Monday, May 14, 2012

Private Trust For Tax Free Investing Analyzed - Why a Charitable Foundation is Superior

Private Trust Services claim they can set up a very inexpensive, legally sound, and very specially designed tax-free private trust for their clients. However, the strategy of a superior solution is talked about in the last six paragraphs below. If you do not have time to read the whole article then go there now. But lets first define what a P.T. (private trust) is before we look at their trust in detail and before we decide on its legality for tax free investing and compare it with the charitable foundation strategy at the end of the article.
Before going any further we need to make the definition of a private trust clear: People who are looking for this kind of structure are looking for a legal way to keep their onshore or offshore assets private and hidden from those who would like to take them in some way. They are also looking for a legal way to gain tax free investing until something is paid out to them. Some would disagree with this complete definition, but if you get into the minds of most people who are looking, you would agree it is sound.
But we found that most trust services cater to the wealthy and so we looked high and low for an offshore services provider that would help anyone no matter how much money they have. If you are familiar with other private financial services you know that they charge very very high fees to set up legal structures for their clients. But this service provider charges low fees to make a private trust available to anyone for tax free investing. We decided to do our case study using P.T. Services to do a critique of the soundness of the private trust concept since everything about them is very good.
Private Trust Services - their strategies critiqued
Private Trust Services offer a FREE and unique banking and investment system for tax-free investing and compounding.
You may be thinking to yourself: "Well, my country has made tax-free investing via private trusts virtually impossible with all of their rules and regulations. It is impossible to have one of these since the tax authorities rule they are a sham."
And these days for most trusts this is true! However with their special structure, you are neither the trustee, settlor, creator, protector, or beneficiary of the tax-free private trust. All you have is a contractual consulting agreement with the trustee. But when you are paid for your consulting or research services then you may have taxes to pay depending on your residency and citizenship. It is ultimately up to you.
Through the contractual consulting agreement you can make tax free investment and other recommendations. Furthermore, this tax-free private trust can reimburse you for the expenses generated by looking after its affairs, including lodging, food, travel, and transportation etc.
The private trust is domiciled in a bullet-proof jurisdiction, and thus enjoys the anonymity and other protections this jurisdiction guarantees. Your name will not show up on any public record, and the trust enjoys the protection of the strong courts AND the best trust laws in the world for asset protection and privacy. If this jurisdiction ever capitulates to freedom robbing global powers, then the trustees can move the trust to another jurisdiction that is bullet-proof.
AGAIN, these private trusts are not recorded at all, and are totally private which helps insure that your desired goals are accomplished. Again, I am just reporting the claims of those who set up these trusts.
The private trust is started with property of nominal value, in accordance with the trust instrument. Subsequent funding with trustee approval can be done by anyone via gifts, loans, or other arrangements. It is NOT required that transfers of cash or other assets (at fair or less than fair market value) to these structures be reported. This feature assures your privacy and asset protection also.
The assets of a private trust can be invested in total privacy into the numerous investment opportunities available to companies and individuals. Any investment returns can compound completely tax-free, allowing a significantly greater rate of growth than if the returns were taxed. The time-frame in which sizable sums are able to be generated is thus significantly compressed.
They claim the legal foundations of their services are exceptionally sound, but their effectiveness in providing tax freedom, asset protection and other benefits depends critically on the conduct of all parties involved with this private trust. They claim it is the way they appoint the special beneficiary that allows for the tax free investment compounding and legal non-reporting of asset transfers that distinguishes their trusts.
They also steer clear of the so called "foreign grantor trust" option, which allows a foreign attorney to act as a grantor on behalf of the client. This is an erroneous definition of the term foreign grantor trust and also a sham by the very definitions given in the US tax code and would be ignored by the IRS for U.S. clients -- an attorney acting on your behalf is the same as you taking an action yourself. Such does not remove the reporting requirements of the structure for US citizens. This may be true for the citizens of other countries also. They claim that their private trust is not like this at all and you should steer clear of the hucksters who promote the other kind of defective structures.
Case Study Reveals Grave Weakness in the Private Trust:
So, is their private trust legal? The one Achilles heel in this whole thing is that each and every trust that is ordered is set up for each and every client that orders one. So, the trust is actually an alter ego of the client and the set up is tailor made so the client can avoid paying taxes. This is how most tax authorities would view the establishment of this kind of trust. It would be labeled a sham for attempted tax free investing and the person could get big fines or even jail time.
Charitable Foundation Strategy: Why it is legal and Superior
In our opinion, a bullet proof tax freedom strategy would involve ONE charitable foundation that has been set up several years or more prior to a charitable donor approaching it. This ONE charitable foundation is involved with contributing to worthy programs that the donor can truly see value in. Therefore, the donor gives a substantial amount of money to the foundation and then afterward is asked by the foundation council if they would like to manage the amount they contributed minus a fee for processing their contribution. The donor would then become a contractual employee.
They as a contractual employee would agree to set up a very private foreign llc (foreign limited liability company) or an ibc (international business company) in a private jurisdiction for the owner, manager, and member which is the charitable foundation. A bank account will be opened and the money is then transferred from the charitable foundation to the bank account of the offshore LLC or IBC. From that bank account money is sent to various investment accounts for tax free investing or wherever the donor employee directs it to go. If the contractual employee is a good manager then the onshore or offshore assets will grow in value. The investment accounts do not need to be offshore. They can be onshore also.
The contractual employee of the foreign llc or ibc which is owned by the charitable foundation has a contractual consulting agreement with the charitable foundation and with the foreign llc or ibc he or she is an employee of. The employee may be granted tax free loans from the foundation council. Or, the foundation council can pay the donor employee a salary for the work as investment adviser of the assets they contributed to the foundation.
Through the contractual consulting agreement the foreign llc or ibc employee can make tax free investment choices and make other recommendations to the council for the benefit of both the foundation and the llc or ibc he or she is working for. Furthermore, this charitable foundation can reimburse this donor employee for the expenses generated by looking after the affairs of the offshore llc or ibc, including lodging, food, travel, and transportation etc. and this could be done through loans or a salary.
Critique of the Private Trust Versus the Charitable Foundation
How is this charitable foundation and foreign LLC or IBC arrangement better than the strategies of Private Trust Services? Well, one big reason it is better is that the charitable foundation was not set up for the donor, but has been established years prior to the llc or ibc that is set up for the management of the money that the donor contributed to the charitable foundation. Other providers will set up a trust or a foundation "for you" and you are supposed to hide the fact that you had anything to do with the foundation or the trust. But after this defective structure has been set up, if your taxing authority probes deep enough, they may label what you did as a sham for tax evasion and rule against you with fines and possibly jail time.
But if you contribute as a donor to a charitable foundation that has been set up years previously, then the record is there right on the internet and in legal paperwork, and you have something in your defense should the issue ever be raised. So you can see why this arrangement is better than a private trust and provides bullet proof asset protection, tax free investing, compounding and income for the charitable foundation and also employee benefits for the lucky donor who made a contribution to the charitable foundation and afterward discovered this little known tool and one of the only legal loopholes available for tax freedom.
Our case study of Private Trust Services revealed them to have a very good product in all ways but one: It has grave legal holes in the area of tax free investing which they claim a client can have with their service in setting up a trust for the client. This is to be compared to the suggested strategy as given directly above which proceeds from our expertise in knowing that a charitable foundation structure, which was established years previously and which a donor gives to, can be financially beneficial for the donor as described above.
James Bauman Ph.D. has been involved with the offshore world, banking, and asset protection for about 12 years now. During that time he has gained an education in offshore banking and high yield return investing and has learned of an offshore bank where depositors regularly make 50% to 100% high yield return on their money per year. Out of the experience he has gained over the years he developed the offshore banking and asset protection business FREEDOM OFFSHORE SERVICES. You can find out more about how to contribute to a charitable foundation and how you can become a paid contractual employee of the foundation so you can insure that the money you donated to the foundation is invested properly by contacting James Bauman at the email address found on this web site: Also, you can learn more about how to get a private foreign LLC here complete with 8 offshore bank account options, 6 offshore brokerage account options, and 4 precious metals account options. Plus we include a FREE list of high performing alternative investments in every package: Now, how do you know we are real? If you want a reference for us then we can give you someone to contact who will confirm our integrity. We hope to serve you not only in a way that saves you money, but by giving you quality service also. May your experience in the world of offshore banking and asset protection always be a pleasant one with our help.