Email Article Print Article

Asset Protection - Don't Let The Tax Tail Wag The Dog

By Rob Lambert - Email Editor - Editor Bio

Date : 25-Jan-2007

Dear Subscriber:

I have to revisit a recurring theme:

Don’t let the tax tail wag the dog.

Yes, it’s great to save on taxes. We all want to give Uncle Sam as little as possible. Our Representatives have given us literally thousands of legitimate ways to reduce taxes.

Asset Protection is most certainly NOT one of the legitimate ways to reduce taxes.

Another one of my often repeated mantras: Asset Protection Planning will almost never save you any taxes. If you use an Asset Protection Trust count on NO material income tax savings and probably an increase in compliance costs.

If somebody advises you that offshore trusts will save you tax, take a step back and get it in writing. You are almost certainly in the hands of a scammer. At the very least, you are probably dealing with an unqualified salesman who does not know what he is doing. Do yourself a favor, at a minimum get a second opinion from somebody who has significant training in U.S. taxation of foreign source income.

How do you know if the promises people make to you about saving on taxes are fraud? SIMPLE… The basic rule is that U.S. citizens are taxed “on their worldwide income from whatever source derived,” (a direct quote from the code). There are very few exceptions to this.

Anytime ANYONE who claims that an offshore Asset Protection Trust or an offshore bank account will save you taxes: RUN. This person almost certainly is advising you to commit a crime.

The reason I revisit this point and pedantically drive it home is that many people still do not get it. Their greed overcomes their common sense. They fall for the load of crap that offshore trusts and offshore entities owned by U.S. Citizens are not required to pay taxes. The shady promoters pushing this garbage forget to deal with the thousands of pages in the tax code and regulations specifically designed to prevent a U.S. Citizen or Resident from escaping U.S. tax just by forming a foreign entity or establishing some “secret” offshore account. Yes, there are a few exceptions to these rules; however, to devise a structure which actually results in an overall reduction of taxes is technically complex. The compliance costs are huge and not for the under advised Citizen hoping to put money abroad and avoid taxes. This just does not happen.

In fact, the IRS specifically requires the reporting of every offshore account (and if you have unreported accounts, you should remedy this before the IRS does it for you). Remember, abuse of foreign trusts, foreign entities and offshore accounts has become a major focus of the IRS. In the VERY near future the IRS will be matching information on offshore accounts it now receives from all offshore banks to personal and business tax returns. There are going to be a lot of doe eyed people paying huge penalties or even going to jail because they fell for a line they got from some tax scammer promoting foreign planning as a way to avoid tax. Don’t become one of these victims.

Things have now changed. The IRS now has the personnel (often ex-CIA), the computers, the data, and other necessary resources to catch this brand of tax cheater.

With a few minor exceptions, Asset Protection and tax savings are not synonymous. Be wary of anyone or any organization that tells you otherwise.

I will probably get an award for the most redundant newsletter ever written. With that said, I hope it keeps some of my dear readers out of trouble and out of jail.

Have a healthy and protected week.

Rob Lambert

RELATED ARTICLES:

• Protect the equity in your home
• Asset Protection Plans
• C.A.L.M. Introduction
• Get educated on Asset Protection

ABOUT THIS EDITOR:

Rob Lambert, Founder and former law professor is considered to be foremost expert on tax compliant asset protection structures. A contributing editor to Lexus Nexus debtor creditors series of law books Rob's passion is implement client wealth plans that stand the test of time and hold up under duress.

Full Bio - Email Rob