[TheBlackTruth]

I thought i'd start a thread so we can evaluate different systems and share information about vendors and experience. I welcome other contributions:


As many of you know, there are many organizations and individuals touting various asset protection schemes. Some of them work to an extent. Some do not work at all. Generally, there are two camps from which most of these schemes come: the statutory, and the common-law camps.

Let's be clear on this part: Neither camp can provide you with "bullet-proof" asset protection. There are a few characteristics to a "bullet-proof" asset protection scheme that make them successful. The first layer of protection is anonymity. No matter how secure or vulnerable your system is, if nobody can find it, its safe! The next good characteristic is its resistance to judgements and liens. If an entity in your scheme cannot easily be attached, then that is good. Finally, tax liability. An entity with little or no tax liability is ideal.

The easiest to fall to a litigation attack would be the statutory entities (e.g. corporations, LLC's, LLP's, etc.) by virtue of their dependency on the government for their existence. A statutory entity, such as a corporation, owes its existence to provisions in State and Federal law that govern it. These laws can change at anytime. This is not good. Statutory entities are by far the worst asset protection tools available. They are better than being an individual, but not by very much. Consider the three characteristics of a good asset protection scheme I just listed. Corporations cannot be anonymous as they are publicly registered with the Secretary of State. Corporations are easily Liened up and Judgements can stick to them like flies to honey. In fact, the UCC was generally created to operate against corporate entities. There is also built-in corporate tax liability in statute that makes a corporation 0 for 3 on the asset protection scale.

This is not to say corporations aren't useful. They are. I'm saying a corporation should not be the only tool in your tool box. If all you have is a hammer, then all your problems will have to be nails. Unfortunately we don't live in a world where all they throw at you is nails so you can handle them with your hammer.

Common-law entities (e.g. corp soles, trusts, etc.) are much better than corporations in all categories. Firstly, a properly used trust is never registered with any government and as such can maintain a fair amount of anonymity. Common-law trusts have no tax liability as they are considered non-entities by the IRS. Trusts can be liened and judgements can stick, but it's not as easy to identify culpable parties if the trust's members are properly structured. A trust, although very handy, is still just another tool and can't do it all.

So far we've covered two jurisdictions. There is one remaining jurisdiction that, when used in conjunction with the other two, can provide you with true "bullet proof" Asset Protection - The Offshore Jurisdiction.

Offshore is a bit of a misnomer. It refers to any place that is outside the external borders of the United States of America and US territories. Canada would be offshore by this definition. When you go offshore, you play by a completely different set of rules - their rules. There are many offshore jurisdictions that are as hostile, if not moreso, than the United States. However there are some that are much, much better. A good rule of thumb is to simply go where the super-wealthy go (e.g. U.S. senators, etc.) and that will take a lot of the guesswork out of it. I personally recommend Panama, but there are a few other jursidictions out there that are as good.

Structuring your system so that your equity flows Offshore is a great way to acheive total protection. A rule of asset protection is that "Liability flows with Equity". So, if your equity flows offshore, so will your liability. That's exactly how you want it to work.

Before I get into further details of my proposed system, I will state the thesis: It is the synergistic exploitation of ALL THREE jurisdictions and the specialized entities they offer (i.e. statutory, common-law and off-shore) that results in a complete, impenetrable fortress.

Synergy: the cooperative use of multiple entities to effect an outcome greater than the sum of their individual contributions

I state my definition of 'synergy' because it is important that we're on the same page as I explain that no single entity, or group of entities from a single jurisdiction, can provide a level of protection as good as using entities from more than one jurisdiction.

More on corporations

In this post and in my earlier post, I use the term "corporation" generally to represent all entities of a statutory nature. This is because all statutory entities essentially have the same benefits and vulnerabilities with only small differences. It's also important to recognize what makes an entity 'statutory' in nature. Registration of any sort with a government agency makes said entity a statutory subject of said agency and therefore a subject of the government. This means, if you obtain an EIN for a common-law trust, you have just moved your trust out of the common-law and into statutory law and you've lost your protection at law. This can happen to any entity from any jurisdiction. Never register across jurisdictions. It is a trap.

Please don't come away from this discussion with the impression that I think corporations are bad. They are not. Corporations are very useful and play an important roll in almost any contemporary asset protection system. In today's world, especially in the United States, it is more often necessary than not that one requires a statutory interface in order to conduct business in today's market. It is in this that statutory entities shine.

By virtue of having an EIN/TIN a statutory entity can obtain financing for whatever business endeavor its controllers deem prudent at the time. A statutory entity can open checking accounts and obtain any licensing necessary to conduct business in highly-regulated industries or for whatever reason.

As for civil liability, your statutory entities will be wholly encumbered by a third party that is outside the statutory jurisdiction, thus making the statutory entity an unattractive target for attachment in civil litigation. Put simpler, your corporate entity should owe more than it is worth to another entity that you control, that way, if a lawsuit ever prevails against your statutory entity, the plaintiff only inherits debt owed to another entity controlled by you (this could be a common-law or off-shore entity). Attorneys don't sue those who do not have any money.

Synergy

If you recall in my earlier post the statement, "Liability flows with Equity." Well, exploring this concept further, I'll use an example:

Let's say we have a Nevada LLC. There are 2 general partners comprising this LLC and both are common-law trusts. Naturally the LLC is a registered entity. The Trusts are not. The common-law Trusts have no inherent tax liability. The IRS considers them non-entities. Since whenever there are 2 or more partners in an LLC the tax liability flows to the partners (or a single partner can specifically elect to do so), the liability flows into a jurisdiction that owes no duty to the IRS. Likewise with other sorts of liability (e.g. civil liability) are also similarly channeled. Essentially, the buck is passed until it is out of the reach of whomever is attempting to attach.

If I may make a brief allusion to the historical events surrounding the creation of the Federal Reserve and the Federal Income Tax. Both these systems are interdependent on one another and were directly preceded by the enactment of Foundation law - all of which was carefully and deliberately orchestrated by the founders of the FED and IRS.

Foundation law is that body of law which defines the scope and powers of Tax-exempt, Private Interest Foundations. There are many such foundations in existence at present, but it's amazing how little people know about what they are and how they work. Most people think of a foundation to simply be a name given to some regular entity that is involved in some sort of charity or philanthropic activity. This far from accurate. A Foundation is a unique entity at law. Foundations owe no tax duty to government and may move funds in and out of its control with very little regulation if any.

This is mainly because of how a Foundation is structured. The beneficiary of a Foundation is always considered to be the as-yet unborn generation to come. This concept is what separates foundations from other entities which have living, present beneficiaries. Liability flows with Equity. The unborn hold the equity. One cannot tax or levy the unborn. Foundations are untouchable. There is no record of a Foundation ever succumbing to a civil attack - ever. It's been attempted as recently as the Enron scandal.

The Foundation should be the foundation of any strong asset protection system. It is the point to which all equity should flow. The ideal system would be comprised of such a Foundation established in an off-shore jurisdiction. This foundation can create for itself as many International Business Corporations (IBCs) as it needs. These IBCs can in-turn travel on-shore and open W-8 accounts as foreign entities and also brokerage accounts if necessary. These IBCs can also send it's own people to conduct certain business on its behalf, such as property management (the house you live in) or asset leasing (the car you drive), or to act as trustees for any trusts of which the Foundation is named beneficiary.

Although many so-called experts have certain pieces of the system and have intimate familiarity with those pieces, there are few that have a complete package that truly leverages the power of jurisdictional synergy.