The Greatest Threat to Your Wealth

Asset protection planning appeals to those of us who are constantly subject to lawsuits and predatory litigation. But the greatest danger to accumulated wealth is our government.

They can take an unlimited share of our income with the income tax. They can take a large bite out of the money we spend with an assortment of excise taxes, a national sales tax or value added tax. Although the estate tax is presently repealed for 2010, it isn't going to stay that way and they can set the estate tax at any level to consume any portion of an estate. They impose an exit tax on any unrealized gains and deferred income if we give up our citizenship or resident status. If they want, they could even impose an exit tax on assets and confiscate any percentage of our assets if we wish to leave. Obscenely excessive fines and penalties can be imposed for alleged money laundering or for failing to comply with a mind boggling assortment of very confusing laws. And, if we are merely accused of any one of a variety of crimes, they can confiscate our property under the forfeiture laws.

What can you do to protect your wealth from these threats?

As long as we are still a country of laws, we can look to the various laws to identify legal (allowed) ways to hold assets or to dispose of assets to children or grandchildren. For now, it is still legal to move money offshore, even though offshore assets may need to be disclosed each year. And, for now, each person can take their assets with them if they expatriate and settle up with the IRS on any untaxed gains or deferred income.

But it seems to me that the doors are closing on both domestic and offshore methods of asset protection if the government is the party that wants our assets. Hopefully, it is mostly because the far left lunatic fringe of the Democratic party is in control and they are pushing through every change they can that will move us closer to a Socialist society. Perhaps the Tea Party and the Conservatives can get rid of enough Democrats and Liberals this fall to put a stop to this crazy frenzy of "progressive" legislation. But it seems highly unlikely that anything that has already been turned into a law will be repealed. Our move toward the European style of Socialism is like taking three steps forward and two steps back -- but the momentum is clearly for more government rather than for less.

Meanwhile, there are relatively few legal structures that can survive a challenge by a rogue government -- which is what we will most surely have if the November elections do not result in a sea change in the Congress. So maybe it's time to invest some time and money in helping to "kick the rascals out" this fall. Otherwise, the only way I can think of to preserve your wealth will be to leave the U.S. after becoming a citizen of some other country. And if we don't kick enough rascals out this fall, even that option may be extremely limited.

That's my two cents.

Vern

Fallacy of the Progressive Ideal

Those who adhere to a Progressive/Liberal/Socialist philosophy appear to believe that government is both benevolent and omnipotent. (Even the leaders of the movement who don't really believe it, promote that message to the masses.)

But this belief in the benevolent power of government to regulate every human activity for the benefit of all is predicated on a serious logical fallacy.

The Liberal or Progressive presumes that whatever the government commands will and can be done. The problem is that there are two sides to the equation. For every right or benefit, there is an obligation or burden on someone. For every form of property that is confiscated to be re-distributed, there is someone who has lost that property by force or the threat of force. Thus, the premise of a benevolent government is destroyed.

The majority of people living in a totalitarian system will comply with the demands of the government but only to the minimum extent required to avoid punitive treatment. A few members of the society will strive and aspire to become one of the leaders who always manage to enjoy a much better life style than everyone else. But the nature of their effort is to be a loyal member of the system rather than to be a productive member of society. Those who are the most productive are expected to be even more productive but are rarely rewarded for their effort. So in time, those are able to be productive give up and produce the minimum that is required to survive.

What if there was only one person on a remote island who knew how to obtain food? If the other residents on that island confiscate what has been obtained, the one who knew how would have little incentive to secure more food than he could eat while out hunting. And he might have a lot of incentive to move to some part of the island away from the others.

Little by little, the level of productivity throughout the entire economy begins to diminish and everyone must cope with fewer of the essentials and comforts of life.

To forestall this decline in productivity, the government begins to impose more and more harsh regulations and punishments for non-compliance. In time, workers are hard to distinguish from slaves who toil for a bare minimum of what is needed for them to continue working.

Those who believe that government can solve problems that have not been solved by free citizens will soon learn that government can only issue laws and regulations that can be enforced at the point of a gun. Force is not an incentive to do well. It is an incentive to become obscure.

Vern