HARD TIMES, Part 12
"A good man leaves an Inheritance for his children’s children and the wealth of the sinner is laid up for the just." - Proverbs 13:22
In this series of articles, we have been discussing certain events of an economic nature, some of which have transpired already and some still future, that are designed to eliminate the ‘middle class’ in America through taxation, inflation and military conquest. In so doing, I hope to touch on the following issues and possible courses of action available to us.
INFLATION - THE COMING CURRENCY SHORTAGE - ELECTRONIC MONEY - NEW KINDS OF WEALTH - REASON FOR THE ASIAN BANKING CRISIS - THE REAL REASON FOR Y2K SCARE - CAPITAL FLIGHT & SEVERE PENALTIES
TAXATION - REASON FOR THE SAVINGS & LOAN SCANDAL - THE ILLEGAL SEIZURE OF ASSETS, HOMES, RIVERS & WILDERNESS AREAS - THE NEXT MASSIVE TAX LEVY - TAX HAVENS - OFF SHORE BANKING - TRUSTS - FOUNDATIONS - BEST PLACES TO HIDE ASSETS - FORMATION OF SMALL CLOSE KNIT COMMUNITIES - BARTER EXCHANGES - E-GOLD
INVASION OF PRIVACY - NATIONAL I. D. DRIVERS LICENSE - NEW DEFINITIONS OF ‘TERRORIST GROUPS’ - NATIONAL DATA BASE FOR ALL WORKING AMERICANS - NATIONAL DATA BASE FOR MEDICAL RECORDS - DANGEROUS NEW EXECUTIVE ORDERS - GUN CONFISCATION - COMING OF U. N. PEACE KEEPERS TO AMERICA - AND MUCH MORE.
Having examined the precipitous decline in the value of the U.S. Dollar in previous ‘HARD TIMES’ articles, we must return to the subject we broached in Issue #19 of THE SEVENTH TRUMPET. We now need
to explore more fully how to expatriate our savings to safe havens. For as the saying goes: "If you earn it, they will tax it; If you spend it, they will tax it; If you give it away, they will tax it; If you die with it in your possession, they will tax it!"
This has been true in our country for so many years, that many have come to feel that it is their "patriotic duty" to pay their "fair share" of taxes. For sure, there are some taxes that are necessary, but again there are taxes that should be avoided completely. And that is exactly what this article is about - how to legally avoid certain taxes. First, we are going to look at specific taxes and show you HOW TO AVOID THEM ALTOGETHER. In the process, we are going to examine the greatest right we have, relative to property, under the Constitution, which is the UNLIMITED RIGHT TO CONTRACT. Then, we are going to show you how to MAKE MONEY TAX FREE!!!
WILLS Vs ESTATE & INHERITANCE TAXES
It is not enough to earn money, we must learn how and where to hide it. Unfortunately, leaving a Will is not necessarily the best course of action for the head of a family. If you leave a Will, you can bet that your heirs will encounter difficulties.
When the family bread winner dies, guess what happens to 35% to 70% or even more of the assets that should be passed on to the heirs of an estate. They are devoured by the "green alligators" of estate taxes, inheritance taxes, income taxes, probate costs, legal and accounting fees, and appraisal costs.
When you calculate the size of your estate for Federal Estate Taxes, you must include all life insurance death proceeds, as well. Probate does not take life insurance into account unless the beneficiary of the policy is the person's estate. If an estate is $800,000, it is over the current limit by $125,000. The minimum tax due is 37% of $125,000, or a total of $46,250.00. This tax is due and payable no more than nine months after the day of death. You pay or they confiscate assets to pay the tax. Have you ever heard of an "Estate Sale"?
Then all the creditors must be satisfied (paid off) by the estate because the law states that your heirs cannot inherit money that belongs to any creditors! They have from four months to a year (depending on state laws) to make their claims. This is another costly delay in the probate process.
After paying various taxes for a lifetime, you'd expect NO MORE TAXES to be due upon death! However, these "death taxes" and related expenses become an assault to every family that has labored many years to accumulate their assets. Sadly, these legal thieves rob an excessive amount of the wealth that belongs to the rightful heirs!
Although it is strongly recommended by certain people, a Will offers very little help in relieving this outrageous burden to your estate!
1. The beneficiary of a Will can have as many as 75 time-consuming duties that cost money and create heartache at the least desirable time.
2. Your spouse does not automatically get your estate. In some states one half to one third of the estate is divided among surviving children. If you have none, even brothers and sisters, parents or distant relatives could qualify for a share. In addition, the wife must pay a court-appointed administrator to settle your financial affairs, and a guardian to protect minor children's rights. If the wife is guardian, she must POST A BOND (another expense) and make a periodic accounting to the court.
3. Even if the will is valid, there's no guarantee that the wishes of the deceased will be carried out in a reasonable time period, or ever! BUSINESS WEEK magazine (June 3, 1972), stated about wills and probate:
"Named in a Will? It can take years to collect! If you suddenly
discover you are beneficiary of an estate, don't be too fast to
order your yacht...it can take years for rightful heirs to collect
their legacies. Legal and court costs, as well as taxes and debts, can sometimes SHRINK an estate to a pittance!"
Regarding the efficiency of the Executor and the Attorney, it said,
"No matter how efficient they are, delays are inevitable. Dozens
of claimants get a crack at the estate before you can collect a
penny! Creditors have from four months to a year to audit the
return, and state tax agencies will take a few months too."
4. Wills are often contested! What then? BUSINESS WEEK continued:
"No matter how amicable the atmosphere may appear among the heirs at the reading of the will, don't be shocked if the will is later contested!"3.
Anyone who needs a reason, can declare a will invalid because of any irregularities or discrepancies. "One legal expert alleges that 35% of all wills are broken..." said the magazine.————————————————————————————————
We must emphasize that the advice in this section is not intended to violate 26 U.S.C. Section 7206 item (4), which makes it a crime to conceal assets otherwise lawfully owed: (4) Removal or concealment with intent to defraud Removes, deposits, or conceals, or is concerned in removing, depositing, or concealing, any goods or commodities for or in respect whereof any tax is or shall be imposed, or any property upon which levy is authorized by section 6331, with intent to evade or defeat the assessment or collection of any tax imposed by this title; or shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.
"Where rights are secured by the Constitution are involved, there can be no rule making or legislation which will abrogate them" Miranda v. Ariz. 384 U.S. 436 at 491(1966).
"In construing federal revenue statute, Supreme Court gives no weight to Treasury regulation which attempts to add to statute something which is not there." United States v. Calamaro, 354 U.S. 351 (1957), 1 L. Ed. 2d 1394, 77 S. Ct. 1138 (1957)
We as individuals have God endowed, unalienable Rights (Declaration of Independence, Paragraph 2) and these same rights are secured in the Preamble and the Constitution of the United States of America, and in the Preamble and the Bill of Rights (the first ten Amendments) of the Constitution of the united States of America. These Rights existed long before the organization of the State and can be taken from an individual only by Constitutional due process of law that is in conformity with the Constitution of the United States of America."The individual may stand upon his Constitutional rights as a citizen. He is entitled to carry on his private business in his own way. His power to contract is unlimited. He owes no duty to the State or to his neighbors to divulge his business, or to open his doors to an investigation, so far as it may tend to incriminate him. He owes no duty to the State, since he receives nothing therefrom, beyond the protection of his life and property." "His rights are such as existed by the Law of the Land long antecedent to the organization of the State, and can only be taken from him by due process of law, and in accordance with the Constitution."
4."Among his rights are a refusal to incriminate himself, and the immunity of himself and his property from arrest or seizure except under warrant of the law."
The famous Supreme Court Justice, Learned Hand wrote, "Any one may so arrange his affairs that his taxes shall be as low a possible; he is not bound to choose that pattern which will best pay the Treasury: there is not even a patriotic duty to increase one’ s taxes." - Helvering v. Gregory, Federal Reporter, 2nd series, Vol. 69, Page 810 (1934)
The Court has ruled: "The legal right of an individual to decrease ... or ALTOGETHER AVOID his/her taxes by means which the law permits cannot be doubted" Gregory v. Helvering, 293 U.S. 465
There are three things I would recommend to certain of my readers: 1. Go Off Shore, 2. Set up a Trust and 3. Create an IBC.
WHY GO OFF SHORE?
Most of those who are going ‘off-shore’ are doing so for a variety of reasons: To hide assets from potential litigants, as in bankruptcy. To protect their assets from militaristic, fascist governments. To prepare for the coming of ‘hard times’ and civil uprisings. And to pass on wealth to their heirs intact.
Others are moving their banking ‘off-shore’ to take advantage of higher interest rates and possibly take advantage of fabulous business investments that produce a greater return on investment.
How much are you paying in taxes right now? 20%, 30%, 40%? Never mind the question of whether you are paying your ‘fair share’ of taxes. Ask yourself this question. If you could take most of the money you currently pay in taxes and INVEST IT OUTSIDE THE UNITED STATES realizing a return on your investment of 20 to 40% a year, what would that do for your RETIREMENT?? We can do this through an instrument called an IBC (International Business Corporation). A corporation is an entity (person) with perpetual existence and limited liability. It can sell shares, sue or be sued.
An International Business Corporation is usually a tax exempt corporation that can do business all over the world, except in the country where it is incorporated.
Under U.S. law, non-resident foreign companies, trusts, and individuals can trade stocks, bonds, commodities, and options, 100% tax free; free from all U.S. capitol gains and income taxes. Under the U.S. Tax Code (Title 26 U.S.C.) only when a foreign company, foreign trust, or nonresident alien individual takes up permanent residence within the United States will he be subject to U.S. capitol gains taxes in the same way as domestic taxpayers.
For a corporation, permanent residence would be a U.S. office or warehouse, in the United States. Capitol gains realized by foreign corporations and other nonresidents "not engaged in a trade or business within the United States" are exempted from tax" under IRC § 871 and IRC § 881 and IRC § 897(c)(3).
Nonresidents who are "not engaged in a trade or business in the United States" are exempt from tax under 26 U.S.C. $$ 871, 881 and 897 (c) (3).
U.S. Treasury regulations § 864-2(C)(1)&(2) provides an exception for what embodies being "engaged in a trade or business within the United States".
Under U.S. regulations, a nonresident's stock market transactions, carried out through a U.S. stockbroker, independent agent, or an employee, are not considered to cause the nonresident to be "engaged in a trade or business within the United States". The foreign corporation "not engaged in a trade or business within the United States", and not controlled by "U.S. Shareholder(s)", may also trade securities on the U.S. securities markets without tax consequences. And if he does business through an I.B.C. (International Business Corporation) or an off-shore Trust, he is exempt from taxations that would accrue to the average citizen.
A U.S. person is deemed to be a "U.S. Shareholder" if he owns or controls 10% or more of the voting stock of the foreign corporation. A "Controlled Foreign Corporation" is one where more than 50% of its value or voting stock is owned by "U.S. Shareholder(s)".
For purposes of determining the 50% limit, U.S. persons who own less than 10% of the voting stock (and therefore are not "U.S. Shareholders") will not be considered.
The distinction between a "U.S. person" and a "U.S. Shareholder" is an important one. Only U.S. Shareholders are restricted from electing, appointing, or replacing foreign directors, and then only a majority of those directors. The Treasury Regulations at § 951(g)(2) provide the factors to be considered in determining whether a U.S. person is in fact a U.S. Shareholder. The law also says that when a foreign corporation has more than one class of stock issued and outstanding, and one or more U.S. persons OWN shares of any class of stock which possesses the power to elect, appoint or replace a person or persons of the foreign corporation that exercises the powers ordinarily exercised by a member of the board of directors of a domestic corporation, then such U.S. person would be a U.S. Shareholder too. But, if a U.S. Founder (F), on the same day that he incorporates his foreign business corporation (I.B.C.), also distributes all 100% of the "voting" stock of the IBC to a wholly owned (grantor) trust set up by the corporation (in compliance with the terms of 26 USC § 679 (c)(2)(A)), while retaining the "value" stock of the I.B.C. within the family holdings, and, at the same time, the Trust agreement appoints (F) as one of three Trustees of the Trust (two foreign), and delegates to (F) the power to vote the voting stock of the IBC, held and owned by the Trust, at shareholder meetings, then (F) will be able to indirectly elect the directors of the company.
Treasury regulation § 957-1(b)(1) only prohibits U.S. Shareholders from electing, appointing or replacing the directors of a foreign corporation (and (F) is not a U.S. Shareholder because he owns not a share of the IBC voting stock). Since a foreign trust (set up by a nonresident alien grantor - the IBC)) now controls the voting shares of the foreign company, the IRS Pentapus is legally avoided entirely, for the U.S. Founder (F).
WHY SET UP A TRUST?
Q. What is the definition of a, TRUST?
A. "In its technical legal sense, a trust has been defined as "the right to the beneficial enjoyment of property, the legal title to which is vested in another." Bowes v. Cannon. 116P336.
Under current U.S. tax law, a trust entity is not subject to U.S. income tax as a foreign trust if it is (1) classified as a trust, and (2) if its contacts with a foreign situs are sufficient, and (3) its contacts with the U.S. so insubstantial, as to render it a foreign entity. Title 26 USC 7701(a)(31) says that a foreign trust is one "the income of which from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States, is not includable in
gross income under Sub part A." In effect, to avoid U.S. income tax liability, the trust must take the appearance of a nonresident alien.
Since a trust is a separate legal entity, it can be used in estate planning to hold assets in suspense, in capitol gains tax planning to avoid time apportionment, in income tax planning to reduce the effective rate of tax, and by changing the residence to defer income tax and capitol gains tax, often for long periods of time.
When the trust's grantor trust status makes the beneficiary's income tax free, retaining that status for as long as possible becomes important. To solve the problem of the grantor predeceasing the beneficiaries, thus inconsiderately ending the trust's favorable tax status, use of a corporate grantor is recommended.
It is clear that a corporation may be the grantor and the owner of a trust. Thus, a foreign grantor could create a corporation which in turn would create a grantor trust. The death of the creating shareholder would terminate neither the corporation's separate existence nor the trust's grantor status.
The IRS uses 6 factors to determine the situs and nationality of a trust:
1. the country under whose laws the trust was created,
2. the situs of the trust's corpus,
3. the nationality and residence of the trustees (at least one-half must be for
4. the situs of the trust's administration,
5. the nationality and residence of the Grantor.
Transfers of property to a foreign trust by a foreign corporation triggers no U.S. income or gift tax liability, because tax havens typically have no gift or income taxes. Such transfers can be made routinely, without any income or gift tax liability what-so-ever. The U.S. Internal Revenue Code recognizes and states that those transfers are outside the scope of the U.S. tax laws and its authorities, just as the business of the IBC (conducted outside of the United States) is recognized by the IRS and IRS Code as not being taxable to the United States government.
Additionally, properly arranged foreign Trusts do not have to be registered with either the U.S. government or the tax haven government, thus names of beneficiaries, trustees and grantor(s) are not a matter of public record, and are not subject to disclosure on IRS forms 3520 or 3520-A.
A foreign corporation (or trust) that does not carry on a trade or business within the United States does not have to file a Federal Income Tax Return.
WHAT TO PLACE IN A TRUST
- Residence - Stocks
- Life Insurance - Other Real Estate
- Bonds - RV's, Boats, Automobiles
- CD's - Furnishings & Antiques
- IRA's - Savings
- Jewelry - Money Markets
- Accounts Collections - Mutual funds
Many people buy and sell their cars every three or four years. Depending on the state allowable non-Trust estate (special allowance made by states to exempt vehicles from Probate allowing transfer of title with presentation of death certificate), you may not care to move vehicles into the Trust. Most states automatically transfer car titles without Probate. If you wish to put a vehicle into the Trust, you simply need to ask for a new title that reflects the new owner as the Trust. Remember to use the correct wording. The correct way to list ownership is as follows: There are three important items in identifying your Trust: 1) The Trust name, 2) The Trustees, and 3) the Date of Execution of your Living Trust. Therefore, the correct manner to register your Trust as owner of an asset is:
The Doe Family Trust,
Dated January. 15, 1991,
John and Jane Doe, Trustees (for a couple)
he Doe Family Trust,
Dated January. 15, 1991,
John Doe, Trustee (for a single person)
An S Corp. must file with the state to have the ownership held by the Trust. In many cases this is a great advantage since the Trust can own the Stock without being subject to any liability that will arise from the corporation.
Remember also that funding a Trust will take some effort and time. It is not unusual to take 30-90 days to complete this project. Do not lose your determination. The work you do now will save hundreds of hours and thousands of dollars in Probate problems later.
ESTATE PLANING EXPENSES ARE DEDUCTIBLE
You may wonder if your Trust preparation services are tax deductible. The answer is "Yes." Legal and accounting costs of establishing and operating a Trust are deductible from federal income tax because these fees are incurred for the management and conservation of property held to produce income.
IRS Section 212 explains that all reasonable expenses paid for "the production or collection of income," and for "the management, conservation, or maintenance of property held for the production of income" are deductible on the federal income tax form for the Trustor.
The most clear-cut case regarding this IRS decision is Bagley vs. Commissioner. Here an Inter-Vivos Trust and a Testamentary Trust were created by a lawyer with rearrangement of life insurance policies. Obviously this was done to preserve the estate and hold an income producing asset.
The Wall Street Journal also reported that IRS tax court has held that the expenses incurred in the creation of a Living Trust were tax deductible. When you obtain a Living Trust as a part of a comprehensive financial plan which we are assured qualifies your expense as a proper tax deductible item. A recent tax court ruling has concluded that the full cost paid is deductible even if it does not exceed the 2% floor for deductibility.
THE BOTTOM LINE
Procrastination may be a very big mistake. Proper estate planning can mean a huge difference to your heirs. Living Trusts are very effective when used in conjunction with professional help and sound estate and tax planning. Does a Living Trust Reduce Taxes? Definitely "Yes" The taxes reduced or eliminated by a Living Trust are:
Federal Estate Taxes (37%-55%)
Gift Taxes (18%-55%)
Capital Gain Taxes (18%)
Probate (an elective State tax = 5%-15%)
Unfortunately Friends, this is where we must break off our discussion. So till next time. God bless you and yours. I remain Jeffrey Brackeen
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