Rare Insights from FreedomFest
By Seth Van Brocklin
- From unexploited profit opportunities to essential asset protection strategies, you can still grow your wealth and freedom.
- Inside: Exclusive interview with offshore dualcitizenship expert.
FreedomFest bills itself as “the world’s largest gathering of free minds.” It took place this year from July 8th to 11th in Las Vegas. Speakers included such conservative luminaries as Steve Forbes and Glenn Beck. Presidential candidates Marco Rubio and Donald Trump were there, too.
But I didn’t attend FreedomFest for the celebrity headliners. I can just as easily keep up with them via the mainstream media.
I went to FreedomFest in search of diamonds in the rough among the lesser-known speakers and exhibitors. It is they who can provide the rare insights that aren’t widely known or accessible through conventional media outlets.
Toward Greater Self-Reliance, Freedom, and Wealth
Independent Living’s mission is to provide practical tips for greater self-reliance, freedom, and wealth. So I focused my attention on practical presenters who have real-world experience helping people achieve real-world goals. There are plenty pontificators and salespeople at large conferences such as FreedomFest. Fortunately, I also met a few interesting people with substantive insights that I think are worth sharing in this article.
One FreedomFest attendee I chatted with told me he’s gone to the event for 10 years in a row. “It gets bigger every year,” he said.
It’s encouraging that a “big tent” gathering of independent-minded conservatives and libertarians continues to grow. The Conservative Political Action Conference (CPAC) is still seen as more important among politicos looking to network with Washington insiders. But being Washington-centric has its disadvantages. CPAC has become GOP-beholden and Politically Correct to the point that popular speakers have been disinvited for being too critical of Republican leadership or too conservative on issues such as immigration. (Yes, at a “conservative” conference!)
FreedomFest is less stuffy and more authentically grassroots. It is also more oriented toward practical economic and financial concerns – investing, asset protection, privacy, etc.
Developing a Backup Plan Concerning Your Passport
I attended an interesting talk by Jon Green of Henley & Partners (www.henleyglobal.com) about dual citizenship programs. In previous issues, we’ve highlighted some of the options for obtaining a second passport as part of your Plan B.
It’s not for everyone. But it is something everyone should at least consider. Having a second passport opens up so many opportunities. In most cases, you need not relinquish your U.S. (or other) citizenship in order to acquire citizenship elsewhere.
After listening to Jon Green’s presentation, I (SVB) arranged to ask him (JG) a few follow-up questions. His answers are transcribed below.
SVB: What do you see as the advantages and disadvantages of renouncing citizenship as opposed to pursuing dual citizenship?
JG: A lot of people first get dual citizenship. They acquire that second citizenship in case they ever want to get to that stage where they expatriate. A lot of our clients want that backup plan. They may never expatriate. But in case it gets to that point where they want to, they have a backup plan already in place and another citizenship lined up. And they hold that second passport.
The most important thing with anybody expatriating is to plan it correctly and to hire the right lawyers in the U.S. Because there are major implications if you don’t do it correctly.
SVB: Well, there are record numbers of people who are actually renouncing their citizenship because of the fear of accelerating political threats in the U.S. But for people who just want, like you said, a backup plan, what are the most accessible places where they could go?
JG: Yeah, it is interesting. The numbers are increasing every year for expatriation, to record numbers as you said.
Now the most accessible countries are in the Caribbean. There’s St. Kitts & Nevis and Antigua, which both have two options to acquire citizenship. Either make a one-time payment to the government – it starts at about $300,000 U.S. Or you make an investment in real estate for about $500,000 U.S. And that will qualify you for citizenship. Those are the Caribbean options.
In the EU (European Union), we have the Malta program, which is around 1 million euros. Or Cyprus, which is around 2.5 million euros. So the passport is a little bit more valuable for the European programs because it affords greater visa-free travel.
SVB: And for those with more limited means – their options? They would have to have family connections or pursue higher-risk countries?
JG: Citizenship by descent is possible. If you have family or your parents were born in a country, you may be able to obtain citizenship from that country. That’s generally one of the best options if clients have it available.
But if clients don’t have that option or the financial means, they may want to look at a residency by investment program where you actually relocate to another country and spend 2, 3, 5, or even 10 years in that country. Then you’ll qualify for citizenship.
SVB: Thank you for your insights.
Other Offshore Options to Explore… While Staying Safe and Legal
Regardless of what type of citizenship or residency program you may be interested in, Green advises that you go through a firm that is a member of the Investment Migration Council. That way you can be confident you are dealing with someone reputable in the field.
Even if you aren’t interested in citizenship or residency, you may be able to benefit from holding assets offshore. Keep in mind, though, that the recent implementation of draconian FATCA regulations has made offshore accounts less private and more risky from a tax standpoint. Offshore banking isn’t what it used to be. But carefully structured foreign asset protection trusts and LLCs in safe jurisdictions can still be used to diversify your wealth and protect it from domestic threats.
Broke State Governments Cashing in on the Legalization of a $100 Billion Commodity
It’s not our place to weigh in on the marijuana legalization debate. Many people ask about the investment possibilities here. Marijuana has been legalized in a few states and likely will become legal in others – perhaps eventually becoming legal at the federal level. That means what was once a lucrative black market will increasingly become a lucrative regulated market where investors can (legally) get rich.
Already 35 states allow pot use in medical or certain other circumstances. And four states plus the District of Columbia allow full recreational use for adults. Jurisdictions that have opted to legalize have seen massive tax windfalls. Colorado, for example, has generated $70 million in marijuana tax revenue. The dollar signs that legalization brings will ultimately be too tempting for other states to pass up.
What an Odd Area of the Economy to Prosper Under Obamanomics
At some point marijuana will become legal nationally, according to Brett Rentmeester of WindRock Wealth Management (312-650-9822; www.windrockwealth.com). Rentmeester and Kip Ellsworth made the case for marijuana investing at FreedomFest. Ellsworth likens the marijuana investment opportunity to that of “alcohol coming out of prohibition.”
Marijuana is already a bigger market than tobacco. An estimated $80 billion in tobacco-related sales take place annually. But the largely underground marijuana industry (unofficially) tops $100 billion in transactions. Large corporations are wary of getting directly involved even in states where it’s legal. Federal anti-money laundering laws put marijuana profits in a legal gray area, and banks won’t process credit card or check transactions for marijuana retailers.
There are other, more immediate risks to owning a marijuana storefront. As Law Enforcement Against Prohibition notes, “Criminals know where the dispensaries are. They know the businesses are making thousands of dollars a day and that all of those transactions are in cash. It’s led to some horrific incidents, all courtesy of the federal government. They’re setting these businesses up to fail and, worse, they’re endangering people’s lives.”
Strange Social Forces Drive This Budding Market
Investors now also have the ability to buy shares of marijuana stocks. The number of publicly traded cannabis companies has grown to 300 – with most of them popping up just since last year. This sector should be approached with caution, though, as most of the names are still unproven and still carry significant legal risks to their business models. Those who are willing to take on the heightened risks in this sector could well enjoy heightened returns.
One stock to consider if you have an appetite for returns in this area is GW Pharmaceuticals (GWPH). It’s no fly-by-night operation; it’s a $2.6 billion company based out of the United Kingdom. GW “engages in discovering, developing, and commercializing cannabinoid prescription medicines” (medicinal marijuana). The stock has certainly given investors a financial “high” over the past couple years with its stair-stepping ascent.
How to Tell if You Have the Wrong Tax Accountant.
Investors tend to get more excited about the potential for huge profits than they do about preserving their wealth. But wealth preservation, including asset protection and tax-minimization, is more important than chasing after returns.
Will Howard, head of Joe Gandolfo & Associates (800-553-1008; www.joegandolfo.com), had a lot to say on this topic. His company assists clients from around the country with tax and estate planning. And in his talk,“What Your Attorney and Accountant Won’t Tell You About Cutting Your Taxes and Protecting Your Wealth,” he shared some very useful insights.
One of the most widely useable tax tips he gave concerns IRS Code Section 212. This section allows investors to deduct their investment expenses. That includes conference costs (e.g., FreedomFest) and newsletter subscriptions (e.g., Independent Living) that aid in your investment research. If your tax accountant hasn’t mentioned this deduction or says you can’t take it, then according to Will Howard, “you have the wrong CPA.”
Very Big Tax and Estate Planning Mistakes to Avoid
Now for what not to do. According to Howard, converting a traditional IRA to a Roth IRA is “a dumb idea” in most cases – because you’ll owe taxes up front on the conversion.
Over age 70 ½? Don’t let the IRS penalize you for failing to take required distributions! Obtain a QLAC (Qualified Longevity Annuity Contract) within your IRA to shield yourself from required minimum distribution penalties.
Family limited partnerships, touted by promoters as asset protection tools, don’t deliver on all the promoters’ claims. They carry hefty fees and attract litigation and IRS audits. “If you have one, get rid of it,” Howard advises. Instead hold assets you want to protect within a trust or limited liability company (LLC). Howard suggests that all investment real estate should be held in an LLC or S Corporation – with a Nevada LLC being the preferred structure.
Never cosign on loans, rental agreements, or asset purchases. And never establish a joint bank or brokerage account with a child. Doing so increases your exposure to judgment creditors and could even trigger gift tax liabilities.
Beware of trust “portability.” Thanks to an Obama administration rule change, trust assets can more easily flow between spouses. Sounds nice, but there’s a catch. The new rules require more disclosure of personal data, defeating many of the privacy advantages of estate trusts.
Stick with a revocable living trust for privacy. Forget about a “testamentary” trust a lawyer may want to write up for you as an estate planning tool. Testamentary trusts don’t actually avoid probate. Revocable living trusts do. Finally, avoid banks as trustees. “Do not use a bank trust company,” Will Howard told his FreedomFest audience. “They underperform. They overcharge.”