Mr. John has three companies in his country of residency. Those companies have different activities in Romania and Italy. He also owns three real estate properties in his residency country worth over 3 million Euro each. Mr. John contacted several personal loans a few years ago. Lately he has not been able to pay it and he is currently in default risk. The monthly income from properties and his companies is not enough to cover all the costs, because of the market situation. He thought also to sell one of the properties but since he wasn't able to get the right price seems not to be a solution for the moment.
Therefore he will risk entering in enforcement procedure and loose maybe all his property or affect companies' activity.
Mr. John needs to protect his assets and his companies' activity from the enforcement procedure and in the meantime to pay his debt from properties rental income and companies' profits. When market recovers he will be able to sell one of the properties at the right price to cover all the financing cost.
In this situation we recommend to Mr. John an efficient offshore structure to protect his wealth with minimum risk and costs so any threat of damaging litigation is greatly reduced.
The properties currently owned in the name of Mr. John could be transferred each to individual offshore companies (IBC's). That property portfolio might be structured in order to minimize or avoid, legally, any income or capital gains tax. It is a better option to create individual offshore companies for each property instead of just one for all of them in order to protect assets and to optimize tax when selling one of the properties.
We will also incorporate an offshore for the local companies, in order reduce or eliminate the tax and protect it from any possible litigation.
On the top of IBC's we will have a Offshore Foundation since offshore foundations are key structure for asset protection, estate planning tax free vehicles. We could use a trust but the foundation has its own legal personality and no legal owner. Foundation can be well mixed with offshore companies to maximize privacy, business confidentiality and to protect assets, accumulate and manage wealth. This will provide Mr. John the main following advantages:
- He will not be the direct owner of the offshore companies meaning that this will give him extra layer of protection and make him less vulnerable to liabilities.
- The Foundation regulations are based on the strictest legal principles of confidentiality and protection of patrimony.
- A document named Foundation Regulation also known as Foundation Whishes is created. This document is very similar to a will. This way Mr. John can legally state that he will be the sole beneficial owner of the Foundation. Under this, he can legally transfer all assets to his family or somebody else, appointing them as secondary beneficiary.
In this case Mr. John will be the Protector of the Foundation but not the founder. The Foundation constitutes a separate legal estate from that of the Founder and its assets are protected from future claims against him.
However it is a very common and useful structure to have a foundation as owner of an offshore corporation. The profit of the corporation is regularly transferred to the foundation but should a bankruptcy of the corporation occur, it would not affect the foundation at all.
In two years' time real estate market recovers and John is selling one of the properties at a convenient price. Due to this efficient proposed scheme he will sell one of the IBC owning the property optimizing all transaction tax costs and cover all his debt.
IBC - Offshore company
RE - Real estate property
LLC - Local Limited company