Offshore Asset Protection BLOG - Bob Bauman

The Cook Islands – Far Out

Way out in the South Pacific, (some would say, in the middle of nowhere), lie the Cook Islands, home to a very modern set of offshore financial laws that may be just what you need: iron-clad asset protection trusts, international business corporations, limited liability partnerships, and a very strict financial privacy law that keeps private your personal business.

Travels of Capt. James Cook, 1755-1779

Not as well known as some offshore financial centers, in 1981 the Cook Islands government first began adopting (and updating) a series of wealth and asset-friendly laws. Since then these islands have attained a definite role in offshore financial circles, especially when it comes to asset protection trusts.

Named after Captain James Cook, the famous British explorer who visited them in 1773, the islands became a British protectorate in 1888. By 1900, administrative control was transferred to New Zealand; in 1965, residents chose self-government and a free association with New Zealand. A member of the British Commonwealth, the islands have a constitution with a Westminster style parliament elected every four years by universal suffrage. The legal system is based on British common law and English is widely spoken.

Heart of Oceania

A broad net of 15 coral islands in the central heart of the South Pacific, the Cook Islands are spread over 850,000 square miles, southwest of Tahiti and due south of Hawaii. The islands occupy an area the size of India, but have a population (a little over 21,000 people) no larger than a small town in America.

Local time is 10 hours behind GMT, with 9:00 a.m. in Hong Kong is 3:00 p.m. the previous day in the Cook Islands. When it is noon EST in the United States it is 5:00 p.m. in the Cook Islands.

This geographic location gives the Cook Islands, with its excellent modern communications, a strategic advantage in dealing with both the Asian and American markets.

Planned Offshore Center

The development of the Cook Islands as an offshore financial center was the product of the government’s official collaboration with the local financial services industry. It’s no secret that certain American asset protection attorneys played a role in advising the government on asset protection issues, actually drafting statutes for the island’s parliament.

Financial services now rank second to tourism in the economy. Despite some 50,000 visitors a year to the capital island, Rarotonga, (left) the beautiful Cook Islands remain largely unspoiled. The New Zealand dollar is the local currency, but usually offshore transactions are in U.S. dollars. Several major Pacific area banks have offices here.

Tailored Wealth Protection

There is much here to for serious persons of any nationality who want strong asset protection supported by sympathetic government and judicial policies.

Existing statutes provide for IBCs, offshore banks, insurance companies, and trusts. All offshore business conducted in the Cook Islands must be channeled through officially registered and regulated trust companies. A comprehensive range of professional trustee and corporate services is available.

International companies incorporated are allowed great flexibility in corporate structure with provisions to ensure ease of administration. Incorporation can be completed within 24 hours.

The Cook Islands definitely is a tax haven. The government officially guarantees no taxes will be imposed on offshore legal entities. Thousands of foreign trusts, corporations, LLCs and partnerships are registered here, protected by an exceedingly strong financial privacy law. There are no currency controls.

Updated Laws

The Cook Islands systematically has adopted a series of anti-money laundering, financial reporting, and anti-financial-crime laws. These laws were sufficient in 2005 to get them removed from the Financial Action Task Force (FATF) blacklist, which was their stated objective. These laws prohibit "fishing expeditions" and ensure that any information disclosed is done through proper channels with legal justification after a court hearing.

In 1989, an amendment to the International Trusts Act 1984 introduced the asset protection trust (APT). This legislation is considered cutting edge and has since been copied by many offshore financial centers.

An asset protection trust is not required to file any returns, reports, or records. A trust settlor’s bankruptcy does not void the trust. Foreign court judgments are not enforceable against a trust. A foreign claimant must start new proceedings in the Cook Islands subject to local law. All claims are subject to a two year statute of limitations running from the time of the trust creation.

Strict Confidentiality

Strong financial and banking secrecy provisions apply here, requiring government officials, as well as trustee company and bank employees, to observe strict secrecy backed by criminal sanctions.

The official registrar records of foreign companies and of international trusts are not open for general search, with a few defined exceptions. Thus all parties are kept private unless a court releases the information.

In 2009, together with almost every offshore financial center in the world, the Cook Islands government agreed to apply the OECD standards allowing exchange of tax information about foreigners accounts when tax evasion can be shown.

The Anderson Case

In a major American legal case, the U.S. government tried to force the repatriation of funds held by a Cook Island trust and lost, even though the Americans who created the trust for a time were jailed for contempt of court. Not even a federal court could crack the Cook Island trust laws. For more about what is known as the "Anderson case" see FTC vs. Affordable Media LLC, 179 F. 3rd 1228, U.S. Ct. of Appeals, 9th Cir. (1999).

So don’t let those thousands of miles distance scare you.

A good offshore-savvy attorney in any country should know how to use the Cook Islands asset protection laws to your benefit. If you need a U.S. offshore attorney just ask me. 

I have a good friend who has had a Cook Islands trust for many years as a protection against possible business liabilities. He is fully satisfied with its operation and protection, with his local American attorney acting as liaison with his Cook Islands trust company.

Or, if you want to go direct, you can contact our man in the Cook Islands: Puai Wichman, Managing Director, Global Consultants and Services (Cook Islands) Ltd., Global House, PO Box 92, Avarua, Rarotonga, Cook Islands, Tel: +682 27 047 Fax: +682 27 046, Email: cookislands@gcsl.info or puai@gcsl.info

  You can read all about the Cook Islands and all of the world's 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.

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.

The Isle of Man: First in Space?

I've had the privilege during my lifetime of visiting many countries of the world, from Europe to South Africa, from China to Latin America.

But one country, (or I should say, "Crown Dependency"), that I have yet to see first hand is the Isle of Man, a 32 mile long, 14 mile wide, 221 square mile island in the stormy Irish Sea off the northwest coast of the United Kingdom where gale force winds (30+ knots, 30-40 mph) blow an average 10-15 days each year.

No doubt, the other 360 days the sun shines bright in this island of centuries old mythical creatures, including fairies.

Friends Are the Reason

I've studied the Isle of Man, written about it, and had contacts with its financial community, but the strongest attraction for me has been my friendship with Colin and Judith Bowen, two delightful residents of the island I've have had the pleasure of knowing for several years.

Colin (right) is the Deputy Chairman of the Isle of Man Assurance, an independent insurance company formed in 1971 that offers a host of annuity, life insurance and investment products -- and Judith does her best to keep him in line.

The Isle of Man is known worldwide for its excellent insurance and annuity products. Many of these are popular with Americans, since under U.S. tax law, life insurance allows four key benefits: 1) tax-free build-up of cash value, including dividends, interest and capital gains; 2) tax-free borrowing against cash value; 3) tax-free receipt of the death benefit; and 4) freedom from estate and generation skipping taxes.

What got me to thinking about the Isle of Man was a recent Times of London article about the island and its steady and impressive financial progress, noting that: "This outcrop in the Irish Sea is a magnet for entrepreneurs, an incubator for new enterprises of the most surprising sort."

Manx in Space

Among the surprises: the CVI company that made the laser optics with which NASA’s Phoenix Lander (below) spotted snow on Mars last year. Another Manx company, Odyssey Moon, is competing to win the $30 million (£18.4 million).

Google Lunar X prize by putting a robotic landing craft on the Moon. A third, Excalibur Almaz, is developing space tourism. -- each attracted to the island by a special Manx tax provision that imposes zero income tax for space industrialization.

"Later this month the Isle of Man will officially join the space race. Nicole Stott, (left) wife of a Manxman, will begin her four months on the International Space Station. Ms. Stott’s husband, Chris, a space fanatic working for Lockheed Martin in the late 1990s, persuaded the island’s government to file for the orbital satellite space slots to which it was entitled.

In 2004 Allan Bell, the Treasury Minister, needed a headline announcement for his budget and declared a zero corporate tax rate for space activities. The response, he says, was "quite amazing".

"More than a dozen space-related businesses operate from the island, including some of the world’s biggest satellite companies. It has a director of space commerce, an honorary representative to the international space community, and an International Institute of Space Commerce. Manx schoolchildren attend NASA summer camps in Houston.

Gambling Center

A deconsecrated Methodist chapel in a narrow lane in Castletown hosts another surprise: the European headquarters of SBOBET, one of the world’s biggest online betting companies.

On a typical Saturday a dozen "liability managers" will be glued to computer screens in what used to be the church nave, constantly adjusting the odds on hundreds of live football matches as bets flow in at a rate of 200 a second. "The adrenaline level is quite amazing," says Bill Mummery, the executive director.

"It is one of about 30 e-gambling companies that have set up in the Isle of Man, attracted by a maximum gaming tax of just 1.5% and state-of-the-art telecommunications. Businesses have long used the island as a testing ground for new technologies.

Others firms include PokerStars, the world’s largest on-line poker room, and two gambling software companies, Microgaming and Playtech. E-gambling has created more than 500 jobs.

World's Oldest Parliament

The Isle of Man’s 1,030-year-old Tynwald, (below) which is the world’s oldest parliament, is thought to have been the first to give women the vote.

That innovative spirit lives on. The government runs what will soon be the biggest offshore register for corporate and private jets, and another for super yachts, which generates hundreds of jobs for lawyers, insurers and tax experts.

In 1995 the Government decided to develop a film industry. It offered to pay 25% of production costs in return for a share of the profits. In the 14 years since, 91 films have been made on the island, and the government has earned £3 for every £1 invested. Islanders talk nonchalantly of seeing Renée Zellweger jogging along the beach, or Johnny Depp in a pub.

Freedom to Flourish

"Freedom to flourish," is the island’s marketing slogan. Aside from handsome tax breaks it offers entrepreneurs friendly legislation, ready finance, a nimble bureaucracy, and easy access to politicians; their numbers are in the telephone book and Tony Brown, the chief minister, works in his electrician’s shop on Saturday mornings.

DOUGLAS, Isle of Man's capital city.

It is an approach that has reaped rewards. In spite of grumbling from London about its tax haven status, the island has enjoyed 26 consecutive years of growth. It has no national debt, an unemployment rate of just 2.2% cent, and has avoided the global recession. Per capita income 24% lower than Britain’s in 1996, is 18% higher now at about $35,000.

"It’s the greatest economic success story nobody has ever heard of," says Chris Corlett, head of the Department of Trade and Industry. The island does not flaunt its new-found wealth but it is apparent from the Mercedes, Porsche, Morgans and Bentleys and from the conversion of dilapidated hotels into sea front apartments.

Even old timers agree that life is better: the young no longer have to leave to find work, the Government pays for islanders to have medical treatment or university educations in Britain, and it is planning to give every schoolchild a free laptop.

Tax Haven Name Change

The Isle of Man no longer wants to be called a "tax haven" (does any place?) but it is a "low tax economy" with no capital gains tax, wealth tax, stamp duty, or inheritance tax and a top rate of income tax of 18%. The rate of corporation tax is 0% for almost all types of income, the only exceptions are that the profits of banks are taxed at 10%, as is rental (or other) income from land and buildings situated on the Isle of Man.

Offshore banking, manufacturing, and tourism form key sectors of the economy contributing to the Island's GDP of about US$3 billion.

The financial sector is the largest single sector, employing more than 20% of the total work force of nearly 40,000. More than 40 licensed banks (including many international banks) offer comprehensive, discreet and confidential, services that compare favorably with the banks in Switzerland or Liechtenstein.

In addition to banking, high caliber legal, accounting, insurance and other financial services are available on the island. In spite of their ancient history, banking on the offshore islands is modern, sophisticated and user-friendly. Total deposits in the 47 banks in the Isle of Man banking system in 2009 exceeded £98 billion (US$156.5 billion).

Welcome

It is one of the few low-tax international financial centers actively encouraging new residents. Work permits are easily available. Many thousands of international business corporations are registered here as well, attracted by the zero tax policies. There are more than 200 licensed corporate and trust service providers and the island has excellent. modern trust laws. There are also nearly 40,000 companies and partnerships and about 40,000 trusts under the administration of these local service providers. The investment industry has expanded with US$82 billion managed on the Isle of Man.

And if you're wondering about that unusual Manx symbol on its flag, called a triskelion, the three legs refer to the island's motto (adopted late in the symbol's history): Quocunque Jeceris Stabit, traditionally translated from Latin as 'Whithersoever you throw it, it will stand', or 'Whichever way you throw it, it will stand'.

Colin at Los Cabos

You can meet Colin Bowen in person at the Sovereign Society's 3rd Annual Offshore Advantage Seminar: A Beginner’s Guide to the Offshore World, November 4, 2009 – November 7, 2009, at the Westin, Los Cabos, Mexico. Colin will be among 21 of the world’s most respected offshore masterminds. Sign up now. Remaining spaces are going fast.

In the meantime, contact Colin Bowen, Isle of Man Assurance, Ltd., IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP, Tel.: +44-1624-681-200; E-mail: colinb.ioma@ioma.co.im Web: http://ioma.co.uk

Michael Jackson: An Estate to Die For

Someone has observed: "Death is more universal than life. Everyone dies but not everyone lives."

Although there are many opinions about how the late Michael Jackson lived his life, no one can say he didn’t live – and live large. But one of the many headlines after The King of Pop died last week told of what may be a sad and expensive story: "Estate Has Piles of Assets but Loads of Debt"

What a Mess

"It’s all a mess," said an unnamed executive involved in Jackson’s financial affairs. "No one really knows what is going on, but these are early days."

Mr. Jackson’s business life, like his private and public life, was a mass of contradictions. Administering an estate such as Jackson's requires a military-style operation with scores of lawyers, pro and con, reviewing over reams of contracts.

Shrewd but Sloppy

Unlike many show business performers, Michael Jackson was a shrewd negotiator and investor; in 1985 he pulled off one of the great deals in music business history when he bought the publishing rights to the Beatles songs catalog for $47.5 million. Today it is part of a larger collection of songs worth more than $1 billion that he owned in partnership with Sony.

But it was no secret that his personal finances in recent years were a mess. He spent millions of dollars on frequent art and shopping sprees. Neverland, his California ranch, had a zoo, an amusement park and as many as 150 employees, costing millions annually. He nearly lost it last year when he defaulted on a $24.5 million loan.

Millions Spent, Scores Advising

Worse still, he burned through financial advisers almost as swiftly as cash, with a revolving door of characters coming in and out of his life, several of whom were hired only weeks ago, in Jackson’s latest round of managerial housecleaning. And he was the defendant in numerous personal and business lawsuits, some of which he was forced to settle for millions.

"Michael never thought his personal finances were out of control," said Alvin Malnik, a former adviser who is godfather to the youngest of Jackson’s three children. "He never kept track of what he was spending."

What’s Next

The big question now is what happens to whatever remains of his assets. So far, that is unclear even to Jackson’s closest advisors. They say it could take years to sort through the financial and legal mess left after his death, with a predicted price tag for legal fees alone in the double digit millions.

It is also unclear how much will be left for his heirs. The estimate is that Jackson earned about $700 million as a performer and songwriter from the 1980s on, much of it already spent. His debts have been estimated at form $400 million to $500 million or more.

To complicate things further, the rumor is that Jackson left behind at least two wills. (In such cases, the law usually recognizes the latest will as controlling if it can be shown to be valid).

Lesson for Others

Now why have I gone into such detail about the King of Pop’s untimely passing?

Because some day we all will die and the question you should ask right now, today, is whether you’re going to leave behind a financial mess for your heirs?

If you're even modestly wealthy, an important component of a successful life is planning what happens to your wealth when you "shuffle off this mortal coil," as Shakespeare said in Hamlet.

Trillions & Billionaires

A senior U.S. Federal Reserve economist estimates that by 2050, the so-called U.S. "baby boom" generation will pass some US$41 trillion in assets on to their heirs. That's the largest potential inter-generational wealth transfer in world history.

Forbes magazine estimated that in 2007 there were 482 billionaires in America. A record nine million U.S. households had a net worth of US$1 million or more in 2006, numbers that likely have been reduced considerably by now. Yes, the richest people have gotten poorer, just like the rest of us. In 2009 the world's billionaires had an average net worth of $3 billion, down 23% in 12 months.

Estate Draining Death Taxes

There are many good reasons why you should pay close attention to your estate planning. -- Reducing taxes has to be a major consideration.

A big portion of the federal income tax burden is paid by a small group of the richest Americans. The wealthiest 1% of Americans earn 19% of the income but pay 37% of the income tax. The top 10% pays 68% of the taxes. The bottom 50%, those below the median income level, now earn 13% of the income but pay just 3% of the taxes. In other words, the rich pay almost double their share, based upon the income they earn. Add to those numbers the fact that about 120 million Americans, 40% of the population, pay no federal income taxes at all because of exemptions, deductions or income level.

Both "wealthy" and the "middle class" Americans get socked with high income taxes in life – and then more taxes in death, but these can be lowered with smart estate planning. Indeed, you can reduce the death tax just by using trusts or gifts during your lifetime. You can give away $13,000 a year to each individual free of any federal gift tax, thus reducing the size of your taxable estate at death.

Death Tax Muddle

Keep in mind that the present U.S. estate tax law is a major muddle. By law, estate taxes have been declining since 2001 when the Bush administration and a Republican Congress authorized a gradual phase out of the tax. But estate taxes could be snapping back to the old high rate levels in 2011, especially with Democrats in control of both the White House and Congress.

The amount each individual can leave to heirs free of federal estate taxes in 2009 is $3.5 million (up from $2 million in 2008). For any estate valued over that amount, the IRS gets a flat tax of 45 cents of every dollar. Die next year if you want to save taxes for your heirs because from, January 1st through December 31, 2010 the federal estate tax is repealed – zero! But if Congress fails to amend the current law, on January 1, 2011, the old, pre-Bush federal estate tax will be reinstated with an estate tax exemption of only $1,000,000 and a maximum estate tax rate of 55%.

Still, with retirement accounts, homes and life insurance death benefits thrown in, it's easier than you might think for a working couple to be hit by the federal estate tax. And this tax can be brutal.

Nobody’s Business

Privacy is another major reason for estate planning now.

Jocko Jackson was almost fanatical about his privacy and his lawyers are likely to try to preserve that legacy. As a California resident, the singer may have left a revocable trust, the administration of which can keep many details of the estate secret, compared to a last will and testament that must go through probate court with detailed publicity and accounting.

But while you, too, should consider a creating a trust, it's difficult to place all the assets in a huge, complex estate into a revocable trust. Contracts, royalties, partnerships and other elements of the estate may get left out.

A few years ago a study examined travelers' attitudes and behavior. The study concentrated on individuals from the top 5% of U.S. households with annual incomes of over US$150,000. The study listed these wealthy individuals' tastes and meticulous demands. According to the findings, these wealthy travelers seem to know exactly what they want when it came to service and comfort.

So one must wonder why so many wealthy people are not so meticulous when it comes to their personal estate planning. Perhaps they think they’ll live forever if they just don’t think about it.

Post Mortem Messes

Jack Kent Cooke (below) was a leading U.S. businessman in the 20th century. He grew rich in life, but created financial chaos in death.

The Wall Street Journal reported that when "...he died of a heart attack in April 1997, the 84 year old Mr. Cooke...had amassed a US$1.3 billion collection of media companies, sports teams and real estate. But he also left a convoluted will, amended eight times, that named seven executors..." The dust finally settled seven years later, after numerous lawsuits and US$64 million in lawyers' fees.

If ever there was another convincing case for prior estate planning, Anna Nicole Smith's notorious death should be a clincher. She left behind a poorly drafted "last will and testament" for her young daughter, Dannielynn Hope. It's a classic example why all of us should act now to avoid such a legal swamp.

On Thursday of this week the 9th U.S. Circuit Court of Appeals will have the honor of hearing the latest episode of the long-running (14 year) litigation saga that's become the legacy of Anna Nicole. Smith, the former model and reality show star, had been fighting for years over the estate of her late second husband, Texas billionaire J. Howard Marshall, when she died in February 2007.

Act Now - Before It's Too Late

These sad examples call for good estate planning advice and prompt action. After all, you've worked hard all your life. Why not devote that same energy to making certain your wishes are followed after you're gone?

At the very least, you should have a will or other means to transfer property to protect your loved ones. Otherwise the state law where you live will decide who gets what. A "means of transferring property" could be a trust, family foundation or jointly title property or financial accounts. (If you're the young one in the family, talk to your aging parents!)

Otherwise, assuming your business and other assets are worth more than US$3 million; your family could be stuck with a considerable estate tax burden. In fact, your heirs could be forced to hand 55% of your total estate over to the IRS just to pay income and estate taxes.

Protection Offshore

By all means, when you create your estate plan, consider an offshore solution.

By taking part of your estate offshore, to some degree you increase asset protection from domestic U.S. creditors and lawsuits. Your estate can grow safely offshore for your heirs to use later in life. More importantly, your assets can remain confidential offshore; none of the glare and hassle of the U.S. probate process.

If you set up an offshore vehicle like an annuity or life insurance, you can easily pass the title of those vehicles onto your heirs at your death. Best of all, both of these vehicles allow you to defer taxes during your lifetime.

An offshore asset protection trust (APT) is another device that both protects assets during life, and provides for heirs afterwards.

Better Dead Than in the Red

Michael Jackson could be richer in death than he was when he his life ended. In the last few days his songs have generated millions of dollars in record, CD and DVD sales, downloads and radio and TV royalties. Elvis Presley hadn't had a hit in years and was worth just under $5 million when he died at the age of 47 in 1977. Today his name and music earn as much as $50 million a year. Together, the sales from Jackson’s own recordings, plus income from Sony/ATV and his own song catalog would be worth $30 million a year. And the amounts he spent on his lifestyle would be gone.

Quite frankly, he may be worth more dead than alive," said Jerry Reisman of the Hit Factory recording studio, where Michael Jackson produced Thriller, his 1982 best-selling album (109 million sold).

May Michael rest in peace -- even if his estate cannot.

**In THE TRUST REPORT, Bob Bauman demystifies the process of creating and maintaining an offshore trust, outlining its many benefits.In addition, you'll automatically receive a FREE subscription to the world’s most popular offshore e-letter, The Sovereign Society Offshore A-Letter. With more than 160,000 readers worldwide, it will keep you in touch with global events that can affect your wealth and safety.

** For a valuable consultation on your estate plan contact: N&C International Wealth Consultants, LLC. 777 E. Atlantic Ave, Suite C2-295, Delray Beach, FL. 33483 Email: info@nolan-crouch.com Web: http://www.nolan-crouch.com/

Obama: Curbing American Freedom

"An unlimited power to tax involves, necessarily, the power to destroy."

So advised Daniel Webster, one of America's leading statesmen in the pre-Civil War era, a member of the House of Representatives from New Hampshire and a U.S. Senator from Massachusetts for more than 30 years -- and a presidential aspirant who never made it to the White House.

But an ambitious young politician who served only three years in the U.S. Senate representing Illinois, (most of the time campaigning for president), did make it to the White House. Now Americans are paying a huge price in our lost freedom.

Obama & the Tax Dodger

On Monday, in the Grand Foyer of the White House, President Obama stood grandly alongside his grand, tax-dodging Treasury Secretary, Timothy F. Geithner and for good measure, the Internal Revenue Service Commissioner, Douglas Shulman.

There the president spelled out his grand tax proposals to finance his more than grand trillion dollar deficit budgets.

Obama's remarks echoed the overblown sentiments he voiced repeatedly during the 2008 presidential campaign when he pledged to crack down on what he conveniently defines as "illegal overseas tax evasion."

He did not repeat his Joe the Plumber theme, that wealth needs to be taken from those who have it in order to spread it around to those Obama (and his re-election chances) favor -- but that was implicit in today’s message.

You'll Feel the Pain

If one ever needed proof of his radical intentions, Obama made clear his leftist goals, including milking American taxpayers, especially those he calls "rich", for all he can wring from them. For just the rest of 2009, the government needs to borrow about $2 trillion. Long term Obama needs trillions more to finance his comprehensive program transplanting European-style socialism to America.

That includes government-run health uncare, federal control of education, handing over faltering auto companies to unions, selectively bailing out his Wall Street campaign contributors and buddies, nationalizing banks, confiscating private pension funds and stimulus for all.

Ignoring the need for true reform of the U.S. Internal Revenue Code, Obama claimed ominously that today was just his first step in a much broader effort to fix a "broken tax system."

Rahm Emanuel, the White House chief of staff, summed up Obama's goal: "Never let a serious crisis go to waste." Thus the president is using the recession as an excuse for big government ambitions that liberals have failed to achieve for decades.

Tax Havens: Obama's Phony Bogeymen

Mr. Obama said he is seeking to crack down on overseas tax havens in an attempt to "close the international tax gap," meaning he (and the IRS) want to end legitimate tax competition from low tax offshore jurisdictions. If you can't compete, destroy the competition.

At the White House Sec. Geithner noted that the G-20 group of high tax welfare countries had agreed to act against tax havens. "For years, we've talked about shutting down overseas tax havens," Obama said as he made a presumptuous and patently erroneous claim: "That's what our budget will finally do." (As if the president has some magical power, short of military action, to force independent nations to change their laws to satisfy his bloated budget needs).

Screw U.S. Corporations and Consumers

American businesses pay one of the highest corporate taxes in the world at 35% of profits, (closer to 40% when other fees and state taxes are included). But while corporations do pay taxes, every penny of those taxes is passed on to American consumers in higher prices for the goods and services corporations provide.

At a time when business needs money to preserve and provide American jobs, Obama proposes to abolish existing tax breaks and tax deferrals for corporate offshore activity and to tax at the 35% rate, all U.S. corporate foreign business as if conducted within the U.S. For a better understanding of why Obama’s plan is so damaging to the U.S. economy, I commend you to the views on this subject of my colleague, Mark Nestmann.

Biased and Prejudiced

Americans who have offshore bank accounts, investments and other financial activity are, for the moment, still legal under U.S. laws.

But Obama's tax plans announced today echo the traditional IRS and U.S. Justice Department attitude that assumes any offshore financial activity by a U.S. person probably is illegal, illicit or both. The president displays a virulent prejudice against "offshore" that he apparently he thinks is good politics.

In a way, Obama is heeding the philosophy of his fellow Chicagoan, Al Capone who said: "They can't collect legal taxes from illegal money." Obama's tax plans do everything short of making it a federal crime for hitherto innocent Americans to bank, invest or to do business offshore.

Read at your leisure the full text of Obama's press release describing the horrors he has in store for Americans who dare to go offshore financially, especially the section entitled "Getting Tough on Overseas Tax Havens."

Guilty Until You Prove Your Innocence

But one important point really should upset intelligent citizens -- Obama proposes to repeal the traditional, time honored legal presumption of innocence, specifically for those doing business offshore.

Instead, his proposes to make Americans who go offshore prove to the IRS, upon demand, that they are not engaged in tax evasion or any other crime. The White House said today: "These presumptions will make it easier for the IRS to demand information and pursue cases against international tax evaders. This shifting of legal presumptions is a key component of the anti-tax haven legislation long championed by Senator Carl Levin."

Indeed, many of Obama's proposals were taken right out of the Levin-Obama Anti-Tax Haven legislation they first introduced in 2005, although Levin’s legislative tax haven black lists mercifully have been dropped.

Coercion & Criminalization

Other provisions in the Obama anti-offshore plans:

* Using the current "Qualified Intermediary" system under which the IRS decides which offshore banks are acceptable to them, foreign banks will be forced to disclose any and all information the IRS demands, under the implied threat of being cut off from the U.S. banking system. In theory, QIs offshore banks would be required to report information on their U.S. customers to the same extent that domestic U.S. financial intermediaries must. All this it seems, without regard to the bank secrecy or other financial privacy laws that apply in the foreign country.

* U.S. investors who fail to report offshore investments now face penalties limited to 20% of the amount of the understatement. The statute of limitations for enforcement is typically three years. The penalty will be upped to 30% and the statute extended to six years. The plan will double certain other penalties when a taxpayer fails to disclose foreign financial accounts.

*  The Treasury Department will be given authority to issue expanded regulations on offshore financial institutions under the QI program.

*  The IRS will hire 800 new employees devoted specifically to international enforcement, including agents, economists, lawyers and specialists, supposedly increasing the IRS ability to crack down on offshore tax avoidance and evasion, including transfer pricing, financial products such as abusive trusts, and transactions such as purported securities loans.

What's Next Offshore

In coming days I'll have more to say about the impact of this blatant attack on Americans who dare to do business offshore. The ritual truism is that if you comply with the law, you will have no problems. But who knows what compliance with this morass of new rules will require, both in legal advice and fulfillment costs?

One thing is certain. This will accelerate a trend already well underway -- more offshore banks, unwilling to become IRS vassals, will reject new American clients and terminate some of those who are current clients. (If you need an offshore bank, we can help you.)

Unintended Consequences

Oddly enough, Obama's radical political crusade against tax havens could produce unintended effects he and the IRS wont like.

Fact is there remain very important and useful roles for offshore financial activity by Americans -- much stronger asset protection, better investment possibilities, real, though now more tempered, financial privacy, tax deferred life insurance and annuities, offshore residence and second citizenship -- all providing physical and geographic distance between Obama's tax police and your assets.

U.S. persons who have bank accounts or who are active in established offshore tax havens, such as Switzerland or Panama, or those planning future activity, probably will not suffer from Obama's and the OECD's political attacks, as long as they follow the law.

Tax Havens Will Survive

Thankfully, U.S. presidents serve four year terms. Some tax havens have been around for centuries

The history of the last ten years of anti-tax haven attacks has been marked by a welcome general offshore clean up and impressive tightening of offshore laws and rules.

The thrust of Obama's radical legislative proposals and the OECD's plans is curbing tax evasion. He and they have no real power to eliminate the tax advantages of independent offshore jurisdictions.

The general move toward greater scrutiny of tax havens undoubtedly will give pause to some, but it is unlikely to discourage those intelligent enough to understand and employ offshore's real advantages.

With our respected council of advisors, offshore professionals, books, special reports, newsletters and conferences, the Sovereign Society will keep you posted and tell you how to "go offshore" -- strictly within the ever changing law.

** Read about the many offshore opportunities in my best-selling book, Where To Stash Your Cash: Tax Havens of the World.

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

Save Your Self and Your Cash - Bank Offshore Now

From the front page of this morning's New York Times: "Only five days into the Obama presidency, members of the new administration and Democratic leaders in Congress are already dancing around one of the most politically delicate questions about the financial bailout: Is the president prepared to nationalize a huge swath of the nation’s banking system?"

To a large degree, the answer is that, thanks to George Bush, the last Democrat Congress and President Obama, billion dollar bailouts already have made banks wards of the U.S. government, feeding off taxpayer funds.

American taxpayers are now the biggest shareholders in Bank of America, with about 6% of the stock, and in Citigroup, with 7.8%. But the government’s influence is far larger than those numbers suggest, because it has guaranteed to absorb the losses of some of the two banks’ most toxic assets, a figure that could run into the hundreds of billions of dollars.

And already the government as quasi-owner has begun the political meddling I predicted only last week when I said: "Fast forward to the future day when Obama's regulatory bureaucrats will be telling banks where to put millions, to whom to make loans, who gets mortgages -- and who doesn't."

After I wrote that The Wall Street Journal detailed how U.S. Rep. Barney Frank (D-MA), the godfather of the FannieMae and FreddieMac subprime housing mess, had personally intervened to get some of the bailout billions for a failing bank in Massachusetts.

Plain Folks Intelligence

My fellow Marylander, The Baltimore Sun's acerbic columnist, the late H.L. Mencken, observed: "No one in this world, so far as I know, has ever lost money by underestimating the intelligence of the great masses of the plain people."

But what happens when that great mass of people are gripped by an almost irrational fear, as it appears Americans are today? In 1757, one of my heroes, Edmund Burke, wrote: "No passion so effectively robs the mind of all its powers of acting and reasoning as fear."

Senator John McCain was pilloried by Barack Obama during the 2008 campaign for making the truthful statement that the fundamentals of the American economy were sound, as they still are now.

Yet in his Inaugural Address the new, perhaps chastened, President Obama, referring to "this winter of our hardship," gave his revised estimate that: "We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished."

Danger to Liberty

The problem sof American banks are real and of their own making. And some of this fear is well placed.

Now all the world knows the stories of stupidity, excess and greed that has brought Wall Street to its knees. President Thomas Jefferson, (who died in near personal bankruptcy), may have approached the truth in a statement attributed to him: "I believe that banking institutions are more dangerous to our liberties than standing armies."

That certainly is true when banks are managed by greedy dunces oblivious to the laws of mathematics and ethics. And it wont get any better if politicians and government bureaucarts are attempting to manage what remains of American banks.

Offshore Trend

In the last several months we have been deluged by Sovereign Society members (old and new) seeking information about offshore bank accounts -- how to set them up, where to get them, how they operate, what the reporting requirements are.

Since our founding over a decade ago, the Sovereign Society has provided international banking guides for members. Drawing on years of experience, we recommend selected banks in jurisdictions where friendly governments welcome foreign financial investors, where banking institutions provide the savvy services investors require. These banks range from Panama to Switzerland and Austria, to Singapore and Hong Kong.

It is our job to explain the positive benefits of having an offshore bank account. Based on each individual's unique needs, we direct members to the right bank in the right jurisdiction, sound institutions where you can protect your assets and managing your wealth.

Continuing Due Diligence

Safety and stability, adequate capital, a good track record, professional, experienced leadership -- all of these are factors we consider when recommending offshore banks. Indeed this sort of due diligence is a continuing work on our part.

Even as you read this, our executive director, Erika Nolan, is in Europe meeting with bankers and financial advisors in Zurich and Vienna. The goal is to determine new banking possibilities and reaffirm existing associations, with banks that we and you can, indeed, bank on.

Each of these banks is financially stable, offering modern facilities, services and the necessary understanding to serve an international clientele effectively. The banks the Society chooses have liquidity ratings well above the international minimums set by the Bank for International Settlements in Basel, Switzerland.

Added Protection

And going offshore adds a strong layer of protection and can be done in more ways beyond banking.

Whether it's in a Swiss or Liechtenstein life insurance wrapper, retirement annuity or an Isle of Man or Panama asset protection trust, placing your assets offshore puts them out of reach of frivolous lawsuits. Litigants usually are ready to settle for pennies on the dollar when they find out how difficult it is to locate and collect your money offshore.

And if you place your 401k or other retirement plan in a suitable offshore jurisdiction - Liechtenstein or Switzerland, for instance - it can be configured to be essentially judgment proof, plus it is covered by strict financial privacy laws that are non-existent in the United States.

Join Us

Americans are in now caught in a financial twilight zone, especially as it pertains to banks. For your own sake, we urge you to join the Sovereign Society today and open the door to safe and secure offshore banking -- while you still can. We welcome you. You can bank of it.

Year End Tips: Six Ways to Protect Your Assets Right Now

As we at the Sovereign Society have been telling folks for over ten years now, if you have wealth, you need wealth protection.

And procrastination can steal more than your time - it can destroy your wealth. So act today. Just a few simple steps - plus some offshore advantages - can ensure that your hard-earned assets remain yours and can be passed on to your family and loved ones.

And, for Americans, these steps are especially important to consider now, with the likelihood of drastic tax and law changes coming under an Obama government.

1) Keep a low profile. Owning assets in your own name too often is like throwing chum in the water for the circling schools of sharks -- lawsuit-happy lawyers and litigants. If people think you're rich, your chance of being sued skyrockets.

One way to lower your profile is not to title your assets directly in your own name. Instead, use a privacy-protected offshore corporation, family foundation or an asset protection trust (APT) to hold title. In many places such ownership is not a matter of public record.

2) Shrink the target. Let's say you own a number of rental properties. A tenant slips and falls at one of these places and decides to sue you. Unless you take precautions, total damages could amount to the value of all your rental properties. Whether it's a rental property, a restaurant, or something else, segregate risks - consider creating a separate corporate entity for each liability generating asset. Especially, never mix large liability-generating assets. For example, an apartment house should not be owned by the same company that owns a trucking company.

3) Going offshore adds a strong layer of protection. Whether it's in a Swiss or Liechtenstein life insurance wrapper, retirement annuity or an Isle of Man or Panama asset protection trust, placing your assets offshore puts them out of reach of most frivolous lawsuits. Even litigants with an ax to grind usually are ready to settle for pennies on the dollar when they find out how difficult it is to locate and collect your money offshore.

For example, if you place your 401k or other retirement plan in a suitable jurisdiction - Panama or Switzerland, for instance - it can be configured to be essentially claim and judgment proof, plus it is covered by strict financial privacy laws that are non-existent in the United States.

4) Get Good Advice. Avoid pushy domestic and offshore hucksters - the ones claiming falsely that you can lower your tax bill to zero if you just put all your money in their "pure trust," a "constitutional trust" or a "corporation sole." Well, you might not pay any taxes, but only because these hood winkers will take all your money and run with it. And you could go to jail.

And avoid those Bernie Madoff types who promise you the moon on investment returns. The rule is - if it sounds too good to be true, then it is too good to be true.

Always work with carefully vetted bankers, investment advisors, financial experts, and legal professionals from select tax and asset haven jurisdictions. Always check references and do your due diligence homework on a service provider before sending them a single penny. Asks us if you want recommendations for good, solid contacts.

5) Pass on your legacy with an offshore trust. In most cases, while an offshore trust will protect your assets, it won't reduce your U.S. tax bill. However, an offshore trust can incorporate provisions that can reduce future estate tax liability. It can protect your wealth, notwithstanding efforts by the U.S. or other governments, to discourage legal offshore financial transactions and investments.

Frivolous litigation, expensive legal defense costs, outrageous jury awards, and government privacy invasions and asset forfeiture all create an urgent need to protect your family and business wealth. An APT can do all that and more.

6) File all returns and reports. certain path to asset loss is ignoring U.S. tax filing and reporting requirements or giving inaccurate or partial information. Get a good CPA who knows the reporting and other rules.

Almost every nation now has "know your customer" laws that require bank account applicants to prove their identity, the source of their funds and their life story. Cash transfers of US$10,000 or more are reported electronically to the U.S. government. U.S. persons, on their IRS Form 1040, must say if they have an offshore account, and if activity therein exceeds US$10,000 an annual U.S. Treasury Form TD F 90-22.1 must be filed. Lying or failure to file these reports are separate felonies.

We at the Sovereign Society can and will help you with all of the above (and more) asset protection devices. Our executive director, Erika Nolan, myself and our Sovereign Society editors often have visited many tax and asset protection havens. We've made strong banking, legal, trust and other professional contacts that are useful to our members with offshore business and financial interests.

That’s another good reason why you should protect yourself and your wealth by joining this unique organization that, for more than a decade, has shown the way for sound offshore banking, prudent investing and real financial peace of mind -- the Sovereign Society.

Singapore: Switzerland of Asia

Singapore may face more political pressure from the United States and other tax hungry welfare countries over its role as an offshore financial center catering to wealthy foreigners, the country's prime minister admitted last week.

Prime Minister Lee Hsien Loong told journalists that U.S. pressure on some European countries to loosen banking secrecy laws and open their banks to greater scrutiny may lead to still more European money flowing into Singapore in the short term. "But I expect Singapore to come under pressure too," he said in response to a question on whether pressure on countries such as Switzerland and Liechtenstein will help Singapore.

Singapore's government has previously denied suggestions that the country is or wishes to be known as a tax haven. But it offers tax breaks to foreigners and has adopted strict bank secrecy laws patterned after Switzerland. It has been promoting itself as a rival financial center to Hong Kong to attract banks such as UBS, Credit Suisse, Julius Baer, and Citigroup to manage money for rich local and foreign clients.

Cash Flows to Singapore

"In the past 10 years, a lot of money from outside of Asia has moved to Singapore from Europe, Latin America, the Middle East, Russia and Central Asia," said Edmund Leow, a principal at the law firm of Baker & McKenzie, Wong & Leow in Singapore.

Many of the worlds wealthy have moved from traditional tax havens of the Caribbean, Switzerland and the Channel Islands to Singapore. One of the prime reasons for this movement is pressure in those places from Organization for Economic Co-operation and Development (OECD) member countries, most notably the United States. Local Singapore bankers expect this pressure probably will grow once president-elect Obama takes office in January.

Escape from the EU

In Europe money is being moved out of Switzerland to avoid paying withholding tax on interest income as required by the European Union, even as the EU is calling for more and expanded taxes. In Asia, even in the face of the global recession, huge wealth has been amassed with funds from the region, particularly China, Indonesia and India, and those funds dominate the bulk of Singapore's private banking business.

Singapore's private banking assets under management have grown over the past few years by an average of 20% each year and now are estimated at US$200 billion, according to the Monetary Authority of Singapore (MAS). Private banks have fueled the growth by expanding their wealth management services, most notably in the setting up of trust companies.

Trusts Use Growing

"Unlike the Europeans, Asian clients previously did not have full knowledge of what trusts can do such as the complicated tax structures," said Mr. Leow. "As the trust industry develops, it will not only grow in terms of the number of trusts or customers or assets under management, but also in terms of sophistication." With business from wealthy clients still growing in this English common law jurisdiction, Mr. Leow said Singapore's greatest task would be to manage its clean and well regulated image both at home and abroad.

Join Us

Our executive director, Erika Nolan, myself and several Sovereign Society editors have visited Singapore. We've made strong banking, legal, trust and other professional contacts that can be useful to our members with Asian business and financial interests.

That’s another good reason why you should protect yourself and your wealth by joining this unique organization that, for more than a decade, has shown the way for sound offshore banking, prudent investing and real financial peace of mind -- the Sovereign Society.

Offshore Trusts for Wealth Protection

This is one in a series of comments I'll be posting  in the coming days, looking at ways you can protect your assets before any projected law changes occur in the United States.

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.

Obama's Anti-Tax Haven Bill

The Anti-Tax Haven Act sponsored in 2007 by then Senator Barack Obama, if it becomes law, will allow Obama's new Secretary of the U.S. Treasury to issue rules that could restrict the now free offshore activity of American banks, businesses and individual Americans.

That being a real possibility, here's something you can do now to protect not only your assets, but your right to conduct your financial business offshore in relative freedom.

I'm talking about creating an offshore asset protection trust (APT) in one of the selected offshore financial centers that specialize in these useful legal entities. 

The last thing anyone needs is a lawsuit filed against them. Statistics say show that in the US over 50,000 lawsuits are filed each week; that in one recent year $163 billion was paid in damages and lawyers fees for plaintiff's lawsuits alone. Add  to threats to your wealth and assets, huge jury awards, government  invasion of financial and personal privacy, and you should be able to see the need for the best asset protection available -- an offshore asset protection trust.

If you're a U.S. person, there are several tried and true domestic legal entities that are partially protective; family limited partnerships, living trusts, limited liability companies.

More Protection Offshore

But for an extra, stronger level of asset defense, (and much stronger privacy guaranteed by law), one of the best vehicles is an offshore asset protection trust (APT).

An APT located in an offshore haven nation can defend against U.S. civil judgments that aren't recognized or quickly enforced by offshore courts. Haven nations have a shorter statute of limitations, (the time in which a suit must be filed), on claims and suits; far greater privacy; diversification of financial risk and better investment flexibility.

The offshore asset protection can protect your wealth, regardless of efforts by the U.S. or other governments to control legal offshore financial transactions and investments. With some limited exceptions, as in the case of estate taxes, a foreign trust can't save on most U.S. taxes, but asset protection is the key.

All in all, for the greatest level of asset and wealth protection, you should consider creation of an offshore APT. The Sovereign Society can show you how to do it.

Click here for my special report, Offshore Trusts: Your Key to Flexible Asset Protection.