Establishing an International Asset-Protection Trust
As an asset-protection lawyer, my focus is on protecting what I have before I worry about growing my assets. As Sun Tsu said 2,500 years ago in his book The Art of War, the successful warrior works to make defeat impossible prior to entering into battle. From there, victory is assured.
Asset-protection planning works the same way. Personally, I love reading all the Stansberry & Associates editors and their unique concepts for making money and growing wealth. But I want to make sure I can't lose my money through forfeiture, seizure, litigation, divorce, or the myriad other threats that may attack my clients' wealth.
So the first thing I recommend is establishing an "international asset-protection trust."
International Asset-Protection Trust
Trusts are among the oldest recognized legal structures in the world, having been in existence for more than 1,000 years. The trust is a unity of three parties: the grantor, who gives the legal ownership of the asset (referred to as the "res" or thing) to the trust; the trustee, who takes legal ownership of the res; and the object of the trust, who receives the benefits of the asset in trust. (This party is known as the "beneficiary.")
Together, these parties form a new legal – or "juridical" – "person" separate and distinct from the grantor. When you do have a legal asset-protection trust, it completely cuts off the legal ownership of the asset from the grantor. The asset cannot be taken from the grantor by lawsuits, government action, or creditors.
The Benefits of Establishing an Asset-Protection Trust Outside of the U.S. Include
1) The first $5.25 million placed in the trust is exempt from U.S. gift and estate tax. You can transfer this amount of money into a trust without paying any gift or estate tax.
2) If the money grows during your lifetime, you are responsible for the annual income tax of the trust... but you will never pay a penny of estate tax. Even if the initial $5 million turns into $50 million, neither your heirs nor your estate will pay anything to Uncle Sam on the money you transfer to a trust now.
3) The international nature of the trust will protect you against U.S. lawsuits and make it impossible for the U.S. government or court authorities to "freeze" assets within the trust.
4) You have maximum flexibility with estate planning. You can leave assets without limitation payable when and to whom you want. If you want a trust to provide for linear descendants for the next 1,000 years, you can do so.
5) As the doors to global financial institutions close for Americans, the international trust can be a tool to create an international platform to open financial accounts and make whatever investments you choose. Whether as a vehicle to hold gold outside the U.S., access exclusive hedge funds, or simply open that bank account you want in Switzerland or Singapore... the international trust is the right vehicle.
Factors including your age and expected future earnings will help determine how much you should put in a trust. In general, you should have at least $500,000 to open one... If you have $1 million-$2 million, the decision is a no-brainer. When you surpass the $5.25 million, the funds in excess of that threshold lose some of the tax advantages... But some of the other legal protections may still make establishing one worthwhile. These are issues you should discuss with the professional financial advisor who sets up the trust for you.
If you set yourself as the beneficiary of the trust (and many of our clients do)... you can take the funds out of the trust if you choose. Just remember two caveats:
First, you permanently use up the exclusion amount that is exempted from gift and estate taxes. So if you max out your $5.25 million credit and then bring a bunch of money back, whatever you don’t have in the trust will be subject to the 40% estate tax when you die. If your trust holds about $1 million-$3 million, this won't likely be an issue. But if you are above the threshold amount, it is best to gift the trust only what you don't think you'll need.
Second, moving funds into and out of your trust exposes you to "friction" costs, like wire-transfer fees. Paying $100 to wire $5 million may seem insignificant. But pulling $1,500 out every month for living expenses and being subject to the same $100 fee may be too steep.
Once you take the crucial step of opening a trust, you'll sleep better at night knowing what's yours is yours, and nobody can take it away from you. Then I'd look to the other ideas in this special Stansberry & Associates report to further grow my wealth.
About Joel Nagel
Joel Nagel is among the nation's leading experts in asset-protection. A practicing international lawyer for nearly a quarter century, Joel and his law firm specialize in representing U.S. persons and their capital abroad. He works in such areas as asset protection and estate planning, taxation, business transactions, emigration issues, tourism, and real estate development.
His top "money move" for 2013 is one of the first steps he recommends to clients who want to protect their wealth from onerous taxes and other confiscatory policies of our increasingly indebted government. To contact Joel, you can visit his firm's website at www.nagellaw.com or email Joel.