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How to create a perpetual family office
Mundo´s experts have been asked many times at conferences and
by our readers as to how ultra high net worth individuals, families and
international corporations manage to avoid almost all of the taxation and legal
burdens faced by the middle class and whether such things are only for the
ultra rich.
In this article we have decided to
reveal the “secrets” of the world´s wealthiest families and how their legal
advisers structure their holdings. I
have called this the 5-step walk to total freedom. Some people call this the
Five Flag theory, others call it the ultimate Plan B. In essence, the concept
is quite simple and understanding it will save you tens of thousands in consultancy
fees.
Indeed,there is only one way to
legally escape creditors, governments, socialist policies, and restrictions on
your freedom forever for you and your children. This is it and Mundo calls it
Forever Free.
Before explaining this journeyit is
important to note that some of the world´s wealthiest families such as the
Rothschilds and the Rockefellers have been using structures similar to these
for nearly 100 years, and it is really the existence of such structures that
have ensured that 80% of the world´s money supply has over generations been
concentrated in 1% of the world´s population.
Since our personal belief is that
society should increase the wealth and power of the middle class,we would like
to be able to share this with our readers. I have successfully used this type
of structure for many of my clients over the past ten years. I have run this
structure by top accountancy, tax and legal counsel in various countries and
none have been able to see any flaws in it, in fact some have asked me not to
reveal it to the public because people will realize how simple and easy this
concept is to implement.
Before exploring the architectural
structuring of a Family Office, we first need to understand the philosophy
behind it. The mistake many advisers make is a failure to understand the
ethical, moral, and legal foundations of freedom as a social construction. In
other words, what is freedom and why dowe need it?
The philosophy of freedom
It is not coincidental that the
study of philosophy and ancient history has all but been eliminated from the classroom
by most major governments. No one ever asks the question of why we even need governments
and taxation, as if this was a belief so anchored in our psyche as to not need
analysis. In a way it is similar to the belief in god that the Christian world
had in the dark ages. It was considered heresy to even question the existence
ofa benevolent almighty god, in the same way today it is heresy to even
question the need for a benevolent big brother state. However, it was not
always so.
Arguably the first society to
placea high value on individual freedom and rights were the Greeks. Socrates
was one of the firstphilosophers to insist on questioning institutions suchas
the state, religion and even armies and wars, because he emphasized the value
of being free from all institutions. Of course, we know he was voluntarily killed
for his beliefs, but his death symbolized to the Greeks that freedom in all its
aspects (intellectual, physical, financial, moral, etc.) was worth dying for.
The Greeks were, indeed, one of the
only, if not the only, ancient civilization that believed in individual
liberties and valued freedom.
A second philosophy, represented by
the Persians and indeed all other ancient civilizations, was the concept of a big
brother government where the ruler was supreme and everyone else were slaves. Accordingto
this philosophy,big brother looks after his citizens and his rule is absolute.
It is society, the empire (big brother), who exists with the purpose of looking
after its people.
In modern society,big brother has
come to dominate our political and social way of thinking almost to the
complete exclusion of individual liberties.
In modern history, movements like
national socialism (the Nazis) argued that the state was supreme, and the society
was simply a beehive designed to serve the greater social good of the state.
Hitler argued for the elimination of all liberties and rights and indeed the
eventual elimination of the family as an institution, opposed to the expansion
of state control. Similar philosophies of complete state control were
propounded by the Marxists and the soviet state.
Today we can see the development of
these ways of thinking almost to the exclusion of all others. The power of the
state can be seen recently with the complete control by most governments in the
Covid “pandemics”. No one questions the right
of governments to place their citizensunder house arrest anymore, the right to
restrict their movement and indeed imprison and fine them for going to the
beach.
But the above is only the
conclusion to a development of social control which has been growing like a
cancer since the last 50 years. Today no one questions high taxation, the power
of governments to track and survey their citizens, the control of the education
and health systems and the advent of ever-increasing confiscation of wealth.
If we objectively look at the world,
traditional Greek concept of individual freedom no loner exists.
South Africa, for example, is
controlled by the ANC, which started and remains a Marxist organization whose
very constitution is dedicated to spreading universal communism and removing
property. Indeed,true to its purpose and very much like Mugabi, these soviet
influenced and trained operatives are stripping wealthy people in South Africa by
confiscation and murder. Similar forces run throughout much of the African
continent, which is now being more and more controlled by the communist party
of China with its imperialist “belt and road policies”.
In Venezuela the cancer of communism
has ravaged the country to the extent that an uneducated former bus driver is
now a self proclaimed king of the people, with individual rights and liberties being
onlya distant memory that´s been left far behind in the past. However, only 30
years agoor so Venezuela was the financial powerhouse of Latin America. It
should be remembered that the decay of Venezuela started with the idea that wealth
should be confiscated from the rich and distributed to the poor. This simple
and incorrect idea is what infects most of the world today, even more than the
coronavirus does.
Indeed,the disease of communism and
its opposite feudalism has spread like a fire throughout allLatin America,
where we see high taxation, riots and social unrest and the philosophy that the
government should somehow help fix things. It is onlya matter of time when other
western countries decay into copies of Venezuela. Latin America hasbecome a
place where the communists steal from the rich feudal lords who themselves had
stolen from the people, perpetuating anever-increasing cycle of theft, poverty,
and social decay.
About Europe, we all know it has
become communist in all but the name. Taxation both explicit and hidden has
become so high that it is impossible to run a business in most European
countries and the stated aim of Europe is to eliminate cash and place everyone
on a fixed income. It is clear that theSoviet idea ofa universal (low) wage and
state control has won withouta single shot being fired. The ever-increasingimplementation
of death duties, inheritance taxes and wealth taxes combined with creeping property
taxes determines the end ofa wealthy and middle class in Europe, and the ultimate
consummation ofthe big brother slave state.
The United States too is on the
verge ofa civil war with most of the population in poverty and wanting to
support universal income and socialist taxation, with a country completely
divided by social, class, religious and racial characteristics to suchan extent
that it is no longer safe to even walk the streets.
In this we are seeing ever
increasing destruction of individualism and liberty, and these tendencies are
increasing in asnowball effect.
Today, confiscation of wealth and
property has become the most pressing agenda of many of the world´s largest governments
and certainly of the OECD and the EU. Mistakenly they believe that taking
something away can solve the social problems that theythemselves have created. However,
as we see with Venezuela when the world´s wealthiest, smartest, and often most
gifted individuals leave acountry, that country collapses.
Ayn Rand -back to the Greeks
One of the few (arguably the only)
modern philosophers to take a close look at personal freedom was Ayn Rand,
whose seminal work, Atlas Shrugged, has influenced generations of businessmen, family
offices and entrepreneurs.
Ayn Rand simply argued that,in
essence,individual freedom to earn the fruits of one´slabor free of government
and social control is a fundamental human right.
The individual, she argued, is the
most important and significant unit of society and his/her rights to property,
self determination, and self governance are paramount.
A country is after all an arbitrary
agreement, often not even put into law that a set of individuals living and being
born ina particular territory act ina certain way. Why, she asks, should the
fact that I am born somewhere and live somewhere mean that I have to give away
50% or more of everything I make to a government who distributes it to other
people living in the same piece of territory. The fact that some people take
away my hard-earned goods without any reason is nothing less than theft.
In AtlasShrugged, almost ina
prophetic way, she predicted the collapse of American society through high
taxation, surveillance, confiscation, and socialism. In Atlas Shrugged the heroes
of the book being the entrepreneurs, thinkers, intellectuals and inventors who
make society great, simply leave to create their own island paradise based on
the gold standard and new technologies and, with their leaving, America
collapses.
At the risk of not doing justice to
the depth and complexity of Ayn Rand´s thought , her central thesis is that the
state-democracy-, empires, governments and essentially countries are pure
social concepts created to control people and make them into slaves.
The freeindividual owed no
allegiance to anyone except their own fundamental human creative power. The
individual has the right to create, to run business, to invent and to exchange
with other individuals without the need of governments.
In essence, she says that we all
have the right and power to become our own self-determining government.
Her philosophy has been taken up by
enthusiast of Blockchainwho can now create decentralized exchange systems
whereby central governments are no longer necessary.
However, the ability and power to remove as far as possible the powers of governments and states over individuals is not only a philosophical concept, it is also a legal and structural concept which can be done to protect an individual and family wealth and structure their freedoms forever.
The concept is to create an eternal
structure which functions in many ways outside the power or control of any governmentand
therefore grows organically and perpetually to protect and enhance family
wealth. In a sense, a wealthy individual or a family take back their own self
determination and become free -they exit the state of being a slave or the
slave state.
The legal mechanisms for the
structuring of freedom have been developed for the last six hundred years to
protect wealthy families and individuals.
The structure has been called a family office, or The Five Flag theory.
Having explained the why behind
the theory we will now explain the how.
Baron Rothschild and the 5-flag
theory, the philosophical concept behind a family office
Whilst the real history behind what
we outline here is very much obscured by the mists of time and legend, it is
fair to say that the concept of an eternal family office was developed, if not
created, by BaronRothschild.
The Rothschilds were in the very
dangerous business of lending to kings and knew the capricious and arbitrarypowers
of kings. Lendinga king money was especially dangerous ifa king losta war as
the natural response of kings was to put the lender to death at worst or
confiscate his wealth. So,BaronRothschild developed a system based on a series
of structures (corporations and trusts) spread across 5 jurisdictions.
Some say he did this because of the
biblical concept of the hand with five fingers signifying the power of god,
others say that he chose five because he had five sons,each of whom directed
his part of the business froma different jurisdiction, but whatever the casethis
became later to be copied by many of the world’swealthiest families.
You see at that time, and it may be
said even now, corporations (e.g. the east India trading company) were even
more powerful in manycases than governments and had more money. So, by creating
a series of corporations, Rothschilds became not only free of government
control but over time they accumulated more wealth than many governments.
You see a trust and corporation can
essentially function legally as their own sovereign entities or governments as
the legal mechanisms that determine their functioning are the same as the legal
mechanisms that drive governments.
The legal structures created and
developed by the Rothschilds arguably made them the most powerful family office
in the entire world.
Whist many writers call the five-flagtheory
a theory of minimizing taxes by perpetual traveling, nothing could be further
from the truth. The proper structuring of afamily office using the five flag
theory means that the family wealth is protected intergenerationally and forever,
and we will explain this further down.
Further, whilst many commentators
and writers say that since the OECD initiativesutilizingoffshore structures is
no loner viable, again nothing could be further from the truth. The current
global financial collapse and encroachment on liberties by many states have ironically
created huge opportunities for families to plan their family offices in jurisdictions
which welcome family wealth optimization.
Not only iswhat we are about to
tell you perfectly legal, but it is essentially so simple that implementing this strategy
will save you tens of thousands in consultancy fees.
So now let us take a quick walk to
freedom, at Mundo we call this: the 5 steps to perpetual freedom or “Forever
Free “
The Forever Free strategy is not
about doing anything illegal or indeed hiding, it is designed to simply walk
away from all the restrictions and obligations which empires place on their
slave citizens. How is this done, well, the answer is simple: by getting ona
very comfortable first class plane flight away from high tax socialist
countries and letting them rot in their own moral and social decay. Yes, it´s
as simpleas that, and we explain how.
Step 1: obtain a second citizenship
in a zero-tax country
Whilst the United States is the only country which
at present taxes its citizens on their worldwide income whether or not they
live in the land of the free, the OECD has already indicated that it wishes to control its citizens by receiving
information under CRS about them even if they live somewhere else, this is
really the first stage to enacting a similar taxation system to the United States.
Further OECD are increasingly
creating more and more complex tax residency rules basically trying to tax
their citizens even if they don’t live in Europe. This means that if you have a
house which they define as a place of residency, a company you control, or any
other ties to Europe which they define, they can tax you even if you and your
family live somewhere else. Further, if you are defined as having such
substantial ties you will be caught in the tax net for all the horrible taxes
they have enacted including wealth tax (taxes on how much money you have)
inheritance and death taxes (taxes on what you leave to your children),
investment taxes(taxes on income from investments on which you already have
paid tax), etc.
Now the tax police in many European
countries have already compiled a special list of high net worth individuals
whom they are targeting so they can squeeze more dollars out of them. The OECD member
nations starting with the European Union have enacted a range of special legislation
to be able to arrest the bank accounts of their citizens and indeed have the
power to withhold the issue of passports for unpaid taxes or those under
investigation(whatever that may mean ).
If you obtain a second passport in
a country which has alow tax rate, then you have the opportunity to escape the OECD
net not just for now, but for future generations as well.
Today, with Covid restrictions
adding to this, the states can and will restrict your freedom in numerous ways
including placing you under house arrest. The only way to avoid this is by obtaining
a second passport so you have a choice. Today a second third or even fourth
passport are more necessary than a car ora yacht since it cannot be taken away
and is the only thing that gives youa right to live ina country.
In the world there are only 9 true economic
citizenships -these are the Caribbean islands (St Kitts, Grenada, Dominica, St
Lucia, Antigua), Vanuatu, Montenegro, Malta, Turkey.
Of those, Vanuatu is the only
economic citizenship nation in the world to have no personal income tax
whatsoever, no gift tax, no wealth tax, no death duties and no corporate profit
tax . A Vanuatu citizen /tax resident can make billions of dollars in personal
investments and pay nothing to Vanuatu ever.
Havinga second citizenship is the first step in establishing a family office because it provides the family members with a jurisdiction where they can hold bank accounts ascitizens. In many casesfamilies often have multiple citizenships to diversify risk.
Step 2: obtain a second residency
Now it may not be a surprise that
having a second citizenship is of little benefit for tax planning purposes
unless you combine it with a tax residency.
However, these days a tax residency must be a place which is genuinely
recognized by the tax authorities of the country in which you reside as an
actual tax residency.
The challenge is to choose a tax
residency in a country which does not tax foreign sourced income and in which
you and your family can comfortably live and do business at least ina Plan B
situation. There are not many of these left.
Whilst countries like Portugal give
you tax exemptions on worldwide income for ten years in some cases and
Montenegro and Cyprus can offer interesting tax residency options the places in
Europe where families can optimize their tax residency are becoming fewer.
Having tax residency in most of Europe
is like playing with fire due to what we my call the socialist (or perhaps
communist/dictatorial) leanings of the Europeans. The Europeans are
unfortunately back in the middle ages where they like to freeze everything form
free speech to bank accounts.
Whist we could write a whole paper
on tax residency options,one of my favorites is Panama. Panama does not tax
worldwide income and permits tax residency based on a test involving your
connections to the country such as an operating business. Residency is quite
easy to acquire and Panamanians are pro-business. A Panamanian tax residency
allows you to easily open Panamanian bank accounts and brokerage accounts and
receive income from investments tax free.
There are however still many other
excellent options which are useful for a family either as Plan B or as an
actual living destination. These include Singapore, Switzerland, Hungary,
Malta, Dubai, Greece and even Italy. Ironically, more and more countries are
attracting wealthy families with interesting tax residency options.
Step 3: the dynasty trust
The dynasty trust is a carefully
crafted trust deed that protects you and your children and their children
forever from attack by creditors of any kind. This is really the Rolls Royce of
asset protection and means that if you become bankrupt or get attacked by any
type of creditor (including spouses , inheritance claims, bankruptcy claims,
even tax claims) the trust will protect
you and your family.
One of the best trusts
jurisdictions is Nevis. The small island of Nevis has enacted a comprehensive
trust regime considered by most experts to be ranked as the top jurisdiction, even
better than the Cook Islands. The trust pays no tax of any kind on income
coming into Nevis and does not recognize foreign claims for inheritance, gift,
income, wealth or any kind of tax.
More complex family structures can
be established in certain parts of Europe and, in some cases, the advantages of
offshore jurisdictions like Nevis can be combined with these with the correct
planning.
The trust is actually the essence
and foundation of family office planning.
Since all assets are owned by the
trust, no claim against you personally is valid against the trust. This
confirms to the famous saying of JD Rockefeller “control everything, own
nothing”.
The trust should then own your
holding companies and operating companies that are your business assets and
passive income.
The Nevis trust can also be
combined with onshore trusts (notably Madeira /Hungary) for European compliant
asset protection which takes advantage of relevant double taxation treaties.
Step 4: the operating company
The OECD via the CRS (common
reporting standard) classifies an operating company as one having 50% or more
of its funds in active business. An operating company reports back to its place
of incorporation and not to the place where its UBO is resident.
In order to take advantage of this,
banksrequire the company to show substance, that means an office, an actual
business and some staff.
If an operating company
incorporates ina low tax or zero tax regime for its worldwide profit this
allows tax optimization.
There are many regimes to attract operating
companies including Ireland, Dubai, Shanghai Free economic Zone, Uruguay Free
economic zone and Panama. Of these, one of my favorites is the Panama free zone
because of the simplicity of the regime. There is simply no tax on worldwide
income, no import and export taxes and very minimal requirements to obtain the
free zone certificate (one staff and an office). The Panama Free zone regime allows for almost
any business set up including services and crypto business without any red tape
or bureaucracy and is ideal for trade with China.
Indeed, with new bilateral
agreements between China and Panama, the freezone can become the central office
for a Chinese investor to trade with China and the rest of the world.
Panamanian banks are now beginning to open accounts in Yuan.
Step 5: create a hedge fund
Every family office needs to have a
permanent set of dedicated financial advisors to assist the family to take advantage
of co-investment opportunities with other family offices and also to establish
a strategy of hedging against risk bya combination of diversification into
various types of assets.
Families who have high wealth can create
their own hedge funds which the invest in various asset classes in diversified
strategic locations. These can include IPO, gold and precious metals, cryptofunds
and distressed real estate opportunities.
For families who have wealth over 2
million, establishing their own hedge fund makes sense, however even with lower
wealth the strategy can be achieved simply by using an advisor to your existing
trust structure.
Total freedom
By properly structuring your
residency and your second citizenship, establishing a trust which owns an
operating company you have now established a structure which will last
generations and protect you and your children and their children forever.
The operating company will the
establish various bank accounts diversifying its holdings into passive
investment income such as bonds, real state and shares and active business
operations such as trade. The operating company will lend money to its
associated holdings in order to optimize its tax position and make use of
double taxation treaties via its holdings in operating with other countries.
The operating company will set up
different branches, holdings or subsidiaries in various countries to maximize
its trading opportunities but at all times the structure itself will be used in
the same way that international companies such as Apple and Google or
international families structure their affairs.
You and your children will become global
citizens unaffected by the tides and turns of outrageous fortune, financial crises,
or attacks by creditors because in the end you will become legally and forever
free of all these things.
Contact us right now if you want to
set up the best structure for asset protection and be forever free in
perpetuity.
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