Do I need Asset Protection with my Act 20 & Act 22 status in Puerto Rico?

Act 20 & Act 22 have the potential to have a huge impact on Puerto Rico by attracting the right kind of investment and residents. If you are already in the process of filing your Act 20 or 22 petition, then you already know how beneficial this can be to your bottom line tax bill.

If you haven’t or are not yet familiar with how Puerto Rico’s new laws can benefit you, see my full post on the issue now.

So the next logical question is; “how can I further enhance the strength of my Puerto Rican plan?” The answer is by implementing an Asset Protection structure in conjunction with your Act 20 & 22 planning.

The first question is why would you bother? It seems like moving to PR may have even lowered your risk, as you are semi-out of the U.S. and the dysfunctional U.S. legal system. The problem is that in reality you are not. In fact, a closer look at the situation and it becomes apparent that your risk has increased. Here’s why:

1. By moving a portion of your operation out of the U.S. you have exposed yourself to additional ‘country risk’. This means that problems in PR or with your PR operations now directly affect you.
2. Also, regardless of the fact that your PR Act 20 & 22 tax plans are valid and do not offend any U.S. tax laws; there is still IRS risk. It is possible that at some point in the future you may have a challenge to some portion of your planning. This becomes truer as you add complication to your plan with an Act 20 company and U.S. affiliate companies. Just one example is that the IRS may respect your Act 20 company, but may argue the value of the services you provide.  Another example would be a question about your residency. Having a solid Asset Protection Structure gives you confidence that you will be able to keep what you have regardless of a future issue-even with the IRS.
3. Lawsuit risk in the United States is still just as real and the crisis is continuing to grow. In fact, if you now spend 6 months a year away from your primary business, you may have increased the chances that your U.S. company could be involved in litigation.
4. Asset Protection is simply a requirement for anyone who has the means and need to establish and Act 20 or Act 22 company. If you have sufficient assets and income to need this type of planning, then you absolutely need to protect those assets.

How to best do it becomes the next question. The short answer is that the very best possible Asset Protection in the world today is in the form of an International Asset Protection Trust. This trust allows you to wrap all your assets into it, including your Act 20 Company. The Trust creates a detailed set of provisions, which ensure that if the assets of the Trust are ever threatened, the Trust can legally move them away from the attacking court, regardless of where that may be (U.S., P.R. or anywhere else).

There are different ways in which this Trust can be done, and many jurisdiction that you can choose from. The most important thing is to set it up right from the get go! This means using someone experienced and familiar with your entire structure, including your PR aspects.

For a more detailed discussion of the Asset Protection Structure click here now.