TAX NEWS - June 2010

Avoid Taxes without Evading Them With These 3 Tips

The Single Thing You MUST Do to Preserve Your Wealth for Generations

Maintaining wealth for generations doesn't happen by accident. Truly wealthy families know that keeping money is more of a challenge than earning it.

And as a sovereign individual, you know that an incredibly effective way to secure your financial future is to invest in some offshore assets, and/or to move a portion of your assets offshore.

If you're worried about keeping your wealth "in the family" – and out of the government's hands, as much as possible – you can't afford NOT to.

You know that many people choose to move their assets (and even themselves) offshore entirely. But for those of us who want to stay right where we are, today I want to share a few secrets that can keep you – and your money – protected and thriving globally.


The 'Secret Sucker Punch' That Can K.O. Your Wealth

In a very real sense, taxes can be considered theft by a government that takes your hard-won income and capital gains. But do you know just how much is really coming out of your pocket while you're not looking?

More candid than most politicians, New York Gov. David Paterson recently said, "Taxing the wealthy is probably going to be part of the solution if the deficit gets any worse, and all indications are that it probably will."

But what's the secret sucker punch that most people aren't expecting?

It's inflation, which is much sneakier — as it allows you to build wealth over time while it slowly erodes the value of your savings.

Inflation is a major "stealth tax," while other stealth taxes – import duties, VAT – are hidden in higher prices for goods and services.

Let's face it – taxes are a fact of life. But if you're not making it a priority to protect the money you've worked hard to earn through income and investments, your only chance at outliving your retirement fund is to replace it faster than it evaporates.

And that's why you've got to make some stealthy moves of your own … immediately … and it can be as easy as opening up an online bank or brokerage account to put your money in a safe place – and that's probably offshore!


Above Average Returns on Safe Investments

Before investing offshore, determine which assets will help you meet your financial goals – tangibles, money, businesses or real estate … or some combination thereof.

- Tangibles are commodities – gold, silver, gems and collectibles.
- Money can be cash, bank deposits (including foreign currencies), CDs and bonds.
- Businesses can be wholly owned or partially through partnerships or corporate shares.
- Real estate is raw land or residential and commercial property.

To decide how to allocate, consider the following:

1. Tangibles fluctuate according to consumer demand and are affected by inflation and deflation – inflation generally causes tangibles to rise in value while deflation causes them to fall.

2. Bonds and U.S. Treasuries rise and fall with an inverse relationship to interest rates.

3. Equities fluctuate based on stock market cycles and skills of business managers.

4. Real estate, most of which is mortgaged, will also show an inverse relationship between interest rates and property prices.

Your view of the market and political climate will determine your portfolio evaluation. Political risks include government confiscation of property without a hearing, regulations that can affect property rights, changing tax treatment of investments, and monetary policy (changing interest rates, expanding money supply).

Word to the wise: Do not choose an investment simply because it is offshore.

Like any investment you are about to make, you must determine whether your portfolio would benefit from that type of asset, and how it will perform relative to the other assets in the same category as well as your needs and expectations.


Reduced Tax Liabilities – Avoidance vs. Evasion

Every taxpayer has the right to try to avoid taxes legally.

Courts all over the world have ruled: "Tax avoidance is legal. Tax evasion is illegal."

So, how do you know what is legal avoidance and what is illegal evasion?

This fine line can change overnight. Today's avoidance can become tomorrow's evasion. It can be a costly difference.

Tax abusive schemes to avoid include "secret," supposedly non-reportable offshore bank accounts and schemes, or declaring yourself a "sovereign citizen" who supposedly is no longer subject to laws, courts or taxes.

The common element in these scams is that they are "too good to be true."

There are many legal ways to save taxes, including:

1. U.S. citizens living and working outside the U.S. for at least 330 days within one year can exclude up to $91,400 (U.S. dollars) foreign income from U.S. income taxes in 2010.
2. When a U.S. citizen expatriates by giving up citizenship, future income from outside the country is not subject to U.S. taxation, and non-U.S. assets are not subject to U.S. estate or gift taxes.
3. Foreign source income of a foreign trust after death of a grantor and spouse is exempt from tax distributions to a U.S. beneficiary.

The government increasingly seeks to blur the line between legal tax avoidance and illegal tax evasion. Use caution and common sense and seek professional guidance from reputable sources in tax matters.


One Way to Secure Your Family's Future

Because the death tax and estate taxes take big bites out of your family's inheritance, estate planning is key to ensuring your wealth lasts for generations.

There is one unique, secretive entity called a "private family foundation." It provides simple, yet powerful asset protection, wealth distribution and estate planning.

A family foundation is a fund you can set up just for your family – there are no shareholders, owners or members – just beneficiaries by blood or marriage.

Assets within the foundation are the only assets liable for foundation debts and, when properly created, are immune to creditors of both founder(s) and beneficiaries.

Family foundations are easier to use than trusts and the founder has considerable influence over the managing board of directors.

Creation is simple in one of the few nations that recognize the structure, and can be set up by local, in-country attorneys specializing in foundation and trust law.


Long-Lasting, and Far-Reaching, Wealth

Simply growing and protecting your wealth during your lifetime is only half the battle.

Ensuring that your beneficiaries continue the tradition of saving, investing and preserving wisely, both domestically and abroad will ensure that your legacy benefits generation upon generation to come.