It’s True: Most Wealthy People Know How to Hide Money

It is often said that most wealthy people know how to hide money, but the reality is it is impossible to hide money since the Foreign Account Tax Compliance Act (FATCA). Nowadays, the rich do not hide their assets. In the past they used special attorney driven instruments such as a funded and managed family trust. Any entity created by an attorney is no longer hidden.

How to Hide Money – In a Legal Manner

In the past many wealthy individuals swore by offshore trusts located in the Caribbean and other jurisdictions where the laws related to corporate finance offered a certain level of secrecy and with the plan to bewilder taxation and law enforcement officials in the United States. Legal opinion about these offshore trusts was negative if the purpose was to avoid tax.

When the only purpose of a legal structure is to avoid taxation the IRS will cut through that entity like a hot knife through soft butter and find the hiding behind.

Protecting Your Assets: How Most Wealthy People Go About It

There is a major difference between hiding money and statutory government regulated, FATCA registered and IRS recognized protection of your assets. An eccentric rich man may choose to bury his cash deep underground and then choose to live the life of a pauper for the purpose of not giving way to any suspicions as to his true net worth.

While that hypothetical situation may seem reasonable to a certain extent because there would be no income to tax, what would happen if this wealthy, yet eccentric, man is subject to a civil liability lawsuit?

[box type=”alert” style=”rounded” border=”full”]In the hypothetical case above, a plaintiff filing a civil lawsuit against an affluent man who likes to bury his riches could persuade an order from the court to investigate the respondent’s finances.[/box]

If the investigation determines that the respondent is indeed the owner of significant cash buried underground, the next step might be a court order directing the rich man to comply with the terms of the ruling in the case or potentially be subject to being thrown in jail for ignoring the judge’s order. If the ruling compels the respondent to pay the plaintiff a million dollars, the wealthy man cannot dodge legal responsibility since the court found him to be the owner of the hidden cash. What if he was not the owner of the money?

Affluent people also know how to hide money in divorce cases; contrary to popular opinion, this does not involve the use of prenuptial agreements. In fact, prenups tend to do more harm than good from a legal point of view under many circumstances. In general, the rich know that hiding money is not clever in a banking and FATCA world of extraordinary fiscal transparency and suspicion.

The rich do not hide their fortunes; they protect them by getting rid of the burden of ownership through instruments like a family trust fund such as the UltraTrust®, which is an irrevocable trust structured in such a way to take responsibility away from rich people while still allowing them to control their property and finances but will never allow them to personally benefit nor to touch that property or finances ever again. If it is not yours and you can never get it then it does not actually need to be hidden at all. A harsh reality!

In essence, wealthy persons who use a family trust like the UltraTrust® for asset protection cannot lose their fortunes because they do not legally own them; however, this stops them from being able to enjoy their mansions and luxury sports cars because they still have use over those they could not deny that they own them. This same result could be achieved by standing on a street corner in New York City at lunch time and giving your assets away to strangers.

That is a low cost way of achieving asset protection. If there is ever a time where you can recapture your assets then by definition you own those assets. Ownership defaults your asset protection.

Wealthy people can afford Attorneys who know the government regulated, FATCA registered and IRS recognized law that overrides tax law. If you want to touch your money now, you pay tax now. If you are willing to touch your money later, then you pay tax later.

[box type=”tick” size=”large” style=”rounded” border=”full”]For information on tax deferred on gains and accumulations IRS Tax Law and IRS statutory asset protection request our “Asset Protection” white paper.[/box]