said Adams who hosted a 2008 fundraiser for Barack Obama. "The Swiss simply don’t want American customers because it requires so much infrastructure and hassle that they don’t make any money."

U.B.S. Loved Obama

As I noted here last year at a U.S. Senate hearing in July, 2008 then Senator Barack Obama complained that "Ordinary Americans pick up the slack for tax cheats who hide assets in offshore tax havens, often with the help of foreign banks like UBS…"

When he made this pious statement now President Obama knew that one of the most prominent UBS executives, Robert Wolf, CEO of UBS Americas, (above with the President at the White House recently) already had collected and bundled more than $370,850 in campaign contributions for Obama’s presidential campaign, making UBS Obama's fifth largest corporate donor.

Judging from what Obama’s government has done to U.S. since taking power, this was yet another very bad investment for the geniuses at UBS.

Qualified Intermediaries or Spies?

The current unprecedented disruption for Americans banking in Switzerland results in part from the little known IRS "qualified intermediary" (QI) program that began in 2001.

In its current form, the QI program allows participating IRS-approved foreign banks to maintain accounts for American clients without having to disclose their names to the IRS. (U.S. persons already are required by law to report all offshore accounts on their annual income tax IRS Form 1040 and on Form TD F 90.22-1 – Report of Foreign Bank and Financial Accounts).

Until now the IRS has required the offshore QI banks to promise to identify U.S. clients, withhold any taxes due on U.S. securities in their accounts, typically a 30% tax, and send the taxes owed to the IRS. More than 7,000 foreign banks participate in the QI program supposedly helping the IRS to keep track of American offshore investors. But now the IRS claims each year it is losing millions of taxes owed under the QI system.

As I explained here, in 2009 the IRS proposed tough new QI rules, to take effect in 2011. Under these much stricter rules foreign banks in the QI program will be forced to investigate, determine and report to the IRS, not only the names and information on individual U.S. offshore account holders, but also on any legal entities (trusts, corporations) Americans control as beneficial owners.

In effect the IRS wants offshore banks to act as financial spies on Americans who bank offshore, just as the PATRIOT Act already requires U.S. domestic banks to spy on their clients and report "suspicious activity" to the U.S. Treasury crimes unit.

SEC Extends U.S. Law Offshore

But there's another cause of this Swiss-American banking mess and it comes from the same U.S. SEC, that wonderful bureaucratic agency that wouldn’t investigate Bernie Madoff even when his fraud was explained to them in detail.

The SEC accused UBS with helping its U.S. clients to evade taxes, but it also charged that the bank’s actions that had occurred within Switzerland amounted to the bank acting as unregistered investment advisers and broker-dealers in violation of the U.S. Investment Advisers Act of 1940 and SEC rules. Using this novel extraterritorial approach, the SEC thus has extended its jurisdiction to include any person anywhere in the world who dares to advise Americans about investing before registering with the SEC.

In settlement, UBS paid $200 million to the U.S. and permanently was barred from acting as investment advisors or broker-dealers for American clients in Switzerland.

Blackmail by Regulation

Up until now offshore banks and investment advisors could avoid SEC registration by having absolutely no contact with and never soliciting potential U.S. clients. Because of this previous SEC interpretation of registration rules, careful offshore banks and financial advisors would not even respond to inquiries from a U.S. postal or email address.

The UBS case seems to mean that Swiss or other offshore banks now must register with the SEC, an onerous and costly process, in order legally to provide advice to American customers with offshore investment or bank accounts.

"My bank doesn't want to do that, so we wouldn't accept an investment account for a U.S. person," said Pierre Mirabaud, chairman of Mirabaud & Cie (left).

For Americans with Swiss accounts, SEC registration by their bank also means they must waive the protection of the 1934 Swiss bank secrecy law that makes it a crime for money managers to disclose the names of clients without their consent.

It appears that international blackmail by U.S. regulation is achieving what the IRS and the OECD has long demanded – an end to Swiss bank secrecy, at least for Americans.

Obama’s Tax Hunger

How can these astonishing developments be allowed to occur in a modern banking and financial world system linked by globalism?

Ravenous for tax dollars to finance President Obama's costly remaking of America, it appears the IRS has orders to adopted as official policy the kind of radicalism expressed by Jack Blum, (left) a paid IRS "consultant on tax evasion," who told The New York Times: "There is no legitimate reason for an American citizen to have an offshore account...When you go offshore, you are doing so to evade rules, regulations, laws or taxes."

Indeed, I personally heard a top U.S. Justice Department official make a similar statement that traditional internal DOJ policy assumes that any American engaged in offshore financial activity is probably doing something illegal.

So much for presumed innocence until proven guilty!

Over the years the IRS repeatedly has tried to scare all Americans with deceptive publicity campaigns that insinuate that banking and investing offshore is somehow un-American and even illegal -- when in fact it is fully legal (a least for now), so long as offshore activities are reported and taxes paid on all worldwide income.

Congress Wakes Up

So drastic have the IRS/SEC extraterritorial measures become that even the U.S. Congress has taken notice.

In bi-partisan opposition two members of the U.S. House, Rep. Carolyn Maloney (left) and Rep. Joe Wilson, (below) wrote a May 27 letter to Treasury Secretary Timothy Geithner pointing out the obvious, that if QI requirements are extended beyond investment accounts to cash or deposit offshore accounts, "taxpaying Americans living abroad will have no place to bank" -- which is exactly what is happening.

"If neither foreign nor American banks will take American customers, how will the millions of citizens living abroad bank." asked Maloney, a New York Democrat, and Wilson, a South Carolina Republican, co-chairmen of the congressional Americans Abroad Caucus? (Email your U.S. senators and congressman and let them know your opinion).

Legal Solution for You

At the Sovereign Society fortunately we saw this coming. Over many months we have responded to scores of complaints from Americans affected by these outrageous Obama policies.

Our executive director and marketing directors, Erika Nolan (left) and Shannon Crouch, meet regularly with Swiss and other offshore bankers. We now have in place agreements with reputable Swiss banks willing to accept new accounts from those who identify themselves as Sovereign Society members.

These arrangements are in full compliance with IRS and SEC rules and with other U.S. laws. It also means that a U.S. client must sign an IRS Form W-9 that allows an offshore bank to report required information to the IRS.

As it has been since our founding 11 years ago, our staff is available to assist in opening a Swiss or other offshore account.

Take advantage of these special Swiss banking arrangements -- sign up here for Sovereign Society membership. Once you are a member, you can contact us for help via email at info@sovereignsociety.com

Wealth Advisors As Federal Snitches

Recently Gideon Rothschild, (below) partner in the New York law firm of Moses & Singer LLP and a recognized leader in estate planning, (as well as a long time member of the Sovereign Society Council of Experts), wrote an article in Trusts & Estates that got my attention.

Gideon said: "The feds may soon try to turn wealth advisors into snitches."

I have worked with Mr. Rothschild on a few occasions over the years and I respect his judgment. He is listed in Chambers USA (2009) as one of the nation's leaders in wealth management, is among the "Top 40 Tax Advisors" named by CPA Magazine, In Citywealth's Leaders List (2009) he appears among leading international lawyers who are "generally acknowledged to possess a sterling reputation for expertise in their respective field."

An Expert's Warning

In the article Gideon warned: "The world’s financial system is getting tied more tightly together -- making it far more difficult to hide money anywhere in the world. And, take note, some countries are forcing wealth management advisors to report on their clients. "

He added: "Many types of wealth advisors soon may be required -- that’s right, required -- to report clients who are evading taxes. Sometime later this year, guidelines, and maybe even laws, will be issued in the U.S. requiring 'gatekeepers' to report suspicious clients to the federal government."

Conscripted Gatekeepers

"Gatekeepers" the law says are anyone whose position might allow them to help people launder money. That includes lawyers, accountants, trust company service providers, casino owners, jewelers and just about any professional who helps people form trusts, foundations, LLCs or corporations.

Mr. Rothschild's statement was followed by an article by Vern Jacobs CPA, (left) in the June 15 edition of his International Wealth Protection Monitor that predicted: "IRS Will Be Conscripting Tax Preparers: If you sometimes think that your tax preparer is really working for the IRS instead of for you, 'you ain't seen nothin' yet'. The IRS is currently proposing to regulate return preparers in addition to their present regulation of advisors who represent taxpayers in disputes with the IRS."

Vern also pointed out to me that under current IRS rules, CPAs, such as himself, already must report to the IRS certain "listed transactions, reportable transactions, transactions of interest and -- in some cases -- transactions that do not meet the standard of being supported by 'substantial authority'".

No Privacy Anywhere

If the IRS issues rules mandating that tax professionals report anything that even smells like possible tax evasion, or even actions that smack of possible criminal tax evasion, how could any American taxpayer feel safe consulting a tax professional?

No sane U.S. taxpayers would try to decipher how the 50,000 page Internal Revenue Code applies to them. That's why billions of dollars and millions of man hours are expended each year by taxpayers trying to compute their tax liability. Professional tax advisors, lawyers, accountants, and tax preparers make up a multi-billion dollar industry that thrives on the tax code’s complexity.

IRS Half Wrong

Not even the U.S. Internal Revenue Service (IRS) understands the tax laws it is supposed to administer. Every survey I've seen checking the accuracy of IRS answers given to taxpayer questions finds well over 50% of those answers are wrong.

How would any rational person know, except in an extreme case, that a client was proposing to engage in tax evasion when so many tax issues fall into a gray area?

But you can bet that a great many professionals, faced with such a rule, would err on the side of reporting a client to the IRS, if only to cover their own butts.

Planned Confusion

In both the U.S. and the U.K. national tax authorities have made a conscious effort to equate legal tax avoidance with illegal tax evasion. Charles Cain, a respected editor of Offshore Investment, charges that "the line between tax avoidance and tax evasion is purposely being blurred by governments, with honest people (and their tax advisors) being jailed for failed attempts at tax avoidance while tax evasion is put down on a moral level with heroin and cocaine pushing."

Good-bye Confidential Privilege

Then too, an IRS rule making tax professionals into government informers would clash with the doctrine of attorney client privilege. When you retain a licensed attorney, you generally have the right to refuse to have disclosed all "confidential communications" you share. You also have the right to prevent others from disclosing these confidential communications. The only time an attorney has an obligation to inform the police is when he knows for certain that a client is contemplating committing a future serious crime.

Under current U.S. laws bankers and other financial system "gatekeepers" already have an obligation to file "suspicious activity reports" (SARs) with the U.S. Treasury if money laundering is suspected. In fact, every U.S. banker is a de facto government spy.

Guilty Until Proven Innocent

The IRS perfected this "guilty until proven innocent" tactic a few years back when it attacked all Americans with offshore bank, investment or other accounts that issued credit cards as probable tax evaders. While the IRS did concede offshore credit cards are legal, they insisted some people "might" use offshore accounts and the cards to hide unreported income. At the moment it using this same presumption of guilt smear against 50,000 Americans who had UBS accounts.

Indeed, IRS Commissioner Doug Shulman (LEFT) praised President Obama’s plan that he said "would create a legal presumption against users" of certain offshore bank accounts who would be presumed guilty under proposed legislation.

The Nazification of America

Tax evasion is a crime.

But it is also an unconstitutional fishing expedition when a government agency demands the private financial records of thousands of law abiding citizens.

It is even worse when the IRS turns professional tax advisors into forced informers about matters that are far from clearly criminal. Due process requires that unless and until probable cause can be shown by the IRS of some illegal tax evasion in an individual case, no American's confidential files or conversations should be surrendered to the IRS.

What we see here is yet another giant step in the Nazification of the U.S. financial and tax system.

This latest IRS outrage fits in with billions in civil forfeiture of property, money laundering as an all purpose indictment, bankers and lawyers forced to act as government spies, continued clandestine NSA Internet and phone wiretapping; or in other words -- the Obama surveillance society -- precisely the same tactics for which he attacked President Bush.

Is it any wonder Americans are going offshore? Expatriation anyone?

Need another reason to join The Sovereign Society? How about 58 of them…