Is Your Wealth Protected?
By Michael G. Chatzky
CHATZKY & ASSOCIATES,
A LAW CORPORATION
Editor's Note: As mentioned in this past Tuesday's alert, today we bring you the second installment in a series of alerts designed to help you Keep What's Yours. John Hemingway explored the International Gold Bullion Exchange scam from the early 1980's a couple days ago. And, he offered some suggestions on how not to fall prey to such scams.
In today's alert, Michael Chatzky takes a look at the California Constitution specifically to illustrate the broad national trend toward the steady deterioration of our right to privacy. You see, California's actions are very much different from the tenets laid out in their constitution.
And, this is indicative of what we find in virtually every state across the nation. That's the bad news. The good news is there are concrete legal steps you can take to protect yourself and your assets.
Take a look at this case study in a disturbing trend toward eroding privacy. Then, call as at 877-340-0790 or send us an email to begin the conversation of how we can assist you in your quest to Keep What's Yours...
The exceptional importance of the right to privacy is dramatically illustrated by its inclusion as an 'inalienable right' in Article 1, Section 1 of the California Constitution. That Constitution provision reads:
ARTICLE 1 DECLARATION OF RIGHTS
SECTION 1. All people are by nature free and independent and have inalienable rights. Among these are:
• Enjoying and defending life and liberty
• Acquiring, possessing, and protecting property
• Pursuing and obtaining safety, happiness, and privacy
Thus, the pursuit of privacy is a key inalienable right set forth in the very beginning of the California Constitution. The legislative history of the provision indicates that the principle 'mischiefs' at which the provision was directed included:
• 'Government snooping'
• The secret gathering of personal information
• The overbroad collection and retention of unnecessary personal information by government and business interests
• The improper use of information properly obtained for a specific purpose
• And the lack of a reasonable check on the accuracy of existing records
The history further provided that the constitutional provision, in itself 'creates a legal and enforceable right of privacy for every Californian'.
HOWEVER, during the 40 years in which the provision has been in effect, there has been a serious infringement of the privacy rights of those individuals ostensibly protected by this constitution provision – notwithstanding the growth in the 'mischiefs' at which the provision was directed!
For example, the California Franchise Tax Board publishes a list of the 500 largest state income tax delinquencies if the delinquency is in excess of $100,000 and is subject to a recorded notice of a tax lien. The list includes:
• The tax payer's name and address
• The liened amount owed
• The tax payer's occupational or professional license including the type, status, and license number, among other items
A tax payer's inclusion on the list may cause the loss or denial of occupational and professional licenses and preclude the taxpayer from entering into a contract with California state agencies for the acquisition of goods and services!
Many states other than California are even less protective of privacy rights.
We thus are compelled to rearrange our legal and financial affairs internationally to select ways and means and jurisdictions that will permit us to obtain the invaluable privacy rights and protections we require.
A comprehensive contemporary wealth protection plan must be custom-designed to address your personal needs. It minimally must be able to satisfactorily protect your assets from adverse claimants while providing you and your family with financial privacy. The plan should be psychologically suitable to your personal comfort level.
Effective wealth protection planning can often be achieved through an entirely domestic plan. Nevertheless, international wealth protection planning contains super enhanced features that are absent from domestic planning. These features typically exist because many offshore jurisdictions intentionally want to attract offshore business to bolster the local economy by providing jobs and financial capital. Consequently, these jurisdictions have enacted legislation that provides benefits that are usually not found in the United States.
For example, the following beneficial features, among others, frequently exist in asset protection legislation jurisdictions, in contrast to jurisdictions within the United States where these features are generally absent:
1. Briefer statute of limitations
2. Stricter burdens of proof
3. Impermissibility of contingency fees
4. Substantial retainers are commonly required
5. Mandatory bonds
6. Non-recognition of foreign judgments
7. Enhanced financial privacy-subject to complying with your United States tax and financial reporting obligations
8. Less exorbitant damage awards
Your plan needs to be individually tailored to meet your personal needs and objectives.
You need to incorporate your:
• Estate planning
• Income tax planning
• Asset protection planning
• And business planning into an integrated cohesive plan. The plan needs to address your ancillary objective, such as financial privacy protection and global investing opportunities.
In appropriate situations, the organization, funding, and operation of such vehicles as:
• International wealth protection trusts
• Foreign limited liabilities
• Foreign variable annuities
• Foreign life insurance policies
• Private annuities
and other well established transnational techniques can provide you with the privacy rights that have been seriously eroded domestically – as well as estate planning and asset protection planning and other essential objectives that can protect your estate for yourself and future generations.
A poignant example can illustrate this point. A November 30, 1998, a newspaper article was published in the San Diego Union-Tribune newspaper about the estate of Mary Birch Patrick, the longest probate case in San Diego County history.
The article revealed that for at least 15 years, dozens of heirs of Mary Birch Patrick waited for the estate to close.
The article revealed that the estate was valued at over $47 million, and that Rose Patek was the former secretary to Mary Birch Patrick.
The article further revealed that Rose Patek and her husband have each received over $8 million from the estate through various roles they played in the administration of the estate and a land development company owned by the estate.
The article also revealed that lawyers working on behalf of Rose Patek and her husband received over $4.7 million in fees.
The article discussed a legal dispute between the executors of the estate and the heirs of the estate. The information was obtained by the newspaper through examining probate court records which are available to the public.
The disclosure of the private and personal information in the Patrick Estate case could have been avoided had Mary Birch Patrick left her estate in trust for her heirs.
The trust instrument would normally be exempt from the probate court process. Thus, the heirs would not only not have their personal affairs exposed to the public, but could receive their inheritances as per the terms of the trust instrument without having to wait for over 15 years!
Further, the multimillion dollar fees paid to Rose Patek and her husband and the lawyers for the estate could have been rather considerably reduced! This result could be accomplished through a domestic trust, but for maximum privacy and estate planning a foreign trust would likely have produced a superior result!
Many of the foreign trusts we design for our clients contain:
• Financial privacy
• Foreign investment opportunities
• And asset production advantages, among other financial benefits
These trusts are customarily established in a jurisdiction that does not impose relevant taxes on the trust of its parties, assets, or income. In appropriate situations, we can provide our clients with tax-advantaged trusts that are specifically designed to enable the trust income to be non-taxable to the trust, its settlor, and its beneficiaries when the income is earned by the trust.
The primary point is that you should have your personal situation analyzed to provide you with the optimum plan that is tailored to your own objectives and situation! Privacy protection is a key component of this analysis!
INTERNAL REVENUE SERVICE CIRCULAR 230 NOTICE
NOTHING CONTAINED IN THIS ARTICLE IS INTENDED OR WRITTEN TO BE USED OR CAN BE USED BY ANY TAXPAYER, OR MAY BE RELIED UPON OR USED BY ANY TAXPAYER, FOR THE PURPOSE OF AVOIDING ANY PENALTY THAT MAY BE IMPOSED ON THE TAXPAYER UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED