Ideas Matter
FORBES
How to Keep off The Forbes Four Hundred
By Mark Skousen
“You see that man over there driving that tractor,” my father asked me as we drove by a farm. “He’s a millionaire.” This was in the 1950s. There weren’t a lot of millionaires around in the 1950s. Only my father, who was his attorney, knew that his net worth placed him among the highest 1% of the state’s citizens.
Dad’s client was no miser. He just didn’t believe in flaunting it. Maintaining a low profile is an established American tradition. You don’t have to be a drug dealer to prefer secrecy, anonymity, unlisted telephone numbers. It saves you a lot of bother and unwanted attention. Justice Louis Brandeis once said: “The right most prized by civilized man is the right to be left alone.”
A Warren Buffett cannot preserve his privacy, no matter how hard he tries. He runs a publicly traded company that controls many household names. The same with Bill Gates and with almost anyone who heads a big public company. Donald Trump does not, of course, even want to be anonymous.
But if the stock market or the business world has been good to you and you would just as soon not attract a lot of attention, here are some suggestions.
A prominent international tax attorney (who wishes to remain anonymous, of course) told me, “I know two dozen people who have avoided The Forbes Four Hundred list by going offshore.” He’s not talking about doing it to cheat Uncle Sam–though many people try that. There are legitimate motives: becoming judgment-proof, divorce-proof, or maybe even Forbes-proof.
Here are some ways to avoid tenacious Forbes researchers, litigious relatives and greedy ex-spouses:
1. Own real estate and other assets through non-identifiable trusts or corporations. Trusts may include a revocable living trust, land trust or charitable remainder trust. Such trusts not only avoid probate, but also can hide the identity of property owners. An irrevocable trust can convey ownership of real estate to others. In addition, the corporate veil can hide ownership; Nevada bearer corporations and Delaware corporations are especially popular for this purpose. Real estate expert John Schaub of Sarasota, Fla. has written a report on the subject, “Financial Privacy and Asset Protection for Real Estate Investors” (800-237-9222, $19). In addition to owning property in the name of a trust or corporation, Schaub recommends renting with an option to buy as a way to profit from appreciating real estate without getting noticed. The main drawback with this approach is that you don’t have the same protection against competing claims to the property that you do with a recorded deed.
2. Buy coins, art and collectibles through a reputable dealer or bid at auctions–both anonymously. The right collectibles are portable, recognizable and easily transferable: gold bullion, rare coins, diamonds and other gems.
3. Use trusts and international business corporations (IBCs). This is the ultimate privacy vehicle for wealthy Americans. In addition to foreign bank accounts and real estate, foreign trusts and corporations give additional protection through the use of nominee directors and shareholders. Note: Offshore accounts must be disclosed on Schedule B of your 1040 tax return.
An excellent source for these techniques is Financial Privacy Report, a newsletter edited by Michael Ketcher (612-895-8757, $99, annually).
I recently read in The Wealthy 100 that Ben Franklin was, after taking inflation and relative values into account, among the 100 wealthiest Americans ever. Old Ben had a saying that still resonates with many Americans: “Let every man know thee, but let no man know thee thoroughly.” Though he was a patriotic American, if Ben were around today, I suspect he would keep his affairs private by going offshore–probably to Paris.
Forbes · October 20, 1997
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