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Shedding A Light On The Idea Of Going Offshore

By John Dietz - Email Editor

Date: April 25, 2006

From time to time, Rob gets interviewed by media, government and the occasional six-million-dollar man. His recent Forbes magazine articles can attest to his “Asset Protection guru” status. While it may not be appropriate for him to pat himself on the back, I will do the honors.

But the real story here is not in the pages of Forbes magazine; it’s in the everyday conversations between advisor and client. A recent snippet of a conversation will attest to that. Some of the simplest things can be so enlightening!

So let’s get to it…

Client - These offshore entities you form … are they legal?

Rob – Of course, everything is legal and fully disclosed. With that said, can we back up; what are you trying to accomplish, sir?

Client – It’s my understanding that if I form a series of entities, I will confuse a potential creditor?

Rob – Maybe, but I wouldn’t count on it. Always assume that everything you do is already discovered by your opponent. Your plan should work even if every detail of it is known to your creditors.

Client – I have been told going offshore is a red flag with the IRS?

Rob – This is like saying that living in Hawaii will raise a red flag to the IRS. Anything offshore, when done incorrectly without complete and proper disclosure to the IRS, will cause you unending trouble. Done right, Asset Protection raises no tax flags at all. In fact, in most cases your entire plan will be treated as domestic for tax purposes, even though you have a foreign trustee.

Client – Can you clarify?

Rob – Well, what would be a red flag to the IRS, and is there such a thing? As long as you claim all of your income, file the proper forms, and run a legitimate business, you should have no problem. Remember, U.S. citizens are taxed on their worldwide income, period. Don’t forget this; no plan will ever save you even a penny of U.S. taxes.

Rob – Let me ask you a question: If you live in California and run a business, but let’s say you heard that New Mexico was a good place to form a company to run that California business, does that sound odd to you?

Client - Well, yes, it does…

Rob - That set up may look good on paper, but to me it looks like you are trying to avoid the income taxes due to California, isn’t that a big red flag…

Client – Hmmm.

Rob – How about this example: If you were a U.S. citizen living in Australia for four months out of the year, is that a red flag? Do you want me to keep going?

Client – I see your point.

Client – You make going offshore sound as though it’s for everybody, but isn’t it just a bit too fancy for most folks?

Rob – Depends; I think it all comes down to whatever is being promoted by the latest Asset Protection idea du jour. If you are scared off by the thought of going offshore, please consider the following: The full faith and credit clause of the constitution says that all 50 states recognize each other's judgments. Period. So please tell me what U.S. state would be better for you? The answer is often: NONE.

Rob – There are two rules to Asset Protection:
1. What you don’t own can’t be taken from you.
2. No country in the world automatically recognizes U.S. Judgments.

Rob - Most folks forget the second rule.

Client – Will my money be safe offshore?

Rob – Who said you had to take your money offshore? You can put your money offshore if you want, and if you do, you should only use a Fortune 500 level institution.

Client - What are my tax advantages in this system?

Rob – Typically none…

Client – How complicated is my life going to become if I use your system?

Rob – Asset Protection, properly implemented, should be transparent and seamless to you and your life.

Asset Protection is a process to make it so a creditor has to spend a dollar to collect a dime; it’s just that simple.

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