by Bobby Casey
Asset Protection Case Studies
This month I will share with you the case studies for 2 of my recent asset protection clients. In the following examples, I have changed the names and some of the details, but the basic asset protection framework remains intact.
The purpose is to give you ideas and tools used for both domestic and offshore asset protection planning. Clearly you already know the risks out there today with bankrupt governments, currency controls, parasitic lawyers, and taxation that forces you into slavery to the state. So today, we will not focus on the “why” for asset protection planning, but the “how”.
Before we begin with the case studies, understand that most asset protection consultants and lawyers have essentially the same tools in their toolbox. But just like with professional motor-sports race teams, the tools are useless in the wrong hands – you must have a creative mechanic.
Asset Protection Case Study 1
Mike lives in Santa Clara, California with his wife and 3 children. He has a high paying job as an executive with Intel. Mike is an excellent money manager and never spends more than he earns. He and his wife are in their mid-40s and have built a nice nest egg.
They have combined retirement accounts in the mid-6 figures, a nice house on 20 acres in the countryside, a taxable investment portfolio in the high-6 figure range, and have recently acquired 6 low-income rental houses.
Their household net worth is about $3.5M. At this point in their lives, they could retire early but Mike loves his work and earns a sizable paycheck giving them excellent financial security.
Like many of you, Mike and is wife are seriously concerned about their financial future because of the economic crisis and the very real fears that politicians will not have the discipline to reign in spending thus worsening the situation in America with reduced living standards and higher taxes.
Mike and his wife have decided that if the economic situation does not improve, people will become more and more desperate which can lead to increased frivolous litigation. In addition, they are concerned about tax increases and how it can negatively impact their lives in the future.
Since they have a relatively sizable net worth, they feel they are at risk, especially since they own a large amount of real estate assets. They are seriously concerned and have decided some asset protection planning may be in order.
For Mike the solution for solving his asset protection needs was;
- Get all real estate assets out of his personal name
- Minimize equity in his real estate holdings
- Begin an offshore strategy moving funds to a offshore private bank
- Investment diversification in other countries
Asset Protection using Land Trusts
For real estate asset protection, we created land trusts for each of his properties. This provided Mike with a veil of privacy around his assets. Land trusts are an excellent privacy tool since there is no public record of the beneficial owner of the real estate. For example; Property 1 at 123 Main St is no longer deeded to Mike, but now deeded to 123 Main St Land Trust.
This is a huge frustration for future potential creditors as they cannot locate Mike’s real estate assets. However, a land trust alone is not an effective asset protection tool. The primary function is to create a veil of privacy.
Using a Private Wyoming LLC for real estate asset protection
For real estate asset protection we created a Private Wyoming LLC as Land Trust Trustee, and second Private Wyoming LLC as Land Trust Beneficiary. This further strengthens the structure by adding additional layers of privacy as well as legal asset protection for the real estate held in trust.
Asset Protection using Friendly Liens through an Offshore Cook Islands LLC
To reduce or eliminate the equity in Mike’s real estate assets, we created friendly liens for each property. We created a Cook Islands LLC to hold these liens and the LLC was capitalized by the notes. This is an ideal asset protection strategy, killing two birds with one stone.
By paying a monthly mortgage payment to his own company, he can reduce the equity in his properties making them unattractive to creditors and simultaneously shift cash into an offshore bank account held by his Cook Islands LLC.
For any future potential creditor that can locate Mike’s real estate holdings, they would see that his properties are fully leveraged with no available equity. This discourages frivolous litigation as there would be no equity left in the properties.
Offshore Asset Protection for your brokerage account using a Cook Islands LLC
Using Mike’s new Cook Islands LLC, we opened an offshore brokerage account in Gibraltar allowing him to trade stocks, bonds, futures, options, forex, etc. on all major world markets. This offshore brokerage account is held in his company name in a numbered account giving Mike complete anonymity for his investment portfolio.
Offshore real estate investment diversification
Finally, I introduced Mike to a friend who has an interesting real estate project in Panama City, Panama. Mike purchased a pre-construction condo unit that is managed by a well known global hotel brand. This condo was bought at fifty percent of the cost he would have paid if located some place like San Diego. The cash-on-cash return is in excess of 10% and there is considerable opportunity for capital appreciation. Additionally, the property can be used as his own vacation spot or even a place to move if he chooses to leave the US.
Strategic asset protection planning using Geo-Arbitrage
For Mike, this was an ideal asset protection strategy. He now has assets held in 4 different countries – USA, Panama, Gibraltar, and Cook Islands – thus minimizing his geo-political risk. Previously Mike’s investment assets were all held in the US denominated in US dollars. He now has minimized this risk and has opportunities he never knew existed. Not to mention the peace of mind he has knowing he has more options now than ever before.
Asset Protection Case Study 2
Susan’s situation is simpler, but very unique. She received dual undergraduate degrees in political science and finance (BS) and then a juris doctorate (JD) from well-known US universities. She went on to get her masters in law (LLM) from a prestigious European university in international law and finance. The past several years Susan ran her own firm practicing corporate law in New York City, where she lived.
With her experience studying, living and working overseas she decided to close her law firm and realize her dream of living abroad. Over the years Susan invested her money wisely and accumulated a real estate portfolio generating good cash flow and significant capital gains. She took several months to liquidate these assets and now has a sizable amount of cash on hand.
With her business experience and finance education, Susan developed a passion and a talent for options trading. She has been quite successful trading her own account and generates a consistent low 6 figure income from this alone. In addition to her ability to provide legal consulting services remotely, she felt confident that her trading could support her financially. These factors weighed heavily on her decision to begin the nomad lifestyle.
Susan’s knew she could live and work anywhere in the world, but the logistics of operating her business and her investments were a complete unknown. Additionally, when she liquidated her real estate holdings in the US, she was left with approximately $2M and she didn’t want to leave it in cash at a US bank. She was concerned about future capital controls and the new FATCA laws as well as her desire to earn some income from that nest egg.
In addition to asset protection, estate planning was also a concern. She had no kids, but planned to leave her estate to her niece and nephew and didn’t want to burden them with an enormous estate tax bill.
Using a Seychelles Offshore Company for asset protection planning
For her operating business (legal consulting services), we set up a Seychelles Offshore Company (IBC). This Seychelles IBC coupled with her transactional offshore bank account in St. Vincent was a simple solution allowing her to operate her company from anywhere tax free.
Utilizing the earned income exclusion, Susan pays herself the maximum amount of $95k keeping her income below the threshold that requires US income taxation. Her Seychelles Offshore Company pays all business expenses and her remaining profit is then deferred.
Offshore Asset Protection for your brokerage account using a Cook Islands LLC
For her trading business, we created a similar asset protection structure as with Mike and set up a Cook Islands LLC with the brokerage account in Gibraltar. Just like with Mike, this gave her a completely private numbered trading account in her company name.
Using an offshore Cook Islands Trust for asset protection and estate planning
For estate planning purposes Susan chose to wrap up ownership of both companies inside a Cook Islands Trust. So while the companies are now owned by the trust with her niece and nephew as beneficiaries, Susan remains manager of each company giving her full control over the assets.
Susan now lives the PT (permanent traveler) lifestyle traveling the world working virtually from her laptop. She typically spends anywhere from 3-6 months per location and moves when she is ready to begin a new adventure. Susan is now also considering a condo purchase in Panama at the same place as Mike.
For Susan, she has simplified her life, virtually eliminated her tax burden, and makes more money than ever before while leading a very interesting lifestyle.
Editors Note: For additional information on this and similar topics, please see PremierOffshore.com
