The worst thing you can do is own assets in your own name. If you are ever sued, you could lose everything. In this article I will introduce you to several structures you can use by themselves or combined to protect your business or your assets. This will be a very general discussion as there are many different ways you can structure things depending on your needs. You will need to discuss your individual circumstances with a professional advisor to get specific advice but this chapter will give you food for thought and a basic understanding of what is available. The wealthy use these structures as part of their luxury lifestyles for tax planning, to protect their privacy, to protect their assets from seizure and for estate planning. They also use these structures to access investment opportunities that they as individuals may not have access to. The best countries for asset protection vehicles: Antigua Belize Bermuda The Cook Islands Lichtenstein Panama St Kitts & Nevis St Vincent & The Grenadines Seychelles Switzerland Vanuatu Western Samoa Here are some of the structures available in these jurisdictions that the wealthy use. 1. Trusts Trusts have been used to protect assets since the Crusades. Trusts are used in jurisdictions that are English common law based. That means all the British Commonwealth countries. The basic requirements of a trust are that you must have a settler (the person, usually you, who establishes the trust agreement and transfers the assets into the trust), a trustee (who takes title of these assets and manages them in accordance with the trust deed. The trustee is usually a company you set up or a professional trustee company you engage), and a beneficiary (the person or persons for whose benefit the trustee manages the assets). The trust, not the settler or beneficiaries, controls the assets so, if any of these people are sued, the assets cannot be taken. For estate planning the beneficiaries can be named as your children or grandchildren even if they are unborn (or even unconceived). There are many countries that offer trusts. For privacy reasons it is best to have your assets held outside the country you live in. 2. Foundations Foundations originated in Roman times and can claim to be the original financial planning vehicle, predating trusts by around 1 000 years. Foundations and trusts are both used for the same thing but are structurally different. Technically, a trust is a common law legal action and does not exist as a separate legal entity. A foundation is a legal entity in its own right and it owns the assets transferred to it. This makes the foundation similar to a company but the foundation has no stock (shares). Also, because foundations are based on civil law and not common law they are harder to challenge than trusts. Trusts are hard to challenge; foundations are harder. It is also easier to change the management of a foundation than it is for a trust. The basic requirements of a foundation is that you must have a founder (equivalent to a trust settler), a foundation charter (equivalent to a trust deed), foundation protector (who has the power to remove or appoint council members and beneficiaries) and a foundation council (equivalent to a trustee). There are fewer countries that offer foundations than trusts but they are well regulated. 3. Companies Companies set up in the correct jurisdictions can give you most of the benefits of trusts or foundations. Companies are entities in their own right. The best way to set up a company is to use nominee directors and nominee shareholders or bearer shares. Nominee directors are directors you hire to control the company for you. You can also have nominee shareholders who are hired to own the company for you. Bearer shares are share certificates that are not issued in the name of a person. Anyone who 'bears' the certificate is te owner. By using nominees or bearer shares you do not actually legally own or control the company. This can give you tax and privacy advantages. For safety when using nominees, get signed undated resignations from them right from the start. If you don't like what they are doing, you can then date the documents and remove them. It is usually a government requirement now for incorporation agents to retain the bearer share certificates in a safe deposit box on your behalf. This keeps your certificate safe and stops you transferring the company to terrorists without the incorporation company being involved and performing their 'know your customer' duties. This is the best structure to use if you are planning to deal with the public, ie run a business. 4. Swiss Annuities There is an asset protection vehicle in Switzerland called the annuity. This is the insurance product that can be used to protect cash assets from lawsuits including bankruptcy proceedings. Annuities are a contract with a Swiss insurance company. You invest in the annuity and the insurance company guarantees your principal and all interest payments. It is one of the few interest bearing investments in Switzerland not subject to Swiss withholding tax. 5. Portfolio Bonds A Portfolio Bond is a simple holding structure through which an investor can direct an insurance company to invest in a wide range of investment vehicles like stocks, bonds, mutual funds or cash. The investor has a contract in his name with an insurance company, which is usually domiciled in a tax haven country. The insurance company opens a bank account selected by the investor. The investor is the client of the insurance company and the insurance company is the client of the bank. The bank makes the investments. Portfolio Bonds enjoy legal protection from creditors. They can also be set up for estate planning and tax planning. They are excellent for privacy as the bank account and investments are in the name of the insurance company. Which is the best vehicle and jurisdiction for you? It depends on your own personal circumstances & what you are trying to achieve. Consult an advisor to discuss your needs and for more information on any of the countries or asset protection vehicles discussed in this article. Dr Gregory Lipke. |
