An underlying meme proliferated throughout the American economic system is ownership. The so called “American Dream” is to own; own a home, own a car, own as much as you can; and keep it all in your name. Many American teenagers and 20 somethings of many social classes experience a brief period of freedom in their lives when they have little or no ownership. Work hard, then spend your money so that you can say ‘it’s mine’ – this is the mantra drilled into the minds who go through the education system.
They reinforce this by unfairly comparing the American ‘ownership’ society to societies where ownership was illegal or impossible. So we are supposed to feel lucky by owning things.
Anyone who has ever been through a bankruptcy, divorce, or lawsuit, will probably understand that ownership is a liability.
The simplest example is physical assets, most notably any real estate. Property requires maintenance, taxes must be paid, in the case of residential areas association dues, etc. Also it’s an accident waiting to happen; someone breaks their leg on your property and sues you.
Katko v. Briney
The defendant owned an old unoccupied farmhouse in Iowa, the property was boarded up, had “no trespass” signs around it, and had been unused and was in a deteriorating condition for several years. Briney was very upset with the constant burglaries and break-ins into his unoccupied farmhouse. To solve this issue, Briney mounted a 20-gauge spring-loaded shotgun in the farmhouse to fire when the north bedroom door was opened. The gun was aimed to shoot an intruder’s legs so as not to cause a mortal injury. Five days later, Katko went into the farmhouse with the intent of collecting some old bottles and dated fruit jars that Katko considered antiques. Upon entering the room, the trigger mechanism was tripped and the shotgun fired into Katko’s legs at point blank range. The gunshot wounds sustained by Katko were sufficiently severe for him to require hospitalization. Katko sued Briney after his release from hospital.
The case had several subsequent results. The Brineys sold 80 of their 120 acres (0.49 km2) to pay the judgment while proceeding with an appeal. Three of Briney’s neighbors bought the property at auction, paying $1 more than the minimum bid of $10,000. After the appeal was denied, they made a leaseback arrangement with Briney, but eventually one sold his share to his son for a profit. Briney and Katko then joined in a lawsuit against the neighbor to create a constructive trust on the profit, but the case was settled before trial in an amount sufficient to close out the judgment against Briney.[1]
As Katko’s injury was misreported by the United Press International wire service as having taken place in the Briney residence, several states introduced what were called “Briney Bills” for self-defense, which was not at issue in the case. The Nebraska Legislature act, stating that no person … shall be placed in … jeopardy … for protecting, by any means necessary, himself, his family, or his real estate property …, was overturned due to improper delegation of sentencing authority in State v. Goodseal (1971).[1]
Four years after the case was decided, Briney was asked if he would change anything about the situation. Briney replied: “There’s one thing I’d do different, though, I’d have aimed that gun a few feet higher.”[2]
This case shows how even an abandoned property can create liability; you have to protect it, maintain it, and even a burglar can sue you!
Taxes
Most taxes are the obligation to the individual receiving the income. There is no way around income tax, everyone claims deductions but aside from that income tax is personal liability. There are hidden costs to income tax such as if you utilize credit, making payments to loan obligations (with a few small exceptions such as interest on mortgages) is not deductible.
The Elite
Long ago the Elite learned that ownership is a liability. This is why they limit personal income and assets to a reasonable level and keep most assets in trusts, charities, corporations, and other types of entities.
Historian Howard Zinn points to the Ludlow Massacre as the watershed event that caused the Elite to rethink their social position.
The Ludlow Massacre was an attack by the Colorado National Guard and Colorado Fuel & Iron Company camp guards on a tent colony of 1,200 striking coal miners and their families at Ludlow, Colorado on April 20, 1914.
In 1914, when workers at Colorado mine went on strike, company guards fired machine guns and killed several men. More battling followed, during which 2 women and 11 children were killed and John D. Rockefeller Jr., the chief mine owner, was pilloried for what had happened.
The massacre resulted in the violent deaths of between 19 and 25 people; sources vary but include two women and eleven children, asphyxiated and burned to death under a single tent. The deaths occurred after a daylong fight between militia and camp guards against striking workers. Ludlow was the deadliest single incident in the southern Colorado Coal Strike, lasting from September 1913 through December 1914. The strike was organized by the United Mine Workers of America (UMWA) against coal mining companies in Colorado. The three largest companies involved were the Rockefeller family-owned Colorado Fuel & Iron Company (CF&I), the Rocky Mountain Fuel Company (RMF), and the Victor-American Fuel Company (VAF).
In retaliation for Ludlow, the miners armed themselves and attacked dozens of mines over the next ten days, destroying property and engaging in several skirmishes with the Colorado National Guard along a 40-mile front from Trinidad to Walsenburg.[1] The entire strike would cost between 69 and 199 lives. Thomas G. Andrews described it as the “deadliest strike in the history of the United States”.[2]
The Ludlow Massacre was a watershed moment in American labor relations. Historian Howard Zinn described the Ludlow Massacre as “the culminating act of perhaps the most violent struggle between corporate power and laboring men in American history”.[3] Congress responded to public outcry by directing the House Committee on Mines and Mining to investigate the incident.[4] Its report, published in 1915, was influential in promoting child labor laws and an eight-hour work day.
The result of this situation led to the beginnings of workers rights institutions, as well as the Elite heavily using foundations and charities they funded, owned, and controlled, to have the appearance of ‘giving back’ – but also giving them big tax breaks.
The Rockefeller Foundation was founded in 1913, around the same time as the founding of the Federal Reserve Private Central Bank System, and the beginning of a new ‘institutional’ era of ownership. The previous generation was ‘owned’ by individuals such as Rockefeller, whereas the modern system we have now is owned and controlled by institutions. This took hold during and after WW2, with the foundation of institutions across multiple industries, but most notably banking and intelligence institutions such as the IMF and the CIA.
The Problem
People are reluctant to transfer assets out of their name. But strangely, they are doing this every time they make a deposit in a bank account! But since the bank produces a paper with their name on it, they feel that the account is actually ‘theirs’ which we’ve seen proven false with all the institutional problems of late.
The way most trusts are setup they are more like a contract with a ‘trusted’ agent called a fiduciary, usually an attorney or financial professional, who acts as a trusted custodian.
When you have assets in your personal name you are a target. Not only are you liable to manage the assets, you’re only one situation away from potentially losing them. A business deal gone bad, angry ex lover, desperate family members, or a desperate government trying to create new revenue, are all potential problems.
The Solution
The solution is simple; establish an entity for yourself or immediate family, ideally in a 2nd country. Don’t be misled thinking there is a paradise of some jurisdiction. The fact is that it’s always better to work with 2 countries than one. For those living in the EU, the US may be a good jurisdiction to setup an entity. The reason for this is there is usually special treatment for foreigners. For example in the case of Malta, Malta has rules regarding “International Trading Companies” that are not applicable to Maltese residents. Only foreigners with assets in Malta can receive tax benefits, it is not available to locals. The same applies to IRS rules where a double taxation treaty exists. The point is not to dissect the rules in each jurisdiction, rather to understand that working in 2 jurisdictions is always better than one. Also, as the global situation changes, it may be difficult to get established offshore as they close the borders, whereas existing entities may be grandfathered in with old rules.
Transferring assets out of your name is a big leap for many who have been taught to be ‘owners’ – but there are many structures that would allow the same degree of control over your assets while providing protection from the threats listed in this article. If you are considering doing this, understand that it will be required for a law firm to establish the entity for you, but much of the work can be done yourself if you choose. Otherwise you will need to find a financial adviser in the jurisdiction where you are considering establishing your entity. DO NOT consult with US advisers about offshore structures unless it is their specific specialty. Similarly, if you are in the EU, do not consult with EU advisers about US rules.
Structured Consulting can assist in establishing an offshore corporation or trust for you, or simply put you in contact with our network of international professionals. Contact Structured Consulting
