Florida Asset Protection Blog

Finding An Offshore Bank For Your Asset Protection Plan

Foreign bank accounts are an integral part of offshore asset protection. Clients who establish limited liability companies or corporations in foreign jurisdictions for asset protection frequent ask where and how their entities can set up a foreign bank account. This past week I visited an executive manager of a well-established offshore trust company that assists asset protection for U.S. citizens. The company serves as manager of foreign LLCs or as trustee of foreign trusts. The manager told me that the offshore banking environment has changed significantly in the past year or two as the IRS has cracked down on banks that have maintained secret bank accounts for U.S. taxpayers.

Because of the IRS tax scrutiny, U.S. clients seeking offshore asset protection are finding it more difficult to open bank accounts. This offshore trust company I met with has always recommended that their clients’ asset protection entities use Swiss banks, not the banks in Caribbean or central America where their offshore asset protection entities have been formed. In the past year or two the better known and largest Swiss banks have made it very difficult for U.S. citizens to maintain bank accounts in their own name or through their offshore asset protection companies. These Swiss banks have become wary of accepting any clients who might bring IRS scrutiny. There are, however, still banking opportunities in Swiss banks for asset protection entities. The person I met with has had success referring his clients to smaller Swiss banks that specialize in private banking relationships. For example, he mentioned that he has had good results with private banks such as Bank Sarasin & Cie, AG and Lombard Odier bank. He mentioned other banks as well that solicit U.S. clients.

I have not had any experience with and cannot recommend any Swiss banks. Each person interested in offshore asset protection must do reasonable due diligence of any bank involved in his asset protection plan. Remember always that offshore banking for asset protection has no income tax advantages, and instead, may require additional tax reporting to the IRS.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Tax Reporting Requirements For Offshore Asset Protection

Many callers and clients express interest in offshore asset protection planning. I have prepared some offshore trusts and many offshore limited liability companies over time. Any type of offshore asset protection is complicated, in part, because of IRS reporting requirements applicable to foreign entities. I suspect there are many people with offshore asset protection entities who don't understand or comply with tax reporting rules. For example, a single member domestic limited liability company is by default a disregarded entity for tax purposes. This means the LLC on the entity level reports nothing to the IRS and is not required to get a separate tax number. The member treats the domestic LLC as a sole proprietorship for tax purposes. A single member foreign LLC established by a U.S. resident must file an election form 8832 to claim disregarded entity status. If it does not file this form timely the LLC may be treated as a C corporation and subject to corporate taxation. In addition, the offshore LLC once electing disregarded status must file information form 8858. Offshore entities taxed as partnership or corporation have different filing requirements.

Most people who create offshore entities cause the entity to maintain a bank account outside the U.S. These people are required to notify the IRS about offshore financial accounts withover $10,000 (aggregated)  by filing an IRS form TDF90-22.1. U.S. taxpayers must disclose all offshore financial accounts for which they have signatory authority, or for which they have control over a third party who has signatory authority, by filing the TDF90-22.1. For example, if you appoint someone to be a manager of your foreign LLC, and the manager maintains a financial account offshore, you must file this tax form. The TDF90-22 form is due on or before June 30^th, and there are no extensions. You can control an offshore account, but you must disclose it to the IRS. Offshore accounts also must be disclosed on your 1040 income tax return. Willful non-compliance is criminal.

If you are engaged in offshore asset protection you must consult with a CPA experienced in international tax or a tax attorney. The tax reporting requirements are one of the reasons I usually try to accomplish asset protection with domestic tools under Florida exemptions before recommending more sophisticated offshore entities.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida        

Nevis LLC Bank Accounts

Several of my clients who formed Nevis LLCs have told me that they have had difficulty opening bank accounts in the name of their LLC. Different banks have different obstacles. Common bank demands include registering the Nevis LLC as a foreign entity with Florida’s Division of Corporations and getting a tax identification number even though the IRS does not recognize a single member LLC for tax purposes. Some other clients told me that they have opened financial accounts for Nevis LLCs through their stock broker and that these financial firms are much more accommodating. I am going to ask other asset protection attorneys for their recommendations of Florida banks who accept Nevis LLC accounts. I will post recommendations at a future time. Bank recommendations from a blog reader will be appreciated.

Thinking About Hiding Assets Overseas?

From time to time people ask me about using asset protection tools to hide assets from creditors or former spouses. Some people believe asset protection tools can be used to hide income from the IRS. My standard response is that asset protection is not asset hiding, and that current technology precludes secrets. To illustrate my point I invite those harboring images of asset secrecy to visit a relative new blog written to help creditors discover hidden assets here and overseas. The blog is called “The Asset Search Blog” edited by Fred Abrams, www.assetsearchblog.com.

Mr. Abrams uses sophisticated methods and his personal contacts to help uncover assets anywhere in the world. Some of his entries debunk common myths such as the absolute secrecy of Swiss bank accounts. Read the blog before you devise schemes to hide assets.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

My Visit To Nevis, WI and Nevis LLCs

I am a proponent of Nevis limited liability companies as an offshore asset protection tool. I find the Nevis LLC to be more practical and more cost efficient than offshore trusts. The challenge in using a Nevis LLC is finding an offshore LLC manager to run the LLC and foreign banks to manage LLC funds. Meridian Trust Company is the best known institutional LLC manager located in Nevis, W.I. This past week I visited Nevis and met with Mr. Ernie Dover who represents Meridian Trust and its related companies in Nevis. Ernie has some advice and recommendations which many people considering offshore planning may find interesting.

Meridian Trust of Nevis, W.I. charges a base annual management fee of $950 USD to serve as an LLC manager. Meridian Trust does not manage money and does not maintain financial accounts for its LLC clients. Its services are limited to serving as foreign LLC manager .

Ernie suggests that clients looking to invest or manage money offshore consider two Swiss banks: Pictet bank and Lombard Odier Darier Hentsch bank. Neither bank has U.S. offices. Ernie had three recommendations of offshore banks for people who want a bank account without asset management: Butterfield bank in Bermuda and Cayman Islands; Royal Bank of Scotland (Bahamas) and First Caribbean Bank which bank Ernie says is a joint venture of Barclays and CIBC bank of Canada.

I have no experience with any of these financial institutions. However, Ernie Dover has been in the Nevis LLC business for many years, and his knowledge of foreign banking warrants respect and consideration for those clients searching for places to hold money offshore. You can check out Meridian Trust Company of Nevis at: http://www.meridiannev.com/

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Swiss Annuities

More and more people have been asking me about using Swiss annuities as a financial asset protection tool. Trust and Estates journal, a respected legal publication, published an article in its March, 2007 issue about Swiss annuities for asset protection. Its the best academic article I have seen on the subject. Swiss annuities are an effective financial tool for offshore asset protection. I scanned a copy of the article which can be downloaded and read in this post. Download Swissannuity.PDF

Credit Card or Debit Card Tied To Offshore Bank Accounts

Most of my knowledge about offshore bank accounts comes from my clients’ experiences. This past week one of my new clients spoke with me about an offshore bank account he had previously established and funded. I asked him how he accesses his money from a bank located in another country. Specifically, I asked whether the bank issued him a debit card which he uses to make payments in the U.S. or whether he uses a credit card tied to his offshore bank account.

The client told me that he uses a credit card to charge his U.S. expenses and that the foreign bank automatically pays the credit card from his checking account. He explained that he cannot use a debit card. The reason is that, according to this client, courts in the U.S. consider a debit card to be a negotiable asset, and a creditor can get an order from a U.S. court either levying on the debit card or permitting the creditor to use the debit card to pay the judgment. The client states that a foreign bank will not block a U.S. court order which forcibly withdraws money with a debtor’s debit card.

I do not know whether the client is accurately explaining the difference between using a debit card and credit card tied to an offshore account. I do recall that the IRS has cracked down on offshore credit cards used to evade reporting income deposited in offshore accounts. Otherwise, I present the information for readers to evaluate for themselves.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Offshore Banking

Often, asset protection clients asked me for recommendations about offshore banking. Many have preferences for banks in Caribbean islands which are reputed offshore asset protection havens. I always tell people that I do not have any first hand experiences with offshore banking, no offshore banking recommendations, nor any advice about how to open offshore bank accounts. I do, however, collect recommendations from other attorneys and my own clients and pass on these reports of other peoples’ experiences.

I find that most people with good offshore banking experiences have maintained accounts in banks within the European Union. No client has ever recommended to me a Caribbean bank; some other attorneys have given me names of banks or trust companies in the Caribbean or in Central America. The most enthusiastic recommendations I have heard in the past year have been about banks in Luxembourg, Liechtenstein, or Switzerland. Clients have suggested that anyone considering an offshore banking relationship travel to the country and meet with more than one bank. I understand that foreign banks do not open accounts by email or internet applications similar to our domestic internet banks. Also, people should investigate offshore banks and meet personally with their bankers in order to feel comfortable about transferring funds overseas. Choosing an offshore bank should be based on educated recommendations and personal due diligence rather than what one hears casually or reads on the internet.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Swiss - Liechtenstein Annuities

I had an interesting discussion with an estate planning attorney about offshore annuities. Swiss annuities are a sophisticated offshore asset planning tool because the Swiss law protects these annuities from foreign creditors, including U.S. judgment creditors. The attorney informed me that the small country of Liechtenstein has annuity laws modeled after Swiss law, and in many ways, offers better asset protection annuities

Apparently, if a U.S. debtor purchases a Swiss annuities he has limited options to direct the investment of money in the annuity. Swiss annuity monies must be managed by Swiss money managers; the client cannot choose an independent fund manager. Liechtenstein laws permit annuity owners to pick anyone they want to manage money invested through the annuity. Additionally, Liechtenstein law provides a one year statute of limitations for fraudulent conveyance which time is shorter than Swiss law.

On the other hand, Liechtenstein charges a 1% transaction fee for the purchase of their annuities. Switzerland waives any transaction fee.

There are few financial professions versed in the purchase of Swiss or Liechtenstein annuities. If you believe foreign annuities are a useful financial tool in your asset protection plan make sure your financial advisor is well-versed in all international annuity options.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Homestead Depends on Timing

Timing is a key element in asset protection as evidenced by this story submitted by a caller last week. . A man owned two adjacent lots. He lived in a house on one lot. The adjoining lot was vacant. He and his family wanted to build their new home on the vacant lot. So, he sold his residence to a third party and used some of the sale proceeds to pay a contractor to begin construction of his new home on his vacant lot. He and his family rented an apartment during construction. Approximately two weeks prior to obtaining a Certificate of Occupancy on the new home and moving in a civil court entered a money judgment against the caller. He asked whether his new home is protected homestead.

I don’t believe this caller has any homestead protection from the judgment. Even though he owns the lot where his new house is being built, the caller is not entitled to homestead protection until he actually resides in the property after a Certificate of Occupancy. His intention to make the new home a homestead does not warrant protection. As soon as the judgment was recorded it became a lien on the home under construction. Moving into the home after the judgment attaches will not clear the judgment. The caller will have homestead protection against future judgments, but his protection will be subject to the judgment recorded before he actually resided in the property as a permanent residence.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida