THE LIFEBOAT STRATEGY. Mark Nestmann
thousands of lawyers stand ready, willing, and able to facilitate that process. There’s simply no end to the dirty tricks that angry spouses or the lawyers representing them can play.
To start with, your spouse may start making 911 calls claiming that you are abusive. The goal is to get you thrown in jail and declared an unfit parent. That way, your spouse gets sole custody of your children.
Does your spouse have access to your cell phone or computer? If so, he or she can install monitoring devices to eavesdrop on every phone call, text message, e-mail message, or instant message you send. It’s illegal, but common.
How about your driving records? If you’ve even driven on a toll road with an electronic toll collection system, your spouse’s divorce attorney will retrieve these records. For instance, they might be useful at proving that instead of staying downtown to work late at the office, like you told your spouse, you actually passed through toll plaza a stone’s throw away from the Cheatin’ Heart Motel.13
But the real fun begins when it comes time to divide assets and determine “fair” alimony payments.
For instance: let’s say that you’ve built a successful business. Your spouse helped, but you did the lion’s share of the work. In divorce court, though, your spouse testifies that he or she did everything. The judge may well award your spouse your business, and leave you out in the cold. You may even be required to pay your ex-spouse for the cost of training someone to take your place.
If you’ve ever cheated on your taxes, your spouse can go to the IRS and receive up to a 30% reward for turning you in (Chapter 2). You say it was your spouse’s idea to take tax “shortcuts?” Just try to prove that to the IRS.
There’s also a sneaky legal concept called “enhanced earning capacity.” It’s particularly detrimental to a young person who gets divorced. Not only must you give your ex-spouse a hefty chunk of your assets, you must also make additional payments if your income increases. You might even have to make larger payments whether your income increases or not—it’s sufficient that it should increase.14
Your “Secret” Offshore Account Suddenly Isn’t So Secret
Speaking of cheating the IRS…over the last few years, the IRS has become much more aggressive in trying to unearth unreported offshore bank accounts. And the U.S. Treasury has forced dozens of countries to loosen their bank secrecy rules to allow U.S. tax authorities to make inquiries into account activities. If you have an unreported offshore account, this could spell big problems.15
Penalties for failing to report offshore accounts are severe. Count on a $10,000 penalty for each year you failed to report the account for starters. If there’s substantial unreported income, the penalties are much higher. And in aggravated situations, you may be imprisoned.16
What’s more, the definition of what constitutes a “foreign account” is constantly expanding. The IRS even wants foreign persons “in or doing business” in the UnitedStates to report their non-U.S. accounts, although it’s delayed the deadline for doing so indefinitely.17
These Are NOT Isolated Incidents…
The mainstream media keeps you well informed about celebrity sex scandals, drug abusing sports stars, and politicians who cheat on their spouses. But, I suspect you haven’t read much about the following trends:
• Criminalization. In 1789, when the first U.S. Congress met, there were three federal crimes: treason, counterfeiting and smuggling to avoid tariffs. Today, there are more than 4,000 of them. Congress enacts hundreds more laws annually, and the bureaucracies spawned to enforce them churn out more than 80,000 pages of regulations that carry the force of law each year. Many of these statutes and regulations impose criminal sanctions for their violation.18
• Erosion of electronic privacy. In 1967, the Supreme Court ruled that police needed to obtain a search warrant in order to wiretap your phone.19 That principle still applies, but in the intervening years, that protection has seriously eroded. For instance, police can obtain a list of phone numbers you dial or receive calls from, without a warrant.20
• Expanding theories of legal liability. The concept of “strict liability” holds that even if you’re in no way negligent, you may still be liable for damages in a lawsuit.21 And under the theory of “joint and several liability,” someone suing you can hold you “fully financially responsible” regardless of your individual share of the liability. If you’re 1% responsible for a $10 million loss, you might be required to compensate the successful litigant the full $10 million!22 That’s what made possible the lawsuits against parties with tenuous connections to the Rhode Island Station nightclub fire. Almost every state has some form of joint and several liability statute in force.
• Soaring property seizures. In 1984, Congress enacted a tough anti-drug law with greatly enhanced civil forfeiture provisions.23 Until then, revenues from civil forfeitures came to only a few million dollars annually. Nearly all these revenues resulted from seizures of vehicles and boats used to smuggle illegal drugs or other contraband across U.S. borders. State and local civil forfeiture laws were virtually non-existent. However, the law permitted police authorities to keep most or even all of the property they confiscate, or sell it to generate revenue. This encouraged states to enact their own civil forfeiture statutes. The results were predictable. In 2008, the Department of Justice’s “Asset Forfeiture Fund” generated more than $1.2 billion in “net forfeiture revenues.” And that figure doesn’t include billions more in civil forfeitures by state and local police authorities.24
You may be saying, “Why didn’t I hear about this? Why weren’t the newspapers shouting about these changes? Forget it, it’s the media—always pushing their own agenda.”
But don’t be too hard on the media. Sensationalism sells. Analyzing and reporting on legal trends isn’t nearly as lucrative. And while it’s easy to write about a specific lawsuit, regulation, or court decision, understanding the trend these legal developments represent is a lot more difficult.
…But There Are Solutions Available
Fortunately, for every one of the issues I’ve highlighted, there are solutions. For 25 years, I’ve been researching and writing about them, and more recently, I’ve helped hundreds of clients and their families protect their privacy and wealth from these very threats. Within the pages of The Lifeboat Strategy, you’ll learn how to:
• Shut the door on frivolous lawsuits. One of the simplest ways to prevent frivolous lawsuits is to make certain that any assets you own are pledged to another person or entity. No attorney is likely to sue you if there aren’t any assets available for recovery. A mortgage on your home is a great example, but there are many others. A more sophisticated strategy involves licensing key aspects of your business to another company, with your business making regular (and tax-deductible) licensing fee payments. Perhaps that second company is owned by an asset protection trust. The result: your business is no longer a “honey pot” for litigation. You’ll learn more about these concepts in Chapters 4 and 5.
• Restrict access to your electronic data. It’s easy to protect your electronic privacy by taking a few basic precautions. The most fundamental precaution is encryption. With an encryption program, no one but you and your intended recipient can read your e-mail messages, text messages, instant messages, etc. You can even encrypt your entire data stream to protect all records of your online life from prying eyes. You’ll learn how to do that in Chapter 3.
• Protect your assets from divorce. The safest way to prevent a nasty divorce is to never get married. But most people do anyway. One of the best ways to protect your finances in a marriage is a trust. Just make certain you set it up before you get married,