Everyone knows about the absolute privacy that Nevada corps and offshore planning provide right?
Marketers go on to paint wonderful pictures of no one ever knowing what you are doing and you being able to have all your money grow perfectly protected, no taxes, no lawsuits, just good times sipping pina coladas on the beach!
Unfortunatly most of these privacy based plans typically come to light and rain financial chaos and destruction upon their creators.
Case in point, SPOTTS v. UNITED STATES OF AMERICA, in this case Mr. and Mrs Spotts implented what they thought was a great tax and asset protection scheme.
In 1994, they created a Nevada LLC to have their wages/commissions assigned to, then had that money flow offshore, all presumably without paying a dime in taxes. Then when they wanted to purchase a home, they had $180K of their money wired from an offshore bank to help purchase their home. They then filed a lien against their home for that amount so as to provide asset protection. Life was dreamy.
Unfortunatly maritial woes hit in 1998 and they got a divorce. Mr. Spotts divorce atty. recomended that he come clean with the IRS, and so Mr. Spotts filed amended tax returns for the years that he somehow overlooked certain amounts of income. The amount of back taxes he owed came out to be a paltry $375,000.
Our friends at the IRS, the understanding souls that they are waited until 2002 for Mr. Spotts to pay off his taxes. When they hadn't received their money, they placed a lien upon his home, and currently their is a court case to determine what portion of the home the IRS gets to take, and what portion Mrs. Spotts gets to keep (My guess is that Mrs. Spotts will probably try to file for innocent spouse relief).
What's the moral to this story? Do not use privacy as the basis of your asset protection and tax planning, there are a number of ways to use legitimate, code based, structures to help save taxes and provide asset protection. Otherwise, a spouse, significant other, partner invariably are going to get made at you and decide to reveal all to the proper authorities.
