Yesterday we had a client inquire about offshore asset protection planning and the PT lifestyle. He didn’t understand why anyone would want or need a 2nd passport, a Dominican company (IBC), or offshore bank account.
Understandably, this is a common concern for many people, and you may not know the reason for establishing this type of financial and life planning. Clearly, the majority of you reading this understand the need or else you probably wouldn’t be reading my newsletter, but many of you are still reluctant to pull the trigger.
There are many reasons one may consider this type of offshore asset protection planning, but ultimately they all come down to privacy and wealth preservation.
Recently we had a call from a guy; let’s call him Victor, who had been through a nasty divorce. Like many people over the past few years, Victor had been significantly impacted by the current economic situation in the US.
Before 2008, Victor earned a fairly large income well into the mid 6 figures. He had a nice, big house, expensive cars, country club membership, and all the other trappings of wealth that keep you competitive with your neighbors. He also had a wife; let’s call her Svetlana, who very much enjoyed the expensive lifestyle.
Fast forward to 2011. Victor’s business took a dramatic hit (real estate), as did his income. He had to liquidate many of these symbols of wealth and cut back expenses. He had to get a job, but now earns around $80,000 per year. Luckily, Victor was wise enough to save some money during the boom times as well as the cash he got from selling his expensive house and toys.
Unfortunately, Svetlana was just not willing to accept this reduced standard of living. She was very unhappy now that she was unable to have expensive 3 martini lunches with her gal pals, tennis lessons, or free-for-all shopping trips on a weekly basis.
To cut to the chase, Svetlana left Victor and took him to court for alimony support. In court, the judge awarded Svetlana 50% of all marital assets, which Victor was fine with. But the kicker was when the judge ordered Victor to pay $8000 per month in alimony to poor, little Svetlana.
Remember, Victor didn’t even earn that much. Regardless, the judge didn’t believe Victor’s hard case story and somehow figured he could find a way to earn the difference. Now he is in a difficult situation, both from a financial and personal perspective.
Victor cannot afford to pay, but if he doesn’t he risks going to jail. His assets will be immediately frozen and his ability to work will be cut off thus digging him even deeper in the hole with his ex-wife.
Victor does have a few options here, but unfortunately his situation would have been much better had he taken the precautions before his assets and his freedom were at risk.
If Victor had done some very basic asset protection planning like setting up a Dominican company (IBC) and offshore bank account, he could have moved his liquid assets outside of the jurisdiction of the US court system. This would have given him a financial ‘escape hatch’ and prevented the judge from freezing his assets.
Keep in mind, offshore jurisdictions like Dominican Republic respect your privacy and do not recognize foreign judgments except in very rare, extreme cases. In other words, your Dominican company (IBC) and offshore bank account would be completely safe and outside the reach of poor, little Svetlana.
Another step Victor could have taken was to establish residency and/or citizenship in a foreign country which would have given him the ability to leave the US for the new country of residence and potentially get a passport.
While this may seem extreme for someone like Victor during his happily married, and much wealthier years, there are also various other benefits for establishing residency and/or citizenship in another country aside from the ability to run and hide from a future, potentially vicious ex-wife.
Please keep in mind, the illustration of Victor’s dire situation merely as an example of one reason why someone may want to seriously consider offshore asset protection planning and foreign residency and/or citizenship.
Write us at
BankerTrust@gmail.com for information on securing an IBC, offshore bank account and 2nd passport.
