Like It or Not: Welcome to the New World of Wealth Preservation
Are Your Old Style Asset Protection Structures Still Working? In order to build secure wealth today, we first need to identify the old style structures and strategies to determine their effectiveness in this new environment of openness and transparency.
Below is a summary of the most popular wealth preservation strategies-- their benefits, advantages and disadvantages, how the strategy works, the risks involved, and any recent regulatory actions that might now have an impact on their effectiveness.
There are many ways Americans and other world investors have attempted to protect and defend their personal wealth in the past.
Some strategies have worked well, others have been successful in specific circumstances, and some were unwise choices all together.
Just remember that former questionable asset protections actions will likely catch up with most investors and we urge all readers to make sure their wealth preservation strategies and products are legal as required by U.
S.
regulatory agencies.
A Non-Reported Offshore Bank Account In the not too distant past, secret or unreported bank accounts were difficult for both government regulators and litigators to find, and it was a relatively easy matter to move money in and out of the country in a low profile manner.
This type of activity saved the wealth of thousands of German Jews in Germany after Hitler took over, but it was an illegal activity punishable by death.
Yes, this illegal method of wealth protection worked in the past for some Americans and citizens from many other nations around the world but the free ride is over today-- at least for American citizens.
An Offshore Fixed Swiss Annuity For many years, this type of fixed annuity was the asset protection and hard currency diversification vehicle of choice for thousands of Americans and other world investors.
These investors wanted a simple, effective, and inexpensive offshore account with a low minimum investment and asset protection provided by Swiss insurance law.
These benefits were further enhanced by the fact that the annuity was not reportable as a foreign financial account.
From the late 1970's until the dollar's low point in the fall of 1995, hundreds of millions of dollars flowed into these low cost, attractive insurance products.
While the interest rates were low, the strength of the Swiss franc verses the dollar provided an additional currency benefit, which made this an attractive product during the weak dollar period.
Its low minimum investment of around $10,000 made this the perfect easy introduction to the offshore world.
Today this insurance annuity product remains an excellent offshore investment and its tax-deferred status is apparently still grandfathered for existing policy holders.
It is great for small investors who just want an interest earning account offshore that should appreciate in value as the dollar falls in value.
However, be aware that the feds (thanks again Washington) have ended tax-deferral on new Swiss and offshore fixed annuity accounts.
Now it is just one of several alternatives for investors wanting to diversify outside of the U.
S.
and the dollar, but the benefits and commission costs do need to be compared with that of a simple offshore bank account.
The fixed annuity is still worth considering for investors looking for an easy, low-cost way to diversify a portion of their wealth offshore for dollar protection and asset protection in a wide source of currencies including the Swiss Franc, Euro, Dollar, and British Pound.
I would like to note that you can also easily switch between currencies as markets dictate in many of the annuity products.
You Can Still Trust Asset Protection Trusts When Compliant With All the Regulations During the 1990's, the offshore asset protection trust was often the best protection vehicle available for high net-worth Americans desiring to protect their assets from frivolous lawsuits and unwarranted seizures.
Tax havens were booming as hundreds of millions flowed outside the litigious U.
S.
society to safety offshore.
Their independent government jurisdictions provided the much needed financial privacy and a legal system that actually favored the individuals and trusts instead of plaintiffs and trial lawyers as is the case today in the U.
S.
In the year 2000, the OECD and FATF threatened sanctions against all tax-havens unless they signed treaties with the U.
S.
allowing full investigations and unlimited pursuits against those labeled as tax cheats.
America indicated that foreign laws, asset protection legislation, privacy statues, and even foreign legal systems were required to knuckle under to Washington...
or else.
This expansive attack against offshore asset protection was further aided by the Ninth Circuit action in the Anderson Case, which established the precedent for judges and courts to ignore all offshore jurisdictions and to threaten to throw Americans with assets under attack in jail for contempt of court until the money the courts demanded was paid.
All of this, combined with the increased reporting requirements now has added to the questions, risks, and protection benefits for the still popular asset protection trust strategy.
After all, how popular will a particular offshore product be if the U.
S.
courts can now make policy and confiscation actions independent of the rule of law in an offshore jurisdiction.
Basically, now we have degenerated to the deplorable situation where if an offshore structure or vehicle allows for the easy release of assets by the investor through loans or cancellation, then the American citizen, even if innocent of any wrong doing, can be thrown into jail and held hostage for contempt of court until the court ordered seizure of the assets can be completed.
These actions by the U.
S.
courts should be a wake-up call to every American that the U.
S.
legal system will no longer protect your wealth.
On the contrary, it has now been overtaken by trial lawyers and powerful legal interests who actually use the system that was originally designed to safeguard property and rights, as the main predator against them.
Thus, the American legal system, once the envy of the world, has in situations degenerated to the legal enforcer of pillage, theft, and wealth confiscation.
These new legal tactics, such as with the Anderson Case, where productive Americans are held for ransom by an frenzied, corrupt court system, is a travesty for America's once respected legal system.
Offshore asset protection trusts can still play an important part in your wealth preservation planning, but make sure you close any loopholes, or be prepared to make the difficult choice of your wealth or jail time for contempt of court.
The Offshore Variable Annuity At first glance, this is a significant improvement over the asset protection trust because this annuity offers less complicated annual filing requirements and the low-profile benefit of tax-deferred growth.
A problem with some of these products is the high back-loaded commission structure, similar to many U.
S.
variable products, which can make the product somewhat costly to cancel in the first few years.
In fact, some of the back-end early surrender charges on offshore variable products have equaled, or even exceeded, the American levels.
These often start at a 7% penalty of any withdrawal during the first year declining by 1% each year until the charge ends in the 7th year.
If you are interested in this excellent offshore type of product, consider those with lower charges.
A second problem exists for those offshore variable annuity products that were developed during the late 1990's near the peak of the U.
S.
and global stock market mania.
Many investors transferred funds from existing fixed annuities or bank accounts opened when the dollar was strong into these attractive new variable annuity products.
This was a double-hit because they suffered currency losses from their original investment and went into the new product at the top of the stock market mania during 2000 and 2001, which resulted in additional losses when these markets turned down.
These investor portfolios suffered greatly from the double assault of getting out of the foreign currency at the peak of the dollar and into the equity portfolios of the variable annuity at the peak of the bull market.
Today, conditions for the dollar and US investment markets make this an opportune time to consider additional diversification outside the narrow confines of the dollar and the American stock market, into the wide range of non American investment alternatives.
Timing is often crucial in both liquidating existing investments and in moving into new investments.
Following the crowd is often an expensive and losing proposition since the majority of investors, especially in a mania situation, are always wrong.
Most investors have sadly learned that the same herd mentality is all too often prevalent in investment advice from many U.
S.
and offshore financial experts.
"There is a big difference between thinking for yourself and mass thinking.
In the hands of the mob, ideas get hollowed out like campaign slogans, to the point where they are completely empty.
They appeal, not to the reason of an intelligent observer, but to the lowest common denominator of emotion.
"- Bill Bonner, The Daily Reckoning http://www.
dailyreckoning.
com It is apparent that the strength of the dollar has ended, at least temporarily, as the Euro and the Swiss franc have appreciated substantially verses the dollar during the 2003 to 2005 period.
From 2005 until now, (early 2007) the currencies have remained in a narrow trading range.
I believe the dollar will fall further during the next 36 months as the weakness in the real estate markets will mean lower interest rates and a lower dollar.
Moreover, in response to bloated deficits, a weak American stock market, and terrorist threats, the Euro is beginning to rival the dollar as a world reserve currency.
Although I believe a strong Euro and European stock markets can move up together, it is always very important to diversify, invest conservatively and, above all, remember that timing is crucial.
Investors should always beware of sales pressure or investment solicitations that advocate extreme actions at the peaks or valleys of bull and bear markets.
Regardless of whether the market is currency, bond, stock or precious metals related, major movements or changes of portfolio philosophy can be detrimental.
Remember, all markets are cyclical.
It is important not to follow the mass crowd of investors or non-sophisticated investment advisors and jump off the cliff at the end of each cycle.
The bottom line is to take profits all the way up in bull markets and cut your losses all the way down in bear markets in order to reduce portfolio volatility and increase overall return.
Below is a summary of the most popular wealth preservation strategies-- their benefits, advantages and disadvantages, how the strategy works, the risks involved, and any recent regulatory actions that might now have an impact on their effectiveness.
There are many ways Americans and other world investors have attempted to protect and defend their personal wealth in the past.
Some strategies have worked well, others have been successful in specific circumstances, and some were unwise choices all together.
Just remember that former questionable asset protections actions will likely catch up with most investors and we urge all readers to make sure their wealth preservation strategies and products are legal as required by U.
S.
regulatory agencies.
A Non-Reported Offshore Bank Account In the not too distant past, secret or unreported bank accounts were difficult for both government regulators and litigators to find, and it was a relatively easy matter to move money in and out of the country in a low profile manner.
This type of activity saved the wealth of thousands of German Jews in Germany after Hitler took over, but it was an illegal activity punishable by death.
Yes, this illegal method of wealth protection worked in the past for some Americans and citizens from many other nations around the world but the free ride is over today-- at least for American citizens.
An Offshore Fixed Swiss Annuity For many years, this type of fixed annuity was the asset protection and hard currency diversification vehicle of choice for thousands of Americans and other world investors.
These investors wanted a simple, effective, and inexpensive offshore account with a low minimum investment and asset protection provided by Swiss insurance law.
These benefits were further enhanced by the fact that the annuity was not reportable as a foreign financial account.
From the late 1970's until the dollar's low point in the fall of 1995, hundreds of millions of dollars flowed into these low cost, attractive insurance products.
While the interest rates were low, the strength of the Swiss franc verses the dollar provided an additional currency benefit, which made this an attractive product during the weak dollar period.
Its low minimum investment of around $10,000 made this the perfect easy introduction to the offshore world.
Today this insurance annuity product remains an excellent offshore investment and its tax-deferred status is apparently still grandfathered for existing policy holders.
It is great for small investors who just want an interest earning account offshore that should appreciate in value as the dollar falls in value.
However, be aware that the feds (thanks again Washington) have ended tax-deferral on new Swiss and offshore fixed annuity accounts.
Now it is just one of several alternatives for investors wanting to diversify outside of the U.
S.
and the dollar, but the benefits and commission costs do need to be compared with that of a simple offshore bank account.
The fixed annuity is still worth considering for investors looking for an easy, low-cost way to diversify a portion of their wealth offshore for dollar protection and asset protection in a wide source of currencies including the Swiss Franc, Euro, Dollar, and British Pound.
I would like to note that you can also easily switch between currencies as markets dictate in many of the annuity products.
You Can Still Trust Asset Protection Trusts When Compliant With All the Regulations During the 1990's, the offshore asset protection trust was often the best protection vehicle available for high net-worth Americans desiring to protect their assets from frivolous lawsuits and unwarranted seizures.
Tax havens were booming as hundreds of millions flowed outside the litigious U.
S.
society to safety offshore.
Their independent government jurisdictions provided the much needed financial privacy and a legal system that actually favored the individuals and trusts instead of plaintiffs and trial lawyers as is the case today in the U.
S.
In the year 2000, the OECD and FATF threatened sanctions against all tax-havens unless they signed treaties with the U.
S.
allowing full investigations and unlimited pursuits against those labeled as tax cheats.
America indicated that foreign laws, asset protection legislation, privacy statues, and even foreign legal systems were required to knuckle under to Washington...
or else.
This expansive attack against offshore asset protection was further aided by the Ninth Circuit action in the Anderson Case, which established the precedent for judges and courts to ignore all offshore jurisdictions and to threaten to throw Americans with assets under attack in jail for contempt of court until the money the courts demanded was paid.
All of this, combined with the increased reporting requirements now has added to the questions, risks, and protection benefits for the still popular asset protection trust strategy.
After all, how popular will a particular offshore product be if the U.
S.
courts can now make policy and confiscation actions independent of the rule of law in an offshore jurisdiction.
Basically, now we have degenerated to the deplorable situation where if an offshore structure or vehicle allows for the easy release of assets by the investor through loans or cancellation, then the American citizen, even if innocent of any wrong doing, can be thrown into jail and held hostage for contempt of court until the court ordered seizure of the assets can be completed.
These actions by the U.
S.
courts should be a wake-up call to every American that the U.
S.
legal system will no longer protect your wealth.
On the contrary, it has now been overtaken by trial lawyers and powerful legal interests who actually use the system that was originally designed to safeguard property and rights, as the main predator against them.
Thus, the American legal system, once the envy of the world, has in situations degenerated to the legal enforcer of pillage, theft, and wealth confiscation.
These new legal tactics, such as with the Anderson Case, where productive Americans are held for ransom by an frenzied, corrupt court system, is a travesty for America's once respected legal system.
Offshore asset protection trusts can still play an important part in your wealth preservation planning, but make sure you close any loopholes, or be prepared to make the difficult choice of your wealth or jail time for contempt of court.
The Offshore Variable Annuity At first glance, this is a significant improvement over the asset protection trust because this annuity offers less complicated annual filing requirements and the low-profile benefit of tax-deferred growth.
A problem with some of these products is the high back-loaded commission structure, similar to many U.
S.
variable products, which can make the product somewhat costly to cancel in the first few years.
In fact, some of the back-end early surrender charges on offshore variable products have equaled, or even exceeded, the American levels.
These often start at a 7% penalty of any withdrawal during the first year declining by 1% each year until the charge ends in the 7th year.
If you are interested in this excellent offshore type of product, consider those with lower charges.
A second problem exists for those offshore variable annuity products that were developed during the late 1990's near the peak of the U.
S.
and global stock market mania.
Many investors transferred funds from existing fixed annuities or bank accounts opened when the dollar was strong into these attractive new variable annuity products.
This was a double-hit because they suffered currency losses from their original investment and went into the new product at the top of the stock market mania during 2000 and 2001, which resulted in additional losses when these markets turned down.
These investor portfolios suffered greatly from the double assault of getting out of the foreign currency at the peak of the dollar and into the equity portfolios of the variable annuity at the peak of the bull market.
Today, conditions for the dollar and US investment markets make this an opportune time to consider additional diversification outside the narrow confines of the dollar and the American stock market, into the wide range of non American investment alternatives.
Timing is often crucial in both liquidating existing investments and in moving into new investments.
Following the crowd is often an expensive and losing proposition since the majority of investors, especially in a mania situation, are always wrong.
Most investors have sadly learned that the same herd mentality is all too often prevalent in investment advice from many U.
S.
and offshore financial experts.
"There is a big difference between thinking for yourself and mass thinking.
In the hands of the mob, ideas get hollowed out like campaign slogans, to the point where they are completely empty.
They appeal, not to the reason of an intelligent observer, but to the lowest common denominator of emotion.
"- Bill Bonner, The Daily Reckoning http://www.
dailyreckoning.
com It is apparent that the strength of the dollar has ended, at least temporarily, as the Euro and the Swiss franc have appreciated substantially verses the dollar during the 2003 to 2005 period.
From 2005 until now, (early 2007) the currencies have remained in a narrow trading range.
I believe the dollar will fall further during the next 36 months as the weakness in the real estate markets will mean lower interest rates and a lower dollar.
Moreover, in response to bloated deficits, a weak American stock market, and terrorist threats, the Euro is beginning to rival the dollar as a world reserve currency.
Although I believe a strong Euro and European stock markets can move up together, it is always very important to diversify, invest conservatively and, above all, remember that timing is crucial.
Investors should always beware of sales pressure or investment solicitations that advocate extreme actions at the peaks or valleys of bull and bear markets.
Regardless of whether the market is currency, bond, stock or precious metals related, major movements or changes of portfolio philosophy can be detrimental.
Remember, all markets are cyclical.
It is important not to follow the mass crowd of investors or non-sophisticated investment advisors and jump off the cliff at the end of each cycle.
The bottom line is to take profits all the way up in bull markets and cut your losses all the way down in bear markets in order to reduce portfolio volatility and increase overall return.
Source...