Unusual asset protection strategies

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abw
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Unusual asset protection strategies

Post by abw » Mon Jul 16, 2018 5:43 pm

I'm seeing more discussion of what I'd call unusual asset protection strategies than I recall in the past. Things like avocado farms in New Zealand or passports for Malta. I have two general questions that reflect my ignorance.

First, am I just seeing these now because I'm reading new sources? Have they always been marketed in the US and I've been oblivious? Or is it a new thing?

More importantly, (a) are these things people really consider and if so (b) at what level of assets do they become a real discussion? $10 million? $50 million?

(I'm assuming here that I don't live in a place where it's imperative to get cash out of China, for instance, to a safe haven so I can make cash-only property purchases in Vancouver.)

Thanks in advance.

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JoMoney
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Re: Unusual asset protection strategies

Post by JoMoney » Mon Jul 16, 2018 6:29 pm

As far as I can tell, there have always been people hyper concerned with asset protection strategies forever, going back to stories about a guy building an ark. Sometimes paranoia is justifiable, sometimes it's not.
Doomsday prepping was du jour ten years ago, now it seems people are looking at strategies to escape the U.S. for some eminent civil war or the take over by some extreme fascist or communist ideology... I'm of the opinion we'll survive the crossfire of nasty tweets and polemic muckraking...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

golfCaddy
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Re: Unusual asset protection strategies

Post by golfCaddy » Mon Jul 16, 2018 6:41 pm

Rich people have always practiced asset protection and sheltering for various reasons. Think of all the US tax evaders with Swiss bank accounts. I doubt many people, even the extremely rich, have Malta passports unless they're preppers or engaged in criminal activity. The one significant change is within the past 20 years, many states have enacted DAPT statutes, but that might not be as exotic as you're thinking of.

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FIREchief
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Re: Unusual asset protection strategies

Post by FIREchief » Mon Jul 16, 2018 7:06 pm

abw wrote:
Mon Jul 16, 2018 5:43 pm
I'm seeing more discussion of what I'd call unusual asset protection strategies than I recall in the past.
Is there anything in particular that we would be protecting a person's assets from?

Examples:
divorcing spouses
lawsuits
US political upheval
nuclear war
online theft
family insider theft
our own senility or just plain craziness
hostage takers

Many of those would require different strategies.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

abw
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Re: Unusual asset protection strategies

Post by abw » Mon Jul 16, 2018 7:14 pm

FIREchief wrote:
Mon Jul 16, 2018 7:06 pm

Is there anything in particular that we would be protecting a person's assets from?

...

Many of those would require different strategies.
I agree! Of the ones you list, political upheaval must be the most relevant for those avocado farm and Maltese passport strategies.

Of course, Michael Burry of Big Short fame supposedly invests in almond farms because of future water shortages, so that's another potential risk. Maybe it's easy to conflate asset protection and hedging.

Beehave
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Re: Unusual asset protection strategies

Post by Beehave » Mon Jul 16, 2018 9:27 pm

One reason behind asset protection scheming is the amount of gov't, personal, and corporate debt that is outstanding and the question of how it will play out. Some of the strategies are based on the idea that default, significant inflation, high taxation, confiscation, or reneging on promised obligations may be the answer; and, if so, that some protective scheme may be advisable.

One thing I've looked at is the possibility that there someday might be a Roth IRA conversion "tax holiday" to defray the debt in which, just as an example, anyone could convert their 401K into a Roth IRA for, say, a fixed 25% tax cost. Then I Iooked up the total amount of money in 401K plans in the US, and it is about 5.6 trillion dollars. The US debt is around 20 trillion dollars. So if nearly all people holding 401K plans opted for this hypothetical plan, it would at best eliminate 5% of our outstanding debt. But here's what shocked me, if all 401K holders decided to gift 100% of their 401K funds to the government, and the government then used the funds to pay down the debt, the remaining debt would still be fifteen trillion dollars.

I suspect that many people who have seriously looked at the amount of US debt are at least a little concerned that ordinary planning such as "keep a 60/40 allocation and rebalance periodically" may not adequately cover the possible future scenarios, which may explain outlier asset protection schemes such as the avocado farm in New Zealand.
(edited slightly shortly after original posting)

abw
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Re: Unusual asset protection strategies

Post by abw » Tue Jul 17, 2018 2:25 pm

Beehave wrote:
Mon Jul 16, 2018 9:27 pm
One reason behind asset protection scheming is the amount of gov't, personal, and corporate debt that is outstanding and the question of how it will play out. Some of the strategies are based on the idea that default, significant inflation, high taxation, confiscation, or reneging on promised obligations may be the answer; and, if so, that some protective scheme may be advisable.
Agreed. And as you suggest, the policy risk associated with Roth tools could be substantial.

Still I keep wondering at what wealth level things like second passports become relevant.

bhsince87
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Re: Unusual asset protection strategies

Post by bhsince87 » Tue Jul 17, 2018 2:39 pm

I think you're just becoming more exposed to them lately. You can blame targeted marketing, and the internet in general.

There is a constant demand for content that can pull in new eyes and get a few clicks. Especially the eyeballs of folks who already have a lot of money!

Plus the barrier to entry for new folks trying to hustle a buck off of such schemes is essentially zero these days.
BH87

47Percent
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Re: Unusual asset protection strategies

Post by 47Percent » Tue Jul 17, 2018 2:45 pm

abw wrote:
Tue Jul 17, 2018 2:25 pm
Beehave wrote:
Mon Jul 16, 2018 9:27 pm
One reason behind asset protection scheming is the amount of gov't, personal, and corporate debt that is outstanding and the question of how it will play out. Some of the strategies are based on the idea that default, significant inflation, high taxation, confiscation, or reneging on promised obligations may be the answer; and, if so, that some protective scheme may be advisable.
Agreed. And as you suggest, the policy risk associated with Roth tools could be substantial.

Still I keep wondering at what wealth level things like second passports become relevant.
I don't think it has that much to do with wealth level as mental health level.

Even folks who do not have two pennies to rub together subscribe to survivalist cults. In their mind they plan to survive if the entire world around them goes to hell in a hand basket -- stocking up water, canned food, ammo, etc., holed up in some enclaves and even building underground bunkers that would withstand (!) nuclear attacks.

DetroitRick
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Re: Unusual asset protection strategies

Post by DetroitRick » Tue Jul 17, 2018 3:51 pm

I think there are asset protection strategies worth paying some attention to, but others that are simply not. That's not any kind of advice, just my own choices in life. If I can take an action that won't turn my life upside down, AND the risk it mitigates is high probability, I'll do it. But nuclear war, infrastructure failure, and all that stuff - no, I won't do much, because the effort compared to the risk is huge and I have more immediate concerns. I suppose I might feel a little different if I was sitting on $100 mil and had more options. I've heard the dire warnings from the time I was aware enough for them to register in my little brain (late 1960's, I guess). But I do believe modern news in general, and the internet in particular, go to greater lengths in order to get us to read stuff than ever before. And much of that can be ignored. In other words, sensationalism isn't new, just more visible.

After reading your post about avocado farming in New Zealand, I can't get that Frank Zappa song out of my head ("movin' to Montana soon, just to raise me up a crop of dental floss ..."). But I digress, and asset protection is still a serious topic.

But to borrow FIREchief's list, lawsuits, online theft, family issues - those are pretty actionable and small steps can produce good results. For the rest of it, I'd rather just enjoy life and perhaps get blindsided some day. Stay fit, maintain whatever mental capacity I have, and be resilient. Those "precautions" will improve my life no matter what. I've been inspired by a close friend of mine in this regard. He and his family had to leave Iraq after the 2nd war. Multiple threats to life, taken hostage 3 times in one year, lost nearly all wealth, and yet was slowly able to rebuild in the US through hard work and resilience. Started out working long hours in minimum wage jobs, ended up rehabbing houses and becoming a successful landlord (yes, I've seen his tax returns). His road back, as near as I can assess it, was due to spirit, ability, intelligence and resilience. Not to asset protection plans.

You'll also notice that most of the companies pushing these unusual steps are on the receiving end of a lot of money from the fear they create. Doesn't mean they are right or wrong, but I believe it calls for a dash of skepticism. Best of luck in figuring your own balancing point.

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Emiliania
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Re: Unusual asset protection strategies

Post by Emiliania » Wed Jul 18, 2018 10:06 am

There is a common scenario that can wipe out a couple's assets: a long term health problem. We are well under those high net-worth values that were mentioned, so we are more vulnerable to this one.

And we've taken an unusual safeguard: despite 30 delightful years together, we're keeping our assets in two legally separate piles by not telling the government about our relationship and remaining unmarried. Some have called this an extreme approach, but I've never liked ceremonies anyway! (We've done all the rest of our paperwork with wills, healthcare directives, POA, etc.)

Carefreeap
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Re: Unusual asset protection strategies

Post by Carefreeap » Wed Jul 18, 2018 10:16 am

DetroitRick wrote:
Tue Jul 17, 2018 3:51 pm

You'll also notice that most of the companies pushing these unusual steps are on the receiving end of a lot of money from the fear they create. Doesn't mean they are right or wrong, but I believe it calls for a dash of skepticism.
+1

And right up there with various tax schemes to prevent the government from "taking" your money.

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