When the matter concerns HNWIs or very rich people, we, common Joes, often think the rich hide their wealth from prying eyes guarding it like legendary dragons. Be it a thief or a tax inspector, the rich do not let anyone ever approach their proverbial gold. At least this is what most lay people think of the rich and the way the rich protect and hide their money. The reality however is much different. With transparency principles setting in globally, it is next to impossible to simply hide your money even if you are rich.
Nowadays, super-rich people with multi-billion dollar fortunes are not at all like medieval dragons. In the XXI century, such behavioral strategies do more harm than good where asset protection and preservation are concerned. This is why the rich willing to protect their assets are embracing the “employ the best asset protection possible” strategy instead of “hide your assets the best way you can”. Only legal methods, ways, and schemes are used by the rich to achieve the above goal so that authorities would have no ground for seizing upon just anything. The rich do a lot not to let regular people learn about asset concealment as well.
What are the strategies the rich never employ to protect and hide their assets? For lack of a better word, the rich don’t bury their money under a tree in the yard although a bunch of gold coins could be a useful asset for their offspring and descendants. Likewise, the rich don’t simply go offshore by transferring assets to secret accounts. They also do not violate the law by dodging taxes.
Instead, the rich act in a wiser, more reasonable, and strategically correct way.
The rich use legal instruments to protect assets
For successful asset preservation, the rich use various instruments.
They may partially transfer their assets to offshore jurisdictions. However, the times when it was done in a straightforward fashion are long gone. FYI: every offshore jurisdiction is only good to achieve certain goals and carry out certain transactions. Some work best for corporate account setup, while others are good to store securities or manage real estate.
Incorporated in a certain offshore jurisdiction, a company may set up bank accounts in a different country boasting a better and more reliable reputation. The truth is, classic offshore companies have faced challenges recently with bank account setup. Yet, assisted by the International Wealth industry pros who will tell you more about offshore bank accounts at a free initial consultation, you will seamlessly overcome this hurdle.
Oftentimes, offshore structures consist of several layers. This is primarily done to achieve better and more efficient business and asset protection as well as optimize your taxation. Hiding personal data from authorities is by far not the priority. Even more so that the offshore structure itself shall be transparent enough to avoid issues with regulatory authorities and/or potential run-ins with the law.
Don’t the rich pay taxes? This is not good for asset protection
As far as taxes go, the rich also pay taxes. The rich know however they need the smartest and the most experienced pros to assist them with taxation issues and legal tax optimization. Say, the rich can save money on PIT or corporate taxes by transferring businesses to offshore jurisdictions.
Most often, the rich have no tax issues (in the US, the rich that make up to 3% of the whole population, pay the most taxes, while 49% of common people avoid federal taxes since they have no money). The tax issues they do experience result either from legislative amendments or arise by mistake. This is why the rich should always employ expert tax consultants to monitor risks resulting from newly adopted laws and regulations.
This is how many Americans fell into a tax trap even though their money was perfectly legal. Certain laws appear to have retroactive effect and may result in multimillion fines and penalties for those who employ tax schemes that used to be legal some time ago. Those who failed to notice amendments in laws and regulations may face greater fines compared to what they have in their bank accounts.
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Trusts, LLCs, and other asset protection structures for the rich
The rich in the West oftentimes use trusts to protect assets. Trusts are structures that come without legal entity formation. Under common law, they are analogous to funds. Trusts may be used to partially relieve the stress of owning this or that asset. With assets placed in trusts, you are no longer an asset holder, yet can still profit from your capital and save on taxes. You are a beneficiary in this case. To set up a trust, serious effort and lots of preparation are necessary. Multiple factors need to be accounted for so that your assets could be officially separated from you as their ex-holder. You should arrive at a situation where you could still use the above assets without causing any suspicions.
A foreign Limited Liability Company. a.k.a. LLC, is a part of an asset protection structure, regardless of whether it is independent or trust-related. Analogous to LTD, the structure has its own peculiarities. You may either own the company and manage it on your own or hire managers to do it for you. An LLC can be managed by either a sole owner or several partners. With partnership taxation, all profits and losses are recorded in tax returns that individuals owning the LLC in question submit. By combining an LLC with a trust, the rich achieve great asset protection potential and reduce their tax load.
Don’t play with insurance
Various insurance policies are an instrument anyone can use for asset protection purposes, the rich included. Oftentimes, an insurance policy for over USD 10,000,000 is referred to as an umbrella policy. It is used as accident insurance so that you are protected against accidents that may result in material wealth losses:
- car accidents (especially when there are seriously injured victims and/or the victim requires support)
- somebody was injured or suffered harm at your place or premises (like a guest at the reception)
- liability towards house employees
- defamation, libel, and insult
- professional risks
- risks associated with director responsibilities or any other official responsibilities in a company.
Instead of pursuing legal action against the victims or claimants trying to hit you up for money, dare use insurance. A simple and transparent instrument, it comes with relatively low increases in insurance payments and premiums.
Earning money is half the battle
The rich know only too well that there are 2 ways to make a fortune. To begin with, you can receive an inheritance. The option however is only available to the selected few. The other way is to make money from solving challenges that people face in their everyday life. The wisdom that the rich are well aware of is that the money you earn needs to be shielded from business and life storms. Various asset protection strategies may be employed to not only efficiently achieve the above goal but also multiply the available assets.
The rich seldom achieve prosperity by winning a lottery or purchasing shares. When they invest in real estate, shares, or companies, they are rich already. For the rich, investments mean risk diversification and extra profits. This is what differentiates the rich from all other people.
Asset protection often means more work than just making a fortune. The process needs to be monitored closely and not left unattended. Otherwise, other people may use your wealth and assets, regardless of whether these are thieves or the government.
You are free to use multiple instruments for efficient asset protection. Sitting on moneybags waiting till something good happens is often a recipe for disaster. while taking active steps for asset protection and growing your income looks rather wise. In the long run, you will reap great benefits with the above strategy compared to any other approaches.
Protecting your assets instead of hiding them is the current reality. In the times of the Internet, locating a person, their company, and accounts is a tea party. With a reliable duly structured system, your assets will enjoy bulletproof protection under any circumstances and no one will be able to take them from you.
The International Wealth team is here to assist you with asset protection and maintenance. At International Wealth, we will provide you with detailed industry information and offer you the high-quality services you require. Our pros and consultants will advise you on opening foreign bank accounts, incorporating LLCs abroad, setting up trusts, and keeping offshore company accounts. All it takes to book a free initial consultation with our experts and secure reliable asset protection is sending a message to email@example.com. For years to come, your offspring will be thankful for reasonable prudence and common sense.