Passive Income Blog

Piercing Asset Protection Structures

How does the asset protection corporate veil get pierced regarding an offshore bank account? Well a court order to get the information regarding a bank account, a trust, a corporation or a foundation is going to be required.

Such court orders are generally reserved for serious criminal matters like narcotics, terrorism etc. Civil matters from countries outside of the jurisdiction where the bank is would rarely if ever result in the production of a court order for information.

Be Prepared

Civil financial enemies would have trouble ascertaining that you had a bank account in another country. If they got into your bank account in your home country and saw a wire transfer to a bank account in a tax haven privacy jurisdiction this would hardly qualify as grounds to get into the bank or corporate records.

The corporation should be an anonymous bearer share corporation and the financial adversary would have no way of connecting you to the ownership of the offshore corporation.

Offshore corporations and foundations have assets and debts separate from those of the person(s) controlling them.

If your financial enemies had a foreign judgment from another country against you this would not alter the facts. They do not have a judgment against the offshore corporation whose debts and assets are separate from yours.

Another problem the creditor has is that once they file an action in the offshore tax haven the person they are pursuing will know of it and they can just depart with their funds so it is sort of a waste of time and money.

The offshore privacy tax haven knows that once they start letting foreign creditors collect against assets in the banks of their country, their banks will start to lose clients big time.

Asset Protection and Government Pursuit of your Money

What if a governmental agency of another country were to try to get at your money protected in an offshore bank account? Well this again is a different matter.

These cases start with a request for information, which is made pursuant to a Mutual Legal Assistance Treaty (MLAT) or through a Tax Treaty (TIEA). Embassy officials in your offshore banking jurisdiction will receive a request.

It is a formal procedure requiring the requesting country to state specific reasons for the information, which usually means providing evidence of a criminal prosecution in the requesting country. Pure tax information requests are based on the specific tax treaty if any in place between the two countries. (Panama for example, has no tax treaties).

Approval of such a request in civil matters (divorce, lawsuits, etc) never takes place because the proceedings go through official government channels in both countries. Governments simply don’t get involved in such matters unless they become a matter of national security. For jurisdictions with tax treaties (not Panama as it has no tax treaties), requests for information are not popular with the offshore tax haven jurisdictions but they will comply some day if the treaty terms are met.

They can challenge the request and ask for more information. The time frame for these treaty requests can be from six months to several years for this type of request to be granted. Sometimes the statue of limitations runs out and the request becomes moot. The courts in the tax haven jurisdiction would eventually issue an order to produce the bank, corporate records and they would then serve the requested information on the requesting country embassy pursuant to the terms of the treaty.

These tax haven generated court orders are typically for information only. A request to sequester or freeze the funds in the bank is much less common and a much more difficult procedure. The government in a tax haven jurisdiction will generally not respond to a request from a local government. They would refer them to their national government and told to have them make the request, which is usually not going to be possible.

If a law enforcement official on a national or local level contacts a bank in an offshore tax haven and requests information they will be abruptly cut off with no answer even indicating that you had or did not have an account at that bank. To do otherwise would be illegal for the bank to do in a bank secret tax haven. If a national or local law enforcement official presented himself or herself at the offshore bank and displayed credentials they would be told to leave the bank and reminded they have no authority in that country.

Asset Protection & Taxes

A good asset protection structure will take into account taxes in the offshore jurisdiction or we should say the lack of taxation on income in the offshore jurisdiction.

You want to use a jurisdiction that has no taxation of income at all or one that does not tax offshore-derived income. This of course eliminates any filing requirements with the country, which the offshore bank is located in.

A good example of such a tax haven jurisdiction is Panama where companies or individuals which do not carry out activities within the Panamanian territory and which do not obtain income from a Panamanian source, are only subject to the payment of a fixed annual tax of US$300.00.

This $300 per annum tax holds true even if you have an office in Panama, a telephone number in Panama, a website in Panama, a personal or corporate bank account in Panama.

Proper Structure

Foundations

This is an approach to wrap an additional layer of privacy over the ownership of the corporation. Typically the foundation or trust (a trust is a similar instrument but they have differences) is in one country and the corporation in another country while the bank account is in yet a third country.This makes it extremely difficult, time consuming and expensive for someone to try to determine ownership and they would probably never sort things out even after spending a small fortune and wasting months or even years of time trying.

We do not recommend going to all this trouble, just do everything in Panama since the legal environment is so favorable for asset protection, privacy and security in Panama.There is really no actual owner of a Panama Foundation and that by itself makes things complicated and confusing for your financial enemies. Now when you add in a bearer share corporation, which is practically impossible to determine the ownership of, you have a very secure situation unique to Panama.

The use of a Foundation combined with a S.A. Panama Corporation (bearer share) can be a powerful asset protection strategy; the words bullet proof comes to mind.

Earmarks of a Good Asset Protection Plan   

Don’t settle for an immature asset protection package.  An offshore corporation and foundation by themselves will not do a good job.  Sadly most companies and law firms providing offshore asset protection services fail to understand that a good asset protection structure requires attention to detail when it is being setup if it is going to be effective.  A good asset protection package will give you advanced warning before any of your money or assets are at risk.

Advanced Warning of an Attack on Your Assets

Each layer of an asset protection structure should provide both warning if an attack is underway and protection.  The outer layers of a good structure are designed to provide a warning signal, without allowing the attacker to gain access to any of your assets.  The outer layers should provide at least 1 to 3 months protection, giving you ample time to make any changes to the location of your assets, long before the attacker gets through the outer layer.

It all comes down to Ownership

Separate yourself from your assets.  Most offshore law firms have no idea how to get this done.  INSTEAD THEY SELL YOU A FOUNDATION AS THE PANACEA OF ASSET PROTECTION.  THEY FAIL TO TELL YOU THAT IF YOU ARE THE BENEFICIARY IN A FOUNDATION YOU ARE DEEMED TO OWN THE FOUNDATION BY MOST ONSHORE COURTS.  Yes bank secrecy protects you, but wouldn’t you sleep better at night knowing that your assets are protected by not just bank secrecy, but a proper, legal, structure that won’t get you into hot water if your secrets are somehow revealed.

Individuals worth hundreds of millions of dollars, are surprisingly poor on paper.  They use sophisticated techniques to separate themselves from their assets, while retaining all the benefits of ownership.  We have taken the same sophisticated strategies and adapted them to be affordable for those wishing to protect their assets properly. 

When it is all said and done, every asset protection package comes down to ownership. Generally people are looking for a way to protect assets, by disassociating the assets from themselves.  Lawsuits and other attacks come against a person, or company, not the assets themselves.  An attack on you should not result in an attack on your assets. 

The only way to make this possible is to legally separate you from your assets, yet leave you in complete control of the assets.

Here are some facts about the legal climate today:

Over 19 million lawsuits are filed in the U.S. each year. We (USA) have 5% of the world’s population and 80% of the world’s lawyers. Ninety percent of all lawsuits in the world happen right here in the U.S. and it’s getting worse. According to the American Bar Association, there are close to 700,000 lawyers in practice at present. That’s one lawyer for every 400 men, women and children! So if you own property, a business, own investment properties or practice a profession you have a one in three chance of being named in a lawsuit THIS YEAR!

What is the best way to achieve asset protection? It can be summed up in three words: Don’t Own Anything!

“Control everything, own nothing.”  — John D. Rockefeller

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