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80 Days Left Until the Government Assault on Family Businesses with Joel Nagel and Mike Cobb – Episode 124

December 31st is the last day. In a way, it would probably be kinder if the Mayans were right and the world was to end on December 21st. We wouldn’t have to watch the government money-grab of all our hard work, innovation, and the destruction of our businesses that will occur on January 1st of the new year. We will have gone from “you didn’t build that” to “you owe us….”

I’m talking about what is euphemistically called the “Bush tax cuts,” and they end on December 31st. The consequences are more far-reaching than the average American understands. It is not only the destruction of personal wealth, it’s the further erosion and destruction of our economy.

Off The Grid Radio
Ep 124
Released: October 11, 2012

Bill:      Here is the show. I’m Bill Heid, and today we’ve got two guests, two friends of mine. We have international attorney Joel Nagel, and we also have international property developer, Mike Cobb. Guys, how are you doing?

Joel:     Thank you.

Mike:    Good, Bill. Thanks for having us on the show.

Bill:      Yeah, you bet. Oddly enough, guys, I just got back from Belize, and I wanted to have you guys talk a little bit about the upcoming Global Asset Protection Symposium that’s coming up November 7 through the 11 down in Belize. There’s some new rules, Joel, from what I understand, coming into play this year, so it’s an important year to understand what’s happening in terms of all the laws; is it not?

Joel:     Well, it is. I mean, there have been some extensions to some of the implementation of some tax code sections referred to as FATCA, Foreign Account Tax Compliance Act, which was part of the Jobs Bill enacted back in 2010. Those initial provisions have really already gone into effect regarding many Americans that hold offshore assets this year for the first time. There’s a new form where you have to list all of your financial assets. It goes beyond the old Foreign Bank Account Reporting Form. It’s a new form called 8938. So, in some ways, the new law is already with us. Other aspects regarding foreign banks reporting on U.S. citizens’ activity is going to be phased in starting 2013, 2014, 2015.

So, I think it’s important for Americans to understand what are the implications. A lot of folks think that there are some capital control and effects of the law, and that’s one of the things we’re going to be talking about at the conference.

Bill:      Well, Joel, I’ve always appreciated your perspective when you give your talk. One of the things that strikes me is you always say, look, there’s two different ways to look at this. There’s the hide-n-seek approach, not Bill Heid and seek, but hide your assets. And, of course, inevitably that doesn’t work anymore. So, people that are thinking, hey, I can go open an account and sort of get away with something, I think those days are gone. You sort of have this philosophy instead of hide-n-seek, of show-n-tell that I remember from your talk. And I think that’s a good philosophy to have.

Joel:     Yeah. At the end of the day, if you create a legal structure overseas and you disclose it properly, you pay any tax that’s due, then quite frankly, the IRS doesn’t care. I think they’re going to. . . You know, people ask me all the time, is that going to put a bull’s-eye target on me if I create, let’s say, a foreign trust? No, I don’t think that is what creates the bull’s-eye. What creates the bull’s-eye is the idea or the notion that you can get away with something, that you can put assets offshore and not report them correctly. So, you know, that’s one of the things that we also like to talk about at the conference to make sure people understand just how transparent the world really is right now. If you send a wire or if you write a check, any of the ways that you can move large sums of money around the world, they all trigger reporting requirements from your bank. The government already knows about it, so you might as well make sure you do your part and do the compliance that you’re required to do under the law.

Bill:      Sure, and do it well. That’s where you come in with your services which I’ve always appreciated, like I said, your perspective. And, Mike, I see you’re predicting higher taxes guaranteed no matter who wins the election, in your latest article on the hemispherespublishing.com. Why don’t you tell us a little bit about your perspectives there?

Mike:    Yeah, absolutely. I mean, I think it really boils down to a very simple fact, and that is that the Bush era tax cuts, and specifically the big one that I think is going to affect a lot of folks and a lot of small business folks who have decent assets. We’re not talking about the centum millionaires. We’re talking about people with a small business that’s worth 10 or 15 million dollars. When the Bush era tax cuts expire, what’s going to happen is the Inheritance Tax is going to go from a five million dollar exclusion to a one million dollar exclusion. So, basically, if you have a small business that’s worth 10 million dollars and you and your wife both own it, today until the end of the year you can pass that small business to your children with no inheritance tax; however, on January 1, you would have to come up with 50 percent of eight million dollars, so you’d have to come up with four million dollars in cash to give your children a ten million dollar business.

I mean, it’s going to destroy small businesses all over America. This is an absolutely urgent and critical time for anybody who has assets of more than two million dollars to act very, very quickly to set up some kind of trust or foundation. It doesn’t have to be a trust, but a trust is the easiest one for us to understand. Set up a trust, move those assets into the trust, take advantage of their Federal Unified Credit up to the ten million dollars and protect those assets. Keep them in the family. Don’t let Uncle Sam get his hands on your eight million dollars or your four that you’d have to pay in taxes. Keep that in the family. Keep the small business intact and keep on going. But you have to act quick. These Bush era tax cuts will expire January 1. And I don’t care if Romney wins or Obama wins, neither of them is going to extend those tax cuts by the end of the year. Romney couldn’t if he was elected.

Joel:     Let me just jump in and say that I concur with Mike. I think we’ve reached the point of gridlock in Washington, and it really doesn’t matter. Both parties really want these tax increases. And it’s not just the loss of the five million, it’s actually this year $5,120,000 of gift and estate tax exemption per person. So, like Mike said, a little over ten million per married couple. It’s not only that. I mean, the top inheritance rate goes from 35 percent to 55 percent. Qualified dividend income goes from 15 percent to a whopping 43.8 percent. That’s a 300 percent increase in qualified dividend income taxes. That’s there. It’s not anything that the President or Congress has to do proactively. It’s already on the books. It goes into effect January 1, unless there’s some new law extension or what have you.

But I think we’ve reached the point in Washington where there is gridlock. There’s no harmony. And I agree with Mike. I don’t think it really matters whether President Obama’s re-elected or Governor Romney is elected to a first term. The changes have already been made and everybody wants to blame somebody else for them, for the negative effects, but I don’t think anybody’s going to really do anything. So, it is the moment to sort of take the bull by the horns. There’s still time, but the time is rapidly running out.

Bill:      It is running out. And one of the things that you guys talk about at the conference – and that’s where I first heard about such things – is how to set up legal structures to avoid those things, right? I mean, that’s one of the things you cover. You have a lot of experts. You guys both are giving presentations there, but you have a lot of experts there giving commentary on these issues.

Joel:     Well, a lot of structures don’t per se change your tax ramifications, but some do; for example, as Mike suggested, transferring assets to a trust this year before the expiration of that exemption. You know, you certainly want to take advantage of that. That doesn’t really give you any kind of immediate income tax benefit, but it does give you a long term estate tax relief. And also, the appreciation of that asset once it’s transferred is also not subject to estate tax. So, using Mike’s example, if a family out in Iowa transfers a family farm into a trust that’s worth ten million dollars, and over the rest of their lifetime the value of that property increases from say ten million to twenty million, at their death they would be paying something north of 12 million dollars in taxes.

If you transferred that property now out of your estate, then at your death there would be no estate tax. So, that’s a huge benefit, but that’s a very long range distant benefit. And a lot of people are more concerned about current income taxes than long-term estate taxes. And the structures themselves don’t save taxes in that regard. But, yes, there are lots of experts there to talk about products and services that are time-tested, things like insurance that can legally defer the tax on various incomes. There’s also investment strategies, purchasing hard assets, whether it be gold, whether it be buying a condo for Mike, or any kind of hard asset that you hold outside the United States that’s going to appreciate in value over time. You know, that’s the idea when you marry investment philosophy and strategy with an offshore structure. By doing that, yes, you can minimize or greatly reduce your overall tax bite.

Bill:      Yeah. And if you do it in Belize, you can go scuba diving, too. Guys, I just got back there. For the first time in my life — I’ve done snorkeling before — but for the first time in my life I went out right in front of Exotic Key, right in front of your place. There’s a ship that went down. I don’t know if you guys know this. There’s a boat down in the reef. And so, I went out with a guy and I did what’s called snuba, which is kind of a hybrid between scuba diving and snorkeling. But just to be able to go down there – and I’m kind of mixing pleasure with serious business – but just to go down there and kind of hang out. . . As we said before, the Belizean people are extremely hospitable. And it’s not just resort mentality, but I think it’s just a way of life. We really do enjoy it down there. The other thing, guys, fishing right now was unbelievable. I caught a bunch of Jacks and I caught a huge Barracuda out just a little bit towards the reef off of Caye Caulker. So, you know you can go do all these things and enjoy the heck out of that area because. . . Mike, why don’t you talk a little bit about just what Belize has to offer? We’ve covered it before, but I think there’s a lot of new listeners that really don’t know anything about Belize.

Mike:    Oh, sure, absolutely. And you know what? I mean, I think that’s really one of the beautiful things about doing things offshore. I mean, obviously for us, going to Canada is offshore, and there’s some beautiful places in Canada and up in the north. But, typically when we say offshore, we’re thinking like in the tropics. And Belize is just an incredibly wonderful destination. I like to describe Belize as it’s a – Belize is a mainland country of Central America that’s just below Mexico, about 150 miles south of Cancun. And so, it’s on the Caribbean. It’s a mainland country, but it’s got about, I don’t know, a hundred or some islands off the coast that kind of just, you know, come down this 180 mile barrier reef. It’s the second longest barrier reef in the world after the Australian Barrier Reef. And it’s in fact the longest living barrier reef in the world. So, you were talking about the scuba and the fishing. The abundance of fish and sea critters on that reef is unbelievable.

Even if, like you said, if you’re not a diver, you can do a snuba, which is kind of that half-breed thing, but you get to go down and stay down and walk around a shipwreck or walk on the bottom and see the reef up-close. I mean, it’s absolutely fantastic. Belize is a neat country, because it’s kind of the best of both worlds. And in fact I just described – I’m at a conference in Colorado Springs up here at about 6000 feet trying to suck a little extra oxygen in my body having come from sea level, but anyway, Belize is. . . if you’re on one of the little islands, you mentioned Caye Caulker. There’s Ambergris Caye, which is a very popular tourist island. If you’re on one of these islands, you’re getting the best of a Caribbean island. You’re getting a Cayman Islands or a Turks and Caicos experience, but you’re getting it for pennies on the dollar.

And if you’re thinking about Belize as a Central American country, which it is, you’re in an English-speaking Central American country. It really is a beautiful mixture of cultures that used to be British Honduras, so it’s got the British tradition. The Queen’s on the money. It is part of the Commonwealth. So, you’ve got this incredible British heritage. English is the official language. And then you’ve got this Caribbean island experience if you’re out on one of the islands. But if you’re on the mainland, they’ve got some beautiful highlands. There’s some places called the Mountain Pine Ridge. You’re up at about 3500 feet, and so it’s a lot cooler, and you’re in a pine forest with Orchids and Bromeliads coming off the trees. Belize is a real interesting country geographically and from a pleasure standpoint. But then, you know, we’ve been talking about structures like trusts and IBC’s and bank accounts and things like that. Because of the British heritage, it’s a phenomenal offshore center. So, yeah, you can go mix business and pleasure. You can go down and open a bank account at Key Bank, and then 15 minutes later you can be across the street, getting on the boat, a chance to go out and do some snorkeling or diving or fishing. So, it really is the best of both worlds.

Bill:      It really is. Let me throw you kind of a little bit of a curveball, Joel. Mike just mentioned currency. Obviously, one of the things that would be a concern is Belize, like so many countries, missed a bond payment. And being someone that kind of likes Belize and has an interest in it, like the people, like the country, what do you see that — I mean everybody else misses payments and they get bailed out. What do you see happening with respect to that?

Joel:     That’s a great question, Bill, and I’ve been getting that question a lot lately. It’s a serious issue and should be taken seriously, but I think that it has to be put in context. So, first by way of background going back ten years or so under a previous government, the government of Belize put together what some folks refer to as the super bond. It essentially consolidated all of the country’s external debt into one bond. Now, unlike Greece and Spain and some of the European countries that are having much more serious and significant problems, this debt, this external debt which is about five hundred million dollars — So, let’s keep that in context, too. We’re not talking about hundreds of billions of dollars in the case of the European countries, but five hundred million dollars is a significant amount of money, but for a small country of Belize, that’s a lot.

There were some clauses in the super bond that could trigger fairly dramatic increases in the interest rate. I think when the interest started it was in the two percent range, worked its way up to four or five percent. But, you know, if Standard and Poor or Moody’s or other ratings agencies downgraded Belize’s status, then it triggered jumps in the interest rate. That’s exactly what happened. You had some automatic increases over time in the interest payments. And at the end of last month, the amount due – excuse me, at the end of August, the amounts due on the super bond payment was 23 million dollars. So, that was like an interest-only payment. And actually, my understanding from talking to folks within the Belize government and Central Bank is that the cash was there to make that payment, but it would essentially devastate the country’s ability to just meet its obligations as a government, social spending and other things.

So, the government missed the bond payments. It’s asked its creditors for an opportunity to renegotiate, particularly the interest rate component, to bring it into a manageable, workable number that they can pay. I think without a doubt Belize wants to pay their creditors. They understand that in a global community, if you ever want to get financing in the future for other projects that you have to be current on your existing debt. I also mention — because I get this element to the question quite frequently, also — what about the banks in Belize? Well, interestingly, the banks are virtually unaffected by the default. It hasn’t actually turned into an actual default yet, but it’s close to it. They’re in a grace period where they’re trying to rapidly negotiate the alteration of the terms. But for all intents and purposes, Belize is in a default with its external debt. This external debt, again, 500 million dollars, is owned. . . I think one hedge fund in New York owns over 60 percent of that debt. That’s 300 million dollars. And a variety of other pensions and investment funds own the balance of the debt.

So, you know, the banks in Belize — and there’s about ten of them — are pretty much unaffected, because they’re not sitting there holding the Belize government debt. The problem you have in Europe is that it’s all the banks that are holding this toxic debt. So, if Greece defaults, the feeling is that German banks, French banks, Dutch banks, banks in healthy countries all of a sudden get turned upside down, because if they have to write off the value of those bonds, their capital is gone. So, we don’t have that problem in Belize, fortunately. The banks are very healthy. They have a very high liquidity requirement, capital reserve requirement. In fact, their liquidity requirement, 24 percent, is the highest in the world. And you’ve heard guys like Peter Zipper at our conference. He always likes to play that up. And he says in Q4, 2008, when the rest of the world was crumbling, the Belize banks did very well. And I think his bank grew something like 92 percent that year, some ridiculous number. That’s because they have very conservative lending policies.

They have very conservative loan to value policies, you know, none of this 102 percent loan stuff like we saw in South Florida. So, the banks are healthy. It is an issue. Super bond is an issue. And if they don’t get something worked out, first and foremost, it’s going to be a P.R. blunder. It will affect the way people view Belize. It will also result in probably higher taxes to local Belizeans, because ATCF, Access to Credit Facilities, the government is going to have to maintain on hand a lot more cash. So, maintaining more cash means increasing things like the services tax, the general services tax, which is sort of like their version of VAT in Europe. It sort of functions that way, but think of it as a sales tax. It gets added on to every purchase. So, for average Belizeans, the cost of life is going to get a little bit more expensive. I really don’t think it’s going to affect the international or offshore business climate very much at all. And, certainly, I don’t think it’s going to affect tourism. This is the year of the Mayan. We have the big end of the world celebration scheduled for December 21. And, as far as I know — Mike can chime in on this — but the resorts are booked up and down Ambergris Caye almost completely because of the interest in the end of the world Mayan stuff.

Bill:      Yeah, Mike, why don’t you chime in? I mean, are you predicting the end of the world, as well?

Mike:    I am. I am predicting the end of the world. I said this before, but if you have a business or family farm worth 10 million dollars, it will just be nine days or ten days after the Mayan end of the world it will be your financial end of the world. So, yeah, it’s going to be a great celebration on December 21. It’s the end of a baktun, which is the Mayan sort of millennium kind of thing. Yeah, we’re all playing it up and we’re having some fun with it, but according to the Mayan tradition it’s just the start of a new baktun, a new millennium. So, it’s the end of one world and the beginning of another. But, to be real serious and not to be redundant, but, you know, it really could be the end of someone’s financial world or for their heirs if they don’t get some real serious decisions made in the short term.

I mean, who in the heck wants to give Uncle Sam an extra four million dollars and destroy your small business or family farm. I think a lot of people. . . I’ve still said it, and I think this is really the key. And if I have to just drill something home, these things seem far off. I’m going to die someday. I’m 50 years old today and my life expectancy is 78, or whatever, so I’ve got another 28 years to go. I’m not going to worry about this today. But the reality is that you’ve only got three months or less than three months now, to worry about this. Not just to worry about it, to actually do something about it, because making no decision is making a decision. That’s the reality here.

If you don’t make a decision to set up a trust or some kind of facility like a trust or a foundation to move those assets into, you will lose four million dollars if you have a ten million dollar business. That’s just the reality. So, it’s a wakeup call. Hello! The world is going to end. It’s not going to end because of the Mayans; it’s going to end because of the Bush era tax cuts nine, ten days later, you know, December 31. So, I mean, wake up, smell the coffee, decide you’re going to do something and then do something between now and the end of the year, because it’s serious business. It’s a lot of money.   And it isn’t just the money. It could be the destruction of a family farm or business.

Joel:     I don’t think Mike is actually being overdramatic in this at all. I was talking to a client the other day, a pretty sophisticated client and he said, ‘Well, my accountant says they’ll get this all figured out and there’ll be another extension along the way.’  I mean, there’s always this sort of normalcy bias that what we have now isn’t going to change. It’s changing. I mean, I look at it from every angle and, you know, if President Obama gets re-elected, it’s the 99 versus the one. It’s the ‘You didn’t build that.’  I mean, he’s already said he’s going to not change the expiration of these extensions. He wants taxes to go up on, he says, on people that make over 250 thousand dollars. But, if you read the law, you know, it’s across the board. I mean a dividend income tax increase 300 percent for everyone. It doesn’t matter if you’re a kid that’s made your first investment in Microsoft. You get that dollar. Instead of paying 15 percent, you’re going to pay rates of 543.8 percent. It is happening. It is coming. We have to take the blinders off, get rid of the normalcy bias and take some action.

Bill:      Well, it will be time to take some action. I see it, guys, as really an assault on the family, as well. So, I mean, you have this financial issue, which is true, but there is a theological or philosophical issue here where the family as a central unit in society is being attacked again. And it’s back to this concept of who’s God in any culture, right. The state wants to be God. It wants to take the place of God. And one of the ways that it just does that over and over and over is to attack the family, you know, what the traditional family is. It’s just attacked on every side. So, you see all these cultural issues, but then you also see financial issues, which if you can’t transfer money to your heirs, that breaks the family as well; does it not?

Mike:    You’re right, Bill.

Joel:     Absolutely. I think it starts with the notion – and, again, I’m surprised that this isn’t just played on every single Romney commercial, anti-Obama commercial out there — the notion that you didn’t build that, right. Your assets, your business, your success belongs to the state. It’s owned by the state. The state has the right to redistribute part of it in the quest for equality and fairness. It’s not a Ronald Reagan, hey, let’s build a city on the hill where we give everybody a chance to get ahead. It’s we want an equality of outcome. That’s a very, very different type of mentality. And, you’re right; it puts the state at the top. It’s all about a socialistic outcome. It’s not what made the U.S. great over the last 200 years. So, I think we are treading on some very dangerous turf right now.

Bill:      Mike?

Mike:    I couldn’t agree more. I mean, it’s been said twice. I pray for our country, because I think we’re like the frog that’s just in the pot and the water is being turned up a little bit by a little bit. Look, if you know – and I’m not going to pick on the Russians, but why not. Let’s pick on the Russians. The Russians came marching into the United States and said we’re going to impose a Communist/Socialist society, there’d be up in arms, an outcry, a wellspring of support to battle this Socialist/Communist takeover of America. But we’re the frogs in the frog pot, and the water is slowly getting warmer and warmer and warmer. And, you know, I mean somebody just sent me an e-mail yesterday. It was kind of funny. In fact, it was one of the directors of the Carlsberg Insurance. His name is Carl, by the way. But, anyway, Carl sent me this e-mail, and it was about how the National Park Service has all these signs up:  Please don’t feed the animals, because if you feed the animals they become dependent upon us; whereas the rest – not the rest, but much of the other parts of the U.S. Government, it’s about the handouts.

So, the irony that the Park Service is telling us not to feed the wild animals because they’ll be dependent upon us; yet at the same time, Health and Human Services and the Welfare and Social Services Department are giving out handouts like crazy. And the irony is, it’s just unbelievable that here we are as a nation creating a dependency culture. I mean, this is unbelievable as an American, but it is the reality. And I choose to look at reality, not what I’d like it to be. Of course, I’d like it to be different, but it’s not. And so, when you look at this reality and you see the dependency culture that we’re creating, yes, the state is the number one, because the state is the giving of the blessings to, what, 47 percent of the people now or something like that. So, yeah, the new God is the state for almost half of America now. And that’s just unbelievable.

I’m standing right below. . . I’m in Colorado Springs calling in with you this morning on the phone, and I’m standing right below the Will Rogers Shrine. I mean, there’s a guy who understood what it was to be an American. We need to go back to those kinds of roots, and we need to go back to those kinds of beliefs as a culture, as an American culture, to heal this country and look to the one true God who can serve us and we can serve him together in that mutual blessing that he promises us. You know, I mean, that’s where we are. I’m frustrated, but I’m also a realist. And I say, hey look, we’ve got to do things that make sense for us and our families and our faith, and so I choose to do those things, and I encourage people to make those individual decisions to do something, as well.

Bill:      Yeah, there’s this normalcy bias, as Joel was saying, where we tend to think inertia, right. We don’t do anything. But, if you look at a lot of the great heroes – Mike, you’re talking about God. We’ll talk about the Bible – They’re folks that took action, that actually did, they did something once they had the information. So, you know, Joel is talking about this concept of there’s no neutrality, right. The lack of a decision is in fact a decision. I was thinking what would Will Rogers think of the presidential debates and what would the founding fathers think, Joel? I mean, I think that the language between the two wouldn’t even be recognizable to, say, a Jefferson.

Joel:     Well, I think everybody’s so concerned about making a misstep and it’s so rehearsed, and it’s really gotten to the point where it’s a Hollywood production. And, you know, everybody’s sort of tip-toeing around. And if anybody makes any kind of real policy statements, they’re worried it’s going to do more harm than good. So, to me, the debates are. . . I guess they play a useful function to try to sway that very, very small group of people in the middle, but most people really already made their minds up, and they’re sort of rooting for it. It’s like a sporting event. They’re rooting for their team. So, anyways. . .

Bill:      Yeah, not much of a swing pop. I mean, I think the country’s really pretty much split, and you have people, as you say, that have already made their mind up.

Joel:     I think the real campaigning they say is at this point limited to about six states, that’s it. And, you know, I’m not. . . It seems to me that Obama will get re-elected, because of all the reasons we’ve been talking about, including this dependency culture. But when you look at a map the last couple of elections, when you look at the red versus blue, if you look at the number of states that support a conservative candidate, it vastly. . . You know, you look at this map and you’re like, wow, how could a liberal Democratic candidate win? But, that’s the way our electoral system is set up. States like New York and Pennsylvania where I live, Florida, they count a lot more than a lot of the smaller states, particularly the less populated states out West.

Bill:      Guys, I’m wondering. . . Both of you travel extensively. Joel, I know you’ve been in Europe, and Mike, you’re in Nicaragua. You’re all over the place, as well. And maybe, Mike, you can go first. I guess I’m wondering what the rest of the world thinks of America. We see this frog in this pan of increasingly hot water, but my experience is when I go abroad is that folks are reading textbooks basically from the 1960’s. And they kind of still have that. . . They think George Washington is a central figure. Mike, what do you think? What do people in Nicaragua think? As you travel, what do folks around the world, how do they see us?

Mike:    Wow! That really varies based on who you’re talking with. All right, let me start with a pretty strong statement. I use this at conferences.  You know, I speak at 15, 18, maybe 20 conferences a year. And, you know, a lot of the conferences I attend I’ve got people who are looking for a second citizenship, which is fine. I mean, certainly residencies overseas, Belize, by the way, has a great residency called the QRP. And so, you know, I’ll meet people who are looking for a Belize residency or a residency maybe in Panama or somewhere else. And then I’ll meet people who are actually looking for a second citizenship. And that’s okay, too; I understand the flexibility of that. And then I’ll meet the one person who’s just so angry with what’s happening in the United States that they’re going to get that second citizenship and then they’re going to expatriate.

Well, okay, a couple thousand or maybe ten thousand people expatriate this year, last year. By the way, that number is way up. I know Joel knows the numbers, but I mean it’s up from hundreds of people to thousands of people a year now. But we’re talking about a country with 350 million people and 10 thousand people expatriated. It’s not a big number of people who are walking into an embassy and giving back their U.S. passport. What’s interesting is this. This is the statement that I make to people. I say, you know what? The United States is the worst government in the whole world, except all the rest, okay, except all the rest. I mean, I don’t know that there’s really. . . I mean probably a few isolated cases out there of governments that are better than the United States, but my world is really Latin America. I travel extensively in Central America, South America. And the people I talk to look to the United States as this beacon of freedom.

You talked about reading the George Washington textbooks and things like that. They do, and they look to America as this incredible beacon of freedom, because in many cases their governments are much, much worse than our government. There are higher tax rates. There’s higher levels of corruption, all kinds of things. So, they look to the United States as this wonderful institution of democracy and freedom, free markets. And, by comparison, Bill, it really is. It really is. And so, I see that. I hear that. And now having lived outside the United States for ten years myself, I also deeply understand that. Look, I don’t like what’s happening here. I don’t like being the frog in the frog pot, so to speak; but at the same time, again, I try to be fairly realistic and I look at the other governments and I say, okay, if I gave up my U.S. passport, what passport would I want in return? And quite honestly, I can’t think of one. The U.S. is the best of the worst, so to speak.

And I think that just goes to a sort of a libertarian principle that I live my life by, that smaller government is better government. And so, right now the U.S. is probably pretty good in that respect, but getting worse. But when compared to other governments, I don’t know. I can’t think of a passport I’d rather have. And most Latin Americans want a U.S. passport, they really do. They get their assets out of their country and buy property in Miami or Texas. So, it’s a great question.

Bill:      But the common thing is diversifying, right? I mean, that’s kind of what you’re seeing is even people there, they want to diversify, so they want some assets in the United States. I think that speaks well of the conference coming up November 7, which is the same thing that you guys are talking about. How do Americans diversify? Joel, you were in Europe not too long ago. I mean, you have the pigs and you have so many debt problems there. How do Europeans, themselves, look at America still? Is there this sense that we’re, as President Obama says, that we’ve made all these mistakes and that we’re. . .? Do they see us as arrogant?

Joel:     I think that a lot of Europeans do see Americans as arrogant. You know, they’re surrounded by other forces in the world that are even much more hostile to the United States than Europe would be. I think that historically we’ve always been trading partners, allies. The older generation certainly still has respect for U.S. from the days going back to World War II, but that generation is quickly dying off. My son showed me a. . . it was this funny but sad YouTube video that a group of British journalists did. It was about a five minute video, and it was asking Americans about the rest of the world. The questions were just unbelievable. They would ask somebody to point to a map and show where South Korea is, and you know, guys pointing to Australia. They asked the question:  What country do you think the United States should invade next, just as an open-ended question. And people were throwing out all kinds of countries, including Italy and France. So, apparently this YouTube video is pretty highly viewed over in Europe.

So, it does say something about the way the Europeans view us. I think that to the Europeans they view somebody like President Obama as a rock star. My German friends just think he’s the only candidate there is. But, why is that? They have a faltering socialistic system in Europe and he’s copying the exact playbook of the failing social system of Europe. So, if you talk to folks in those countries, in Western Europe, I think it is skeptical. A lot of people do differentiate between the U.S. and U.S. government, but a lot of people don’t even do that anymore. They just sort of lump it all the same. Interestingly enough, some of the folks in countries that like Americans the best, and it’s probably because they know the least about us in the greater scheme of things, but they certainly like the notion of America, the concept, the dream of America as the more recently democratized countries, the Eastern Europeans.

You talk to somebody in Croatia or the Ukraine or Latvia, you talk to the average person and, you know, like Mike said, they all want to come to America. America is still the city on the hill kind of picture in their mind. But for much of the rest of the world, the U.S. has lost a lot of its luster. There’s no confidence in the dollar anymore. It’s a fiat currency just like every other currency. People are looking for ways to uncouple the dollar as the leader of the world economic system. I think that’s also a danger. . . Again, I’m not an investment advisor. I’m an asset protection lawyer, but when I talk in terms of protecting assets for people, being diversified away from the dollar is very important, from other paper currencies as well, but the dollar particularly. When the world loses confidence in the dollar, the value of the dollar is going to drop precipitously. And it’s already happening.

Since I was in college in Europe, the dollar has fallen somewhere in the range of 80 percent against a basket of European currencies, which are now the Euro, the Swiss franc and the British pound. So, when you see how far the dollar has already dropped. . . I’ll talk to a fairly affluent client. They’ll tell me they just came back from Italy and they can’t believe how expensive it was. You know a cup of coffee costs 16 bucks. Well, is it really that the local environment is so expensive? I mean, actually if you look around the coffee shops, they’re all packed. So, it must not be that the coffee is too expensive in local terms, but it is too expensive in dollar terms and that’s our measuring stick. So, I like the concept used a minute ago, diversify and have some of your assets away from your home country, regardless of what your home country is, because there is no perfect country.

Going back to Mike’s comments, and I fully agree with those as well, for Latin Americans, the U.S., it’s a nirvana. It’s a place they’d all like to have U.S. passports. And, of course, the U.S. itself is a tax haven for foreigners. That’s something a lot of people don’t know to understand. But if you’re a Brazilian or a Panamanian or a German or a Brit, you keep your money in the United States. You’re not paying any tax. So, the U.S. is a tax haven. It’s just not a tax haven for you and me. And that is one of the attractions. Interestingly, the flip side of that coin is for the wealthy Latin Americans that have second citizenship, meaning the U.S. passport, many, many of them are choosing to give it up, because there is so much compliance oversight. They feel like they’re being scrutinized, and the marginal benefit that they see by having that citizenship is going down dramatically.

The famous case – I forget the fellow’s name right now, but the fellow from Facebook – He wasn’t an American who ran out and expatriated. He was a Brazilian who came to the United State, acquired U.S. citizenship as a second citizenship, but then I’m sure he sat around a conference room table with his advisors and lawyers and accountants and said, ‘Oh, do you mean that if I keep this citizenship I will pay hundreds of millions and perhaps over a billion dollars over the course of my life and even more at my death in taxes, U.S. taxes?’  They said, ‘Yep.’  And he said, ‘Well, it’s just not worth it to me.’  So, yes, the U.S. citizenship is valuable, but it has its limits, too. And we’re seeing more and more people feel that just the control, the tax, the compliance issues are pushing them to the point where they no longer wish to have their citizenship.

You know, five, ten years ago if I would speak at a conference about this issue, normally it wouldn’t be part of my core presentation, but somebody might ask a question. You know, there’d be one or two people interested in foreign second citizenships, passports, foreign residencies. In a room of a hundred, there’s two or three people that wanted to talk about that. And now, it’s across the board. Everybody there has an interest. It doesn’t mean they’re all going to run out and expatriate and give up their U.S. citizenship, but it’s more like insurance. It’s something more and more people feel like they should have just in case things really do get worse. So, versa any kind of planning we do anymore, whether it’s a residency, a second passport, that almost always comes into the discussions.

Mike:    The issue is really about the compliance and the filling out of the forms. Nobody wants to wear an orange jumpsuit with numbers on it. And it’s really simple. And Joel talked about this at the beginning of the conversation, and I just want to reiterate it. At the end of the day, fill out the forms. Fill out the 8938. Fill out the TDF90 Form for your offshore bank accounts. Just fill out the forms. It’s simple. It’s easy to do. The government probably knows about all this stuff, anyway, or could easily find out. And the failure to fill out the forms is what they’re going to get you with. I mean, the penalty for not filling out a foreign bank account form is a fine of $250,000 and five years in jail for not filling out a form. So, the compliancy part is huge.

In fact, we’ve got a guy coming to the conference. He’s an accountant. And he’s been an accountant advising U.S. citizens on how to stay compliant with all the different foreign structures and different asset protection types of things that people do offshore. His name’s Morey Glazier. He’s going to be speaking twice at the conference about compliance on one of his conversations, and then the other conversation I think is going to be about using your IRA or defined benefit programs, a 401, that kind of thing, how to utilize those sources of funds to acquire assets overseas. So, Morey will be there. And, again, his real focus is compliance, which is so, so important for people who have offshore assets or offshore bank accounts. The penalties are severe for not filing, and it’s just so easy to do. It’s a little confusing, especially with the 8938 now, what’s reportable, what’s not reportable, but it’s something that’s worth spending the time to understand so you get it right.

Bill:      And, Mike, I think just hiring somebody to help you fill the forms out so that you feel comfortable. That’s a very easy thing to do, because as you say, there are people that do this for a living and make it their profession and are very competent to help you fill those forms out if you make the decision to diversify as so many people are doing. Why don’t you talk a little bit more about some of the things you’re going to cover as we wind down here a little bit? What are some of the other speakers? What are you going to chat about this year?

Mike:    What am I going to chat about? Well, I’m going to actually give two presentations, my normal ECI presentations about what our company is doing, ECI Development. We build communities, resort communities throughout Latin America. I don’t know if you knew, Bill, we’ve just expanded into our fourth country this summer, or last whenever, a few months ago. I guess it’s October now. But, anyway, we acquired part of a project in Panama on the Pacific Coast. So, we now operate in Belize, Nicaragua, Costa Rica and now Panama, as well. And we’re building resort communities mostly for active adults. Some are retirees, but a lot are not. A lot of folks are buying second homes, vacation homes. Some folks are even buying what I call the insurance policy.

I mean, Joel mentioned that by getting a second citizenship, the second passport’s an insurance policy. That’s a good thing, but you know, if you have that, what are you going to do? Where are you going to live? So, a lot of people are buying a small condo or a small home for a hundred, hundred fifty thousand dollars that they can have as a place to visit in the short term, vacation, maybe retire there someday, but also, as an insurance policy that if things get a little wacky, they don’t like what’s going on, hop on a plane and go to their home overseas. And we provide those. We provide great homes for people, whether it’s a condo, a single family home, a villa on the beach or up in the mountains. Great infrastructure, all the kinds of things that are important for a North American, water pressure, high speed internet access. You have cable T.V. I’m not a big T.V. watcher, but it is important to have cable T.V., so if you want to watch the debate you can, and if you want to log on to the internet and fire off a bunch of Tweets or something because you’re upset, you could do that, too.

That’s what I’m going to be talking about, what our company’s doing in the region. I’m also going to do a very brief presentation about offshore insurance, variable universal life, a product. . . Carlsberg Insurance, the president of our company, will not be there, so I’m going to do a brief presentation about that. Joel’s going to talk about asset protection, the various forms of asset protection, everything from trusts, foundations. I think one of the biggest messages that he really delivers with his tale of two kings — and I’m not going to give away the punch line — but making no decision is making a decision to do nothing. And so, asset protection, the various structures, Joel will be talking about that. We’ve also got him plugged in for a specific presentation on the Higher Act, the FACTA, he mentioned that, with the 8938 Form and the new reporting requirements under the FACTA Provisions, and also how that’s going to affect international banking.

I just had a situation, a gentleman invested in our company last week or the week before last and he sent a check in for $50,570. And banks now are not clearing checks more than $50,000. I mean crazy. His check was $570 more than the amount that they would clear. And we actually did get the bank to give us special dispensation on that, but again, those are the kinds of changes in the banking industry that are going to affect how we do business as North Americans, as U.S. citizens. A lot of banks are just quite frankly closing their doors to U.S. citizens because they don’t want the hassle. Peter Zipper will be there from Key Bank. He’ll be talking about that. And then we’ve got some other folks coming in to talk, Morey Glazier on the compliance and also how to own foreign assets inside an IRA or a 401K or other defined benefit programs. A lot of Americans have a lot of money sitting in their IRA, and it’s almost always in U.S. equities or bonds or U.S. cash. So, it’s not a diversified pot of money. And in many cases, that’s the biggest pot of liquidity that a North American has.

 

And so, getting some diversification, owning some foreign assets, whether it’s a piece of property inside your IRA or foreign stocks or a startup company, those kinds of things, there are lots of possibilities once you get your IRA offshore and into your own control. Morey and Gregg Adams will be talking about that. So, it’s a great lineup of speakers. We’ve got some folks coming in to talk about real estate in Belize, specifically. The conference is in Belize. We’ve got a trust company coming in to talk about the various trust structures, corporate structures, the retirement program, the QRP. So, it’s a wonderful conference, four days.

One of the things we do — and I’ll wrap this up on this comment — is we keep the conference small. I think right now we’ve got 28 registered attendees. We’ve got maybe about 15 or 18 presenters. And so, you see it’s a pretty good one to one and a half, maybe we’ll get up to. . . say we get up to 30 or 35 attendees. We really try to cap it at that. We never have more than 40 attendees on purpose, because we want the ratio of presenter to attendee to be that two to one kind of number. We have all of our meals together. We have breakfast, lunch and dinner the whole conference. All the meals are included, because we want the presenters sitting across the table from attendees.

We want there to be coffee breaks and breakfast roundtables and lots of time for people to really get to know one another and let the ideas kind of ferment, because at the end of the day, you sit in a presentation and for all morning you’re just getting blasted. It’s like a fire hose. I mean, how much can you drink out of a fire hose; not very much. But if the afternoon. . . it’s a lunch and then the afternoon’s got some free time and then your evening, your cocktails, your dinnertime. You’re hanging out together as a group. I mean, ideas that kind of got planted can grow and you can have these interesting conversations with somebody like Joel or like Morey or like Peter Zipper, and explore the nuances of an idea, because ultimately, the nuance of something is where the real substance of these types of things really is. The substance exists in the nuance.

So, the conference format is set up to allow these conversations to move in those directions. It’s a wonderful venue. It’s Exotic Caye Beach Resort. It sits right there on Ambergris Key. We have a rooftop cocktail on top of the Key Bank building, the fourth floor overlooking the reef and beautiful sunset over the bay. It’s a great venue. You’ve been to a few of these, Bill, and we hope that maybe you’ll join us again this year. I’m not sure if your schedule will permit. You were just in Belize, but if it permits, we’d certainly love to have you and Kim come back.

Bill:      Well, it’s always a lot of fun, guys. Let me kind of close up with — well first, by thanking you guys for coming on and just asking our listeners to maybe explore. You can go to the hemispherespublishing.com site. We’ll probably put a banner up. We’ll probably send an e-mail out as well regarding this, but one of the sleeper things of this is sitting next to people who think like you do. And there really are some amazing people, not just as presenters, but as attendees. And inevitably you’re sitting next to a doctor or somebody from this place. I never even told you guys this. One time I sat down with a doctor at the first evening supper and I said, “Where are you from?”  And he said, “Freeport, Illinois,” which is not too far from me. And the conversation led a little bit further and it turns out he had operated on one of Kim’s brothers who was injured in a motorcycle accident. So, you really never know who you’re going to run into. But one thing is always interesting, the attendees are the kind of people that are full of something and vinegar. I’m not sure what the first word is.

Joel:     I really agree with that comment, too. I love the attendees at this particular conference. One of the things Mike didn’t mention I’ll just throw out:  At the very end of the conference we do something that I think is pretty unique. Again, we can do it because the size is so small. We have a several hour roundtable at the end called, ‘So, where do we go from here?’  And it’s, you know, now you’ve heard all the presenters. You’ve had time to ask questions. Some people set up structures while they’re there on the spot. And it’s a very fascinating discussion.

We sort of set the ball in motion, but we have no idea where it’s going to go. Going back to your comment about the attendees, every conference is different, because the attendees are different. And they want to take that ball and run in any imaginable direction. So, it’s a lot of fun. I enjoy being there. It’s nice to mix business with the pleasure of nice people, good company, good weather. Maybe we can get out on the boat and do a little fishing, too. You got me thinking about that when you were telling us your story there.

Bill:      Yeah, it was fun, like I said, caught a lot of fish. There’s a lot of different opportunities. Hey guys, thanks so much for being with me today. It’s always a pleasure talking to you guys. It’s always a lot of fun. And we wish you the best at this next conference. Safe travels to both of you.

Mike:    Always a pleasure to be on the air with you. Thank you for having us.

Joel:     Thanks, Bill.

Bill:      Thanks, guys, so much. From our listeners’ standpoint, your time is valuable, as well, and we do appreciate the fact that you’ve spent the last hour with us. We’ll talk to you next time on Off the Grid News Radio.

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