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Life Member: The Top
Trial Lawyers in America

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"Democracy is two wolves and a lamb voting on what to have for lunch. 
Liberty is a well-armed lamb contesting the vote." - Benjamin Franklin
Our newsletter today looks at the next phase in the architecture of the American dream, and the social engineering that comes with it. Are the trends your friend? Why have men and woman (and children for that matter) become so litigious in our society? Is it possible that you could be locked away in a prison without ever being charged with a crime? Could what you take for granted on the Internet be suddenly censored? And have you - and your money – become prisoners with nowhere to go? Read on for what might surprise you.
Today we look at a few trends happening around you.
The Litigation Lottery
In our ever changing world, we are witnessing simultaneously an increasingly litigious society, coupled with economic, social and political decay. Another 15 million new lawsuits will be filed again this year in America. As a former judge and named a Top 100 Trial Lawyer by the American Trial Lawyers Association, I frequently witnessed frivolous litigation based on nothing more than absurd legal theories. But the good news is that there has been an evolution of legal strategies to protect your assets from capricious creditor claims, and from worsening events at home and abroad.
It has long been my position that all individuals with any measurable assets should proactively take full advantage of the various legal structures, like corporations, limited liability companies or family limited partnerships, as alternative means of ownership and titling of property. These entities can in turn utilize the laws of any state or country that provide legitimate protection against threats to your assets.
And as we have repeatedly discussed in past newsletters, the use of international trusts, particularly when integrated with estate planning, has become an increasingly accepted and successful planning tool to protect against a broad category of threats.
If you are a medical professional, lawyer, accountant, business owner, investor, or involved in any profession or occupation that requires you to maintain expensive errors and omissions insurance coverage – or have any measureable wealth - you are generally perceived to have deep pockets. Therefore, you are much more likely to attract litigation.
Those with little or no assets – or ‘appear’ to own few assets - are rarely sued. Making yourself a smaller target is an important step to protecting assets.
Why our society has turned to a litigation lottery has been the subject of much social and political science debate. Is ‘instant gratification’, a ‘throw-away society’, or something much deeper that’s at fault?  Unfortunately, it manifests in the lack of respect for self and others throughout our culture in different ways. The reasons are varied, but the realities are there: if you don’t take proactive steps to protect your assets, it is only a matter of time before you and your assets will likely part company.
Even if you believe that you will never be sued at home, today there is a fresh array of new threats against you and your assets, and even against the free movement of those assets across foreign shores.
Follow this thought with me.
Are You - and your money - Still Free?
I admit, am absolutely dumfounded. It is beyond my wildest imagination that I could ever witness it happen during my life time in America. But the day has finally arrived. And no one seems to have taken notice, and fewer seem to care. Even writing a newsletter on the topic makes me sick to my stomach.
As a young boy growing up in conservative Midwest America I was often reminded how America's constitutional rights and freedoms were ‘special’. This was part of what made America different and unique from other places in the world we were taught to fear. During my law school studies I learned that the respect for the Writ of Habeas Corpus was one of the significant legal features behind America’s uniqueness.
The Writ of Habeas Corpus has historically been an important legal safeguard in the US and in other developed nations across the globe protecting individual freedoms against arbitrary state action. You only need to look across the world to see what happens when these safeguards are ignored. It requires a person to be brought before a judge and not just thrown into a prison without due process of law. The respect for the due process of law is what makes developed countries stand apart from other places we fear to live.
The writ is addressed to the custodian of a person (a police officer or prison official, for example) and demands that the person held be taken before the court, and that the custodian present proof whether the custodian has lawful authority to detain the person, and the reasons therefore. If the custodian does not have authority to detain the prisoner, or the person is not charged with a crime, then he must be released from custody. This has been an important safeguard against an abuse of power for generations by those yielding their authority.
Of course, habeas corpus has certain limitations. It is technically only a procedural remedy and does not necessarily protect other rights, such as the entitlement to a fair trial. In any event, in developed countries across the world today, the right to petition for a Writ of Habeas Corpus has long been celebrated as the most efficient safeguard of your personal liberties.
But take note: the US Congress passed an Act, and President Obama signed it into law, that makes the US military a police force on US soil that can hold American citizens indefinitely – in a US prison or transferred offshore - without the right to trial, or even the right to hear charges brought against them. Read that last sentence again.
I never thought I would see the day in my life time. Not in America. 
Yes, it is unbelievable, but, on New Year’s eve - without press release or media coverage - during the dark of night, President Obama signed into law the National Defense Authorization Act (NDAA) giving himself and all presidents that follow wide sweeping powers. President Obama, a constitutional scholar, originally indicated he would veto the Act, but then election challenges persuaded him to change his mind. 
Under the new law the US military is entitled to ‘disappear’ American citizens anywhere in the world for offences that are never even made public. If you look carefully at this legislation, what's worse is that it includes a family or a friend who even publicizes that you’ve disappeared, and then they too can be detained. If anybody helps you with even expenses for a bus ticket, or attempts to give any assistance to your family in the circumstances of your disappearance, they too can be detained.
And there's more.
Yet another bill pending before Congress allows the government to strip away US citizenship for anyone engaged in, or supporting, ‘hostilities’ against the US government. At first blush the Enemy Expatriation Act has appeal to many, but the brief law allows the government to strip US citizenship from anyone they consider a threat. There is no requirements that a suspect be charged with a crime and brought before a court. The harsh reality is that anyone alleged to be troublemaker could be detained indefinitely under the above NDAA before or after being stripped of citizenship and their legal rights of due process of law that all US citizens hold dear. 
What has America become?
Some argue this is the architecture of a troubled state. They remind us that something similar happened in 1933 Germany called the Enabling Act – which when used ruthlessly and with authority – virtually assured that the government of the day could thereafter exercise dictatorial powers. The political party of the day was called the Nazi Party, and its leader was Adolf Hitler. We can rest assured that German citizens then also believed that their democratic system of government would not fail them.  
Whatever you believe, the National Defense Authorization Act and the Enemy Expatriation Act are more steps on the path of a decaying American dream. Maybe the dream was nothing more than just a short lived experiment that has passed its’ ‘use-by’ date. Unfortunately these are more examples of the further deterioration of your rights and freedoms in America. And sorry to say, the same trend appears to be occurring across the globe in other Western countries.
The downward spiral in America continues. From when I started observing and commenting on America’s decay over a decade ago, it has happened far faster than my worst nightmares.
And more still to come.
Internet Censorship Coming to a Computer Near You
The strong protections for freedom of speech and expression against US federal, state, and local government censorship in America are rooted in the First Amendment to the United States Constitution. This protection has extended to the Internet, and as a result very little government mandated technical filtering occurs in the US.
But the next step in government social engineering appears to be the "Stop Online Piracy Act” (SOPA), which allows the US government to censor your Internet access. This potential new law would effectively accomplish in America what China did to censor its Internet users at home. There was huge uproar and criticism by Americans against China’s censorship, but the same doesn’t seem to be occurring at home. Why? SOPA allows the US government to shut down any web site it deems to be against the law, without trial, without notification, and without due process of law safeguards.
The arguments in favor of the law are to protect revenues for content creators of intellectual property, and protect Internet users against counterfeit drugs. OK, good moral purposes, so far.
However, the positive arguments are heavily outweighed by the threats against privacy, online freedom of speech, a negative impact on websites that host user content (like Facebook and You Tube), it weakens “safe harbor” laws for copyright protected websites resulting in immediate blocked access without proper due process of law, a threat to web-related “e-commerce” businesses, threatens uploading content, internal networks, free and open source software, will be ultimately be ineffectual against privacy, and results in a lack of transparency in enforcement.
Big name opponents of the bill include Google, Yahoo!, Facebook, Twitter, AOL, LinkedIn, eBay, Mozilla Corporation, Reddit,   the Wikimedia Foundation, and human rights organizations such as Reporters Without Borders, the Electronic Frontier Foundation, the ACLU, and Human Rights Watch. A few individuals are creating a stir on the Internet, but not much more.
Obama recently indicated he wouldn’t ‘back’ the Internet censorship bill, but he made the same claim and then back-flipped on his position and signed the above National Defense Authorization Act under re-election pressures. Stating not to ‘back’ a bill still leaves open an option to claim he reluctantly signed due to other reasons. It’s called politics.
There was much criticism about China’s censorship over its citizens, but now it has come home to America. The passage of this law will make it easier for government busy-bodies to decide what website content is appropriate for your personal consumption. Why does the US continue down this path? Have Americans been dumbed-down to just accept being stripped of their liberties? And what ever happened to common sense?
What’s next – global monitoring of your every dollar? Oopps, you may be sorry we asked.
Yanks - and Their Money - Go Home
To monitor and control American taxpayer’s assets offshore, the US has already implemented strict financial foreign reporting compliance. Other countries desperately in need of more taxes to support their social entitlement programs have similarly followed suit.
Every US taxpayer must report more than $10,000 in cash held offshore and other cash transactions (through the FBAR Form TDF-90.22-1 and 8300, 4789, 4790, etc); report transactions with a foreign entity (Forms 3520, 8865, 926, etc); and report information returns for foreign owners and entities (Form 3520A, 8858, 1120-F, 5471, 5472, 8621, W-8Ben, W-81MY, 8805, 1042, etc), to name but only a few of the foreign reporting requirements. But starting this year US taxpayers must also start reporting any and all types of assets offshore with a total value of more than $50,000 on the new (draft) Form 8938 (see FATCA below).
These are examples of the trend in the US government’s political and social engineering of its taxpayers, and exerting its control over the global financial system. And here’s how the latest took place.
In 2010 President Obama signed into law the Foreign Account Tax Compliance Act (FATCA), effective for US taxpayers beginning for the 2011 tax year, reported in 2012. The official position was that it was enacted to prevent offshore tax abuses by US taxpayers. While there may have been a grain of truth in claiming the higher ground, the real truth of the matter is that it is yet another restrictive measure against the outflow of US taxpayer capital from the US to other countries.
By any other name it’s called currency controls. We have discussed this here in prior newsletters.
What’s significant it that the US has implemented this far reaching legislation forcibly onto foreign soils, effectively making foreign financial and non-financial companies in other countries IRS reporting agents on US citizens and businesses. Simply stated, it is an arrogant display of US government authority in an attempt to force foreign companies to act as their watchdog over US taxpayers offshore.
There are still many uncertainties with the compliance requirements, and many countries are actually considering either cutting their investment and financial ties with all US investments and/or their US clients. The international fallout against FATCA has been enormous, but it has seldom been reported in the US media. And this is where the problem really begins.
Here are a few examples of just how onerous the FATCA compliance is: for foreign financial entities, there is a 30% withholding tax imposed on the financial institution for a failure to enter into an agreement with the IRS agreeing to identify and annually disclose its US account holders directly to the IRS; for foreign non-financial entities a 30% withholding tax imposed on payments made if they fail to certify that it does not have any substantial US owners, or it fails to disclose the identity of the US owners; and in all cases, requirements that the foreign entities obtain a US tax identification number and then report on IRS forms. Foreign financial entities currently include hedge funds, private equity funds, and other investment vehicles, and are therefore not limited to banks. Non-financial entities cast a much wider net.
The first lever the US government currently has over the foreign financial and non-financial entities is the payments of US sourced fixed and determinable annual or periodical income on their US related investments, as well as gross proceeds from the sale of assets that generate US source interest or dividend income to them.
And as a result of FATCA, US taxpayers living at home are now required to file Form 8938 to report assets of more than $50,000 held offshore. For US taxpayers living abroad, the amount is adjusted to $400,000 at year end, or more than $600,000 at any time during the year. And if you haven’t already picked it up, Form 8938 makes redundant the FBAR TDF 90-22.1 (cash more than $10,000) as noted above, but both are still required. Go figure.
The list of questions, requirements, and unknowns for foreign financial and non-financial entities is long. And just how the IRS will enforce these burdens on foreign entities on foreign soils beyond the 30% withholding tax imposed on them remains unclear. How can American politicians arrogantly expect foreign companies in other countries to comply with these extra-territorial laws?
And why would a bank in New Zealand or Australia, for example, provide the IRS with all US account holder information?  The cost in tiny New Zealand (population 4+ million) and its banking system are calculated at more than $10 million. This is a huge cost of doing business for this small country, and it serves to decrease the demand for US depositors around the globe at all foreign banks.
FATCA is all about the US government implementing currency controls on its US taxpayers, and extending it dominance to every corner of the world.
But what happens if New Zealand – recently rated the friendliest place on earth - or other financial entities elsewhere, refuse to comply?  Will US troops march in and demand to see the bank records?  Will the US impose huge import tariffs on New Zealand goods?  Will the DHS (department of homeland security) demand restricted visas for all New Zealand residents visiting the US? Maybe this is why Obama announced that 2,500 US marines will now be stationed nearby in a new US military base in peaceful Australia.
There will be huge unintended consequences with the new law: less foreign investment into the US economy at a time when it is needed most; and less US dollar investments offshore by timid US souls. The confusion and complications will drive away business of entrepreneurs and investors around the globe. While Congress and Obama tried to sell FATCA as a benefit for the US tax system, it will instead have tremendous negative impacts around the globe, and particularly for the US economy.
This law must be repealed, but for now, it stands.
Remember that FATCA is designed to control capital outflow from the US financial system as the US economy continues to weaken at home, and on a global perspective. With the increased need for more taxes, fewer entitlements, a social and political system that is withering, and worse, it begs the question: Do you really want to have 100% of your financial future tied to the US economy?
What to do?
Beyond the financial problems facing the US economy, remember it is still a hugely litigious society. Now, more than ever before, smart money is looking for alternative ways to protect their assets. By diversifying at least a portion of your assets internationally, you at least have one foot in the door. Assets can be located in other jurisdictions that do not recognize US civil judgments or court orders.
If you are genuinely serious about protecting your assets and/or global diversification, now is the time to begin with an international structure that allows for international asset protection.
The new FATCA reporting rules begin taking effect this year, while many are still waiting on directives and interpretations from the IRS that have yet to be released. As this year and next progresses, it will become increasingly difficult and expensive to open an offshore bank account for many US taxpayers.
Looking at the above trends that continue to shape your world is troubling. If these were the only examples we could learn to work around them. But they aren’t, and they reflect more grains of shifting sand on the landscape. And not just in the US, but across the globe.
Does this mean you should avoid diversifying your assets offshore?
To the contrary!
Now, more than ever before it is essential to hold some assets offshore. At a minimum, at least have an exit plan that includes an international financial gateway, away from a litigious society and a faltering US system. By having some cash held in a bank offshore – or at least a planning structure allowing you to move assets quickly - you have at least taken the first step in protecting your assets. We have discussed the pros and cons of offshore vs. domestic banks in a prior newsletter.
Compliance with offshore reporting requirements will naturally be necessary at home. I dislike the reporting and invasion of my privacy - and grumble as much or more than the next guy - but if completed by your knowledgeable accountant at the time your annual tax return is prepared, then it's not all that painful. Besides, the pain is relevant when compared to failing to protect your assets.
Once you have an international planning structure in place, then you can decide if, and when, it’s the right time to include or add additional assets into your structure. But as the doors continue to close in America – and in other venues across the globe - the exits become crowded……and your options for financial privacy and asset protection become increasingly more limited.
If you are interested in learning more about international planning, start with the tips at this link. For more free past articles go to this link. If you what to learn more, then How to Legally Protect Your Assets and Offshore Living & Investing are two great books to get started (I admit, I’m biased).
And if you would like to get serious about how you can protect your personal financial situation, then contact me to learn about how you can proceed with a confidential initial review.
But whatever you do, don’t want until it’s too late.
Until next time…..