Real Estate Developers Synopsis: Discusses the need of real estate developers for asset protection planning, and possible solutions.
Corporate Directors Synopsis: Discusses the need of corporate directors and officers for asset protection planning, and possible solutions.
Business Owners Synopsis: Discusses the need of typical business owners for asset protection planning, and possible solutions.
Physicians Synopsis: Discusses that physicians are typically targets of promoters of sham asset protection schemes, the need of physicians for asset protection planning, and possible solutions.
Holistic Planning Synopsis: Discusses the need for all financial, tax, succession, and asset protection planning that is done for a client to be tightly integrated and mutually supportive.
Remediation and the Planning Process Synopsis: Discusses our process for fixing defective asset protection structures and for creating new plans on a go-forward basis.
Some Final Words Synopsis: A short summary of our main concepts, and references to our primary supportive websites.
Corporate Strategies Synopsis: Describes various complex corporate strategies that may be of use in certain debtor-creditor situations.
Definition: Recapitalization Strategy -- A method of increasing the capital base of an entity under creditor attack by contributing a valuable but illiquid asset to the entity.
Definition: Dilution Strategy -- A method of decreasing a creditor's share or interest in an entity by issuing additional shares or interests to non-creditor shareholders or members.
Definition: Migration Strategy -- A method of transferring assets by repeated sales of the assets to third-parties before a final sale to the target purchaser.
Redemption Synopsis: Describes the basics of the Redemption Strategy.
Definition: Redemption Strategy -- A method of containing liabilities by an intermediate sale to a party in a debtor-haven.
Definition: Devaluation Strategy -- A method of setting a low value for an asset by repeated sales to third-parties at successively lower prices, and which may include dissembling an asset with the idea of later reassembling it with the target purchaser.
Backwardization Synopsis: Describes the basics of the Backwardization Strategy.
Definition: Backwardization Strategy -- A method for creating an apparent high sale value to defeat fraudulent transfer purposes, with a later reduction in price when the limitations period has passed.
Structured Financial Products Synopsis: Describes potential uses of Structured Financial Products in the debtor-creditor context.
Definition: Structured Financial Product -- A financial product created to serve a transaction-specific purpose.
Definition: Replication Strategy -- A complicated strategy for transferring wealth involving mirrored option arrangements and controlled counterparties, and based on particular future assumptions of market volatility.
Definition: Zero-Coupon Bond -- Typically, a bond that has been stripped of its interest coupons so that only a single lump-sum payment is made at maturity.
Introduction Definition: Captive Insurance Company ("Captive") -- Slang for an insurance company used predominantly to underwrite the business risk of other subsidiaries of the parent company or owner. The term "captive" is not used in any insurance statutes or in the Internal Revenue Code, but is rather a practice term used to describe an insurance company fulfilling the described role.
Insurance Company Economics Synopsis: Discusses why insurance companies are created, and the basics of captive insurance companies.
Captives and Risk Management Synopsis: Discusses captives as tools for managing various identifiable risks of the owner's business, and to take advantage of pricing inefficiencies in commercially-available insurance.
Definition: Closely Held Insurance Company (CHIC) -- A privately-held insurance company that is typically owned either by the owner's children or an irrevocable trust formed for the owner's children, to provide additional tax and succession benefits in addition to those of the captive arrangement.
Definition: Offshore Private Placement Variable Universal Life Insurance (OPPVULI or more commonly "Offshore PPLI") -- A variable universal life insurance policy that is offered by a foreign insurance company on an private placement basis, and which is highly customized for the specific needs of the policyholder.
Installment Sales and Annuities Synopsis: Discusses the asset protection advantages of installment sales and annuities under certain state's statutory creditor exemptions, and the difficulties of creditors in garnishing the sale proceeds in other states.
Definition: Self-Canceling Installment Note (SCIN) -- A method of selling an asset where the buyer provides a promissory note to the seller with a fixed payment period, but which note and obligation to pay the seller is canceled if the seller dies.
Private Annuity Synopsis: Describes private annuities, their operation, their tax treatment, and their asset protection benefits.
Definition: Private Annuity -- A method of selling an asset whereby the seller (obligee) sells the asset to the buyer (obligor) in exchange for the buyer agreeing to make certain payments to the seller until the seller dies. To qualify as a Private Annuity for U.S. tax purposes, in addition to other requirements, the buyer (obligor) must not be in the business of issuing annuities.
Definition: Offshore Private Placement Deferred Variable Annuity (OPPDVA or more commonly "Swiss Annuity") -- A variable annuity with annuity payments initially deferred that is offered by a foreign insurance company on a private placement basis, and which are typically customized to the specific needs of the policyholder.
Chapter 22: Management Companies, Leasing Companies and ESOPs
Management Company Structures Synopsis: Discusses the use of Management Company structures to absorb corporate liability and provide control functions.
Definition: Management Company -- A company formed primarily to act as a manager of another entity, distance control of the other entity from the owners, and absorb liabilities arising from the management function.
Offshore Management Companies Synopsis: Discusses the uses of Management Companies formed in debtor haven jurisdictions.
Definition: Offshore Management Company -- A company formed in a foreign debtor having jurisdiction primarily to act as a manager of another entity, distance control of the other entity from the owners, and absorb liabilities arising from the management function.
Leasing Companies Synopsis: Discusses the uses of Leasing Companies for risk management.
Definition: Leasing Company -- A company used to hire employees and lend those to the underlying business, to reduce profits in a liability-producing company or to shift employment liabilities away from a valuable business.
ESOPs Synopsis: Discusses the use of ESOPs to further encapsulate liability in the underlying entity.
Definition: Employee Stock Ownership Plan (ESOP) -- A plan formed to benefit and incentivize the employees of a business, and which can qualify for advantageous tax treatment.
Synopsis: Discusses the use of non-traditional entities as it relates to debtor-creditor planning.
Definition: Hybrid Entity -- An entity that does not have a classic form, such as a corporation or partnership, but instead exists as a combination of entities, such as a combination of trust and corporation. Even as late as the early 1990s the LLC was considered to be a hybrid of a corporation and a partnership, for example, but it has since become a classic form of business entity.
Synopsis: Discusses the predominant offshore jurisdictions that have limited liability company statutes.
Definition: Offshore Limited Liability Company (OLLC) -- A limited liability company formed pursuant to the laws of a foreign debtor haven jurisdiction, such as the Nevis LLC.
Synopsis: Discusses probably hurdles that creditors would face in attacking OLLC structures, and the use of OLLCs in conjunction with foreign trusts and domestic ocmpanies.
Synopsis: Discusses the basics and operations of a United Kingdom Limited Liability Partnership, and its potential asset protection advantages from the U.S. viewpoint.
Definition: U.K. Limited Partnership (UKLP) -- A limited partnership formed under the United Kingdom's Partnership Act of 1907.
Definition: U.K. Limited Liability Partnership (UKLLP) -- A limited liability partnership formed under the United Kingdom's Limited Liability Partnership Act of 2000.
Definition: Charging Order -- An order issued by a court to a judgment creditor which essentially compels an entity of which the debtor is a partner or member to direct to the creditor until the judgment is satisfied any distributions that would otherwise have been made to the debtor.
Foreclosure Synopsis: Discusses the possibility and ramifications of a creditor successfully persuading a court to convert the charging order into a foreclosure of the interest, so that the creditor has fully the partnership or membership rights of the debtor.
The Delaware Series LLC Synopsis: Discusses the basics and operations of the Delaware Series LLC.
Definition: Series LLC (a/k/a "Cell LLC") -- A form of LLC allowed by the statutes of only a few jurisdictions (most popularly Delaware) that allow membership interests to be divided into categories or "cells" with liability for particular actions of the LLC theoretically limited to the capital contributed to the particular series in which the operations of the LLC occurred.
Definition: Charging order protected entities (COPEs) -- Entities that restrict the remedies of a creditor of an owner to a "charging order" that entitles the creditor to distributions made in respect of that ownership interest, but do not allow -- at least initially -- the creditor to actually take the ownership interest. From an asset protection standpoint, the advantage is obvious: The creditor has no immediate means of getting at the assets in the entity even though the creditor holds a judgment against one of the owners.
Extensive information relating to charging orders, including excerpts from the uniform partnership and LLC acts, and a collection of opinions concerning charging order protection, is collected at http://www.assetprotectionbook.com/charging_orders_intro.htm
Synopsis: Discusses the basics of general partnerships and limited partnerships, and their U.S. tax treatment.
Definition: Partnership -- A partnership is an association of two or more persons carrying on a business venture as co-owners for profit. Partnerships come in two basic varieties: general and limited.
Definition: General Partnership (GP) -- A partnership that consist only of general partners, all of who are jointly liable for the liabilities of the partnership, and all of whom have management rights to the partnership. In asset protection planning, general partnerships are usually to be avoided.
Definition: Limited Partnership (LP) -- A partnership that consist of general partners who are jointly liable for the liabilities of the partnership and who have management rights to the partnership, and limited partners whose liability is limited to their contributions to the partnership and who have no management rights, i.e., general partners are true partners and limited partners are mere passive investors.
Synopsis: Discusses the basic elements and operations of limited liability companies.
Definition: Limited Liability Company (LLC) -- A hybrid type of legal entity that combines certain traits of corporations with certain other traits of partnerships and other noncorporate legal entities. LLCs allow their owners (called members) to have the best of all worlds: pass-through tax treatment like a partnership, limited liability like a corporation, unheralded flexibility in ownership and management structure, and charging order protection.
Definition: Member-Managed LLC (MgrLLC) -- An LLC that allows the members to have management rights, very similar in operation to a general partnership, but with some degree of limited liability for the members.
Definition: Manager-Managed LLC (MemLLC) -- An LLC that provides for one or more designated managers to have management rights, and with the members having no management rights. With a Member Managed LLC, the members are in a role very similar to limited partners.
Definition: Single-Member LLC (SMLLC) -- An LLC with but one member, who is typically also the manager, formed in a jurisdiction that allows a single member. Because they are relatively untested, the liability protections of SMLLCs are mostly theoretical, but should be similar to that of a sole-shareholder corporation.
Synopsis: Discussion of the history of the LLC in Europe and Latin America, the adoption by Wyoming of the first LLC statute, and the Check-the-Box Regulations.
Definition: Check-the-Box Regulations -- Regulations promulgated by the Secretary of the Treasury in 1996 which allow an LLC simply to choose whether to be taxed as a partnership or a corporation.
Synopsis: Discussion of the tax treatment of LLCs as corporations, partnerships, or disregarded entities.
Definition: Disregarded Entity -- An entity for which the tax consequences are attributed to its owner as if it did not exist. Note that this does not mean that the entity is "tax exempt", which is a common and false claim made by tax scam artists.
Synopsis: Discusses the uses of LLC for estate planning, and their similarities for federal gift and estate tax planning purposes to limited partnerships.
Synopsis: Discusses the basic elements and operation of International Business Companies.
Definition: International Business Company -- A corporation authorized by the statutes of a debtor haven which (with the exception of banking, of course) can only conduct business with persons or entities outside the debtor haven, and not with the locals. In other words, it is a company incorporated in a debtor haven but required to be used elsewhere.
Definition: Nominees, Nominee Shareholders, Nominee Directors, Nominee Officers -- These are persons who act on behalf of the true shareholders, directors, or officers of the company, and who typically have executed an undated resignation which allows their replacement at any time.
Synopsis: Discusses the use and severe tax disadvantages of bearer share structures.
Definition: Bearer Shares -- Shares which are owned by and give all their rights to the holder (the "bearer"), which ownership is not recorded on the company's books. Because of their primary uses for money laundering and tax evasion, nearly all jurisdictions have abolished bearer shares in favor of registered shares, the ownership of which are recorded on the company's books so that physical issuance of the shares is in many ways superfluous.
Additional information on Bearer Shares is available at http://www.quatloos.com/bearer_shares.htm and is a "must read" for anybody contemplating the use of bearer share structures.
Synopsis: Describes several forms of alternative share ownership, such as companies limited by guarantee and hybrid companies.
Definition: Companies Limited by Guarantee -- A company that has not been capitalized by cash, but rather by the promises of the shareholders to provide a specified amount of cash if required by the company to satisfy liabilities. A similar example is the traditional Lloyds of London syndicates were essentially companies that were capitalized by the unlimited guarantees of their members (the "Names") to stand behind the syndicates' underwritings.
Synopsis: Gives an overview of U.S. federal tax treatment of foreign companies owned or control by U.S. persons.
Definition: Controlled Foreign Corporation (CFC) -- In very general terms, the U.S. Internal Revenue Code term used to describe a foreign corporation that is owned in substantial part or controlled by U.S. persons. For example, an International Business Company formed in the Cayman Islands and owned and controlled in majority party by three U.S. shareholders would likely be treated as a CFC. A CFC has very extensive reporting requirements, and the failure to disclose the existence, operation or revenues of a CFC may be a felony in some instances.
Definition: Registered Agent -- An agent for the corporation who is domiciled in the state of incorporation and is available to receive service-of-process on behalf of the corporation.
Definition: Bankruptcy Remote Entity (BRE) -- A business entity structured so that in the event of a bankruptcy the liabilities created by the entity do not pass to any other entities or assets of the owner.
Choosing the State or Incorporation Synopsis: Discusses the relative importance of choosing the state of incorporation, and the concerns where the corporation will hold real state in another state.
Rights of Creditors Synopsis: Discusses forum-shopping strategies by creditors to get around the corporate protections.
Definition: Professional Corporation (PC) -- A form of corporation that can have only certain licensed professionals as shareholders, and which typically does not protect the professional shareholder from lawsuits brought alleging their professional negligence.
Registration of Foreign Corporation Synopsis: Discusses the necessity of registering a corporation in a particular state when it has been incorporated elsewhere.
Nevada Corporations Synopsis: Discusses Nevada corporations, and how Nevada corporations are shamelessly marketed by promoters as being much more effective than they really are.
Definition: Nevada Corporation -- A corporation formed in Nevada pursuant to Nevada's corporation act, which provides debtors some advantages not typically found in the corporation laws of other states. Unfortunately, the advantages are usually grossly overstated by promoters who arrange structured based on Nevada corporations that have very serious flaws from the asset protection perspective. Nevada corporations are usually the primary part of the "Asset Protection Consultants" scam that is run from Nevada.
Definition: Corporation -- A fictitious legal entity authorized by statute, created by the filing of Articles of Incorporation with the relevant jurisdiction, and capitalized by issuing shares of stock. A corporation can provide protection to the shareholders against the liabilities created by the corporation in excess of the corporation's capital.
Definition: Poison Pill -- A defensive arrangement whereby if a hostile party attempts to seize control of the corporation by accumulating stock, additional stock is issued so that all shares are diluted, thus increasing the costs of the hostile party's acquisition.
Definition: Golden Parachute -- A defensive arrangement whereby if a hostile party attempts to seize control of the corporation by changing the corporation's officers, the officers are given large severance benefits, thus increasing the costs to the hostile party.
Synopsis: Discusses minimal requirements for treating a corporation as a separate entity so that a court would respect it as such.
Definition: Corporate Shell (a/k/a Corporate Veil) -- Slang for the liability limiting advantage of a corporation, which limits the liability of shareholders to the equity they have contributed.
Synopsis: Discusses the corporate veil and circumstances where it might be set aside, and the alternative of debt financing.
Definition: Piercing the Corporate Veil -- Where a court disregards the legal fiction of the corporation and imposes liability against the shareholders.
Synopsis: Discusses the directors' and officers' liability and the use of holding companies and complex attribution arrangements to insulate the client from such liabilities.
Definition: Directors' and Officers' Liability (a/k/a D&O Liability) -- The direct, personal liability of directors' and officers' of corporations for their acts that adversely affect the corporation (and thus giving rise to a shareholders' derivative action) and for the corporation's acts which adversely affect others (as in the case of employment discrimination claims).
Synopsis: Discusses the advantages of debt financing of corporations over equity financing, and discusses some methods of debt financing such as convertible bonds.
Definition: Debt Financing -- The financing of an entity by borrowing or by issuing bonds or promissory notes, etc. From an asset protection standpoint, the advantage of debt financing to equity financing is that in the event of a bankruptcy the debtholders should have priority over general creditors of the entity in the distribution of the entity's assets.
Synopsis: Describes the function of the Trust Protector.
Definition: Trust Protector -- A person or entity who has certain powers under the trust document, usually to discharge (but not appoint) trustees, and to veto (but not make) certain key decisions of the trustees.
Synopsis: Discusses the use of Private Trust Company arrangements to act as the trustee of FAPTs.
Definition: Private Trust Company (PTC) -- A trust company directly or indirectly owned or controlled by the settlor of a trust. The concept is to give the appearance to third parties that the trust has an independent trustee.
Synopsis: Discusses how FAPTs and FLPs have been routinely combined to form “Family Fortresses”.
Definition: Combo Platter -- A widely-marketed cookie-cutter asset protection structure involving an FLP with the limited partnership interests owned by a FAPT. The strategy is that if a creditor attacks the FLP, the FLP is liquidated into the FAPT and all assets moved offshore.
Synopsis: Discusses the planning boom for offshore trusts occurring from the mid-1990s until the Anderson and Lawrence cases were decided in 1999 and 2000.
Synopsis: Discusses the problem of the settlor giving up control to a foreign trustee, and some of the disingenuous schemes created by offshore planners to attempt to circumvent this problem.
Synopsis: Discusses the downsides of FAPTs, their marketing excesses, the Doctrine of Disbelief, and why FAPTs are unlikely to ever find acceptance with U.S. judges.
Definition: Doctrine of Disbelief -- This doctrine holds that since no sane person would transfer all of their assets to a foreign trustee and risk the assets disappearing, it then stands to reason that they still retain some hidden control over the assets whether they admit to such control or not.
