How to Gain Asset Protection and Reduce Tax

by | Aug 20, 2002 | Archives

Here's three ways to enhance your tax position and increase your financial security.

Dear International Friend,

One reader sent this question which I am sure is on many of your minds.


Do you have any reports or info on trusts? I've tried getting into what one resource calls a sovereign trust or “contract” but constantly run aground with trying to open bank accounts, title vehicles, etc. Is there such a thing which the average citizen can use? Or does one need a fortune to be able to utilize a trust?


My reply is one everyone should know.

Sovereign or contract trusts are scams. Forget them. There are some tax benefits that large investors (at least 2 million, better 5 million) can gain using overseas trusts in certain narrow areas, but the formation and maintenance costs are high.

The easiest, low cost structure that increases privacy and asset protection is a simple foreign bank account. This gives no tax benefits, but gives limited privacy and asset protection.

Buying non US mutual funds, especially roll up funds that do not distribute tax, can defer tax and provide asset protection as well (but there is some tax risk when the funds are sold – check the PFIC regulations before you invest).

Overseas, investment linked life insurance policies are the best bet for deferring tax and adding asset protection. IN simple terms they are pretty much law suit proof and defer all income and tax until the policy is cashed in. They are still very private as well. But there is the insurance cost and getting started can be cumbersome. In addition we do not yet know what the practical impact of the new anti terrorism laws will do to erode their privacy. I'll update those who have subscribed to our tax and asset protection club as we learn more about how this new law is used.

Until next message, good global investing!