October 2004 Archives

Many people believe that having more than one citizenship or passport is illegal, or if not illegal, somehow "unpatriotic." That's simply untrue. Public ignorance about this is not surprising. The average person only encounters this issue when reading an international espionage thriller, watching a James Bond movie, or reading reports in the media linking use of second passports to the exploits of money launderers, drug runners, arms traffickers or other undesirables. While some few persons may use second passports for nefarious purposes, many thousands of ordinary and well intentioned individuals benefit greatly from having alternative citizenship and passports. Indeed, holding dual nationality can ensure survival in a dangerous and erratic world. What follows is a discussion of some of the major reasons for obtaining a second citizenship and passport.

On June 12, 1995, the National Assembly of Panama adopted Law No.25 by which Private Foundations are created and regulated. The idea behind the drafting of this new law arose from the popularity and well deserved good reputation of the Liechtenstein Family (and Mixed) Foundations in certain parts of Europe , specially in Switzerland . The law governing foundations is set out in the section "Corporate Bodies", part two, title 5, of the Liechtenstein Law on Persons and Companies (PGR) of January 20, 1926, LGBI, No.4, 1926.

The enactment of this law by the Republic of Panama is one of the latest steps taken by the Panamanian Government and the legal professional community to ensure the leading role of the country as an Offshore Service Center.

Though very similar in many respects to the Family or Mixed Foundation of Liechtenstein ("Stiftung"), the Panamanian Private Foundation, presents some essential differences and we believe "improvements" that we will try to indicate throughout this issue. The group of lawyers and financial advisors behind the drafting of the Panamanian project, took also into consideration some of the most recent updates of the legislation on trusts of some Anglo-Saxon jurisdictions mainly from the Caribbean as well as Jersey and Guernsey in order to prepare a most flexible and modern legal instrument.

A trust may be created for any purpose that is not illegal or void as against public policy. A trust can hold title to and invest in real estate, cash, stocks, bonds, negotiable instruments and personal property. Trusts can provide care for minor children or the elderly; or pay medical, educational or other expenses. A trust can provide financial support in an emergency, for retirement, during marriage or divorce or even carry out premarital agreements.

To the uninformed, the trust process may seem complex and difficult, but in fact a trust is one of the most flexible yet efficient legal mechanisms recognized by law. Compared to the alternatives, it can provide superior asset protection and can assure your bounty will be distributed exactly as you see fit.

A Long History

One reason the trust is such a secure asset protection vehicle is because it has been used, refined and accepted over many centuries. Trusts developed under the English common law, first arising from cases decided in equity courts and later enhanced by trust statutes. Today the trust is a legal concept universally known and recognized in the United Kingdom, all British Commonwealth nations and the United States.

By comparison, the other major legal system used among nations, known as the civil law system, originated in the Roman empire and later was modernized by the French Code Napoleon. Civil law is used throughout continental Europe and its former colonies. It is derived from statutes with court precedents playing a more limited role. However, because the trust is so useful some civil law countries have adopted laws that authorize the equivalent of common law trusts, but within a civil law framework.

Most major countries impose taxes on the worldwide income of their permanent residents. Thus, you must report earnings from an offshore bank, securities or other financial account as you would any other income on your tax return.

Some countries additionally require you to report the existence of offshore accounts; notably, the United States and Canada.

USA. US citizens living anywhere in the world and all other permanent residents of the United States are required to acknowledge their signature or other authority over foreign bank, securities or other financial accounts on Schedule B of Form 1040. Such authority must also be acknowledged in a separate filing of Treasury Form TD F 90-22.1. Persons with an account or accounts with an aggregate valued larger than US$10,000 need these disclosures.

Canada. Canadian permanent residents with foreign holdings with a value higher than C$100,000 are required to complete Revenue Canada's "Foreign Income Verification Statement." It requires classification of foreign investments into six categories: (1) funds held outside Canada; (2) shares of non-resident corporations; (3) indebtedness owed by non-residents; (4) interests in non-resident trusts; (5) real property outside Canada; and (6) other property outside Canada. Residents must also list the total income reported on their tax return in the year from these assets.

Privacy. Anyone can hire a private investigator and find your domestic assets, including bank accounts, -or do it themselves on the Internet. But offshore investments are much more difficult to find. While you are required to disclose income from the account to your domestic tax authorities, these records aren't ordinarily available to creditors.

Asset protection. If you don't look like you have assets, you're less likely to be sued. While an offshore account won't protect you if a court orders you to repatriate your assets, these assets are "off the radar screen" which provides a significant amount of practical asset protection. Moreover, an offshore account can be a gateway to other offshore investments that provide much greater asset protection.

Trusts are the choice when planning asset protection. Both domestic and offshore strategies are useful in protecting wealth.

7 Essentials for a good Asset Protection Plan

1. The plan must protect your entire wealth. If selected assets are not included in the plan they remain exposed. A good comprehensive plan should include future assets such as an inheritance, proceeds from copyrights, patents, and contracts. It should also afford protection to those who inherit your assets.

Offshore Questions:

What is meant by the term Offshore Haven?"

Offshore Haven, money haven, or offshore financial centers are the terms used for any countries with a friendly financial climate towards investors. These can be any foreign jurisdiction where your assets or income enjoy 1. more protection 2. are more private 3. have fewer taxes. In an offshore financial center you can conduct business, invest, raise capital or achieve other financial or wealth preservation objectives and goals.

As we move closer to a global economy, there is a trend among smaller, less economically developed countries to follow Switzerland's lead to legislate measures to attract foreign investment money to their economy. As a result new financial opportunities are opening to those who are willing to take advantage of them.

The global economy is experiencing exponential growth because of the Internet. The ease and fluidness of account access through the Internet has made it possible to seamlessly bank both and invest domestically and offshore: move funds, check balances, write e-checks, make payments, transfer money between accounts, and purchase investment options. Offshore banking is now competing successfully with domestic financial institutions.

By Art Buchwald -

Hurricane Ivan ripped through the Cayman Islands at 150 miles an hour. I saw it on television with Bootstrap McDoogle.

"No, no, no," he said, sticking his head into his hands.

"No one likes hurricanes," I told him, "but it's an act of God."

He said, "My money is in an offshore bank account there and now it's floating out to sea."

By Matt Marshall -

Venture capitalists across Silicon Valley are falling for China.

Tom Shields, partner at the Woodside Fund, sticks a teach-yourself-Mandarin CD into his car player as he heads to his office in Redwood Shores.

Down the Peninsula, Joseph Tzeng, partner at Crystal Ventures, packs for another trip to Beijing. He's teaching himself to skip breakfast and stay up late, so he can hang with Chinese entrepreneurs who pitch to him at a Beijing pub until 3 a.m. over Chinese Maotai nightcaps.