How to protect assets

Experts talked about several ways to keep the real estate owner’s name secret.

Relatives and friends. One of the simplest, most common, and at the same time most risky ways of hiding the fact of ownership of real estate is its design for nominees, often for relatives and friends. Experts spoke about the features and risks of such schemes.

The main risk of real estate registration for a nominal owner is the possibility of losing this property due to the unfair behavior of such a person in relation to the actual owner, explains Sazonov. The fact is that legally the property belongs to the nominal owner, and the real owner does not have any rights in relation to it. This risk, respectively, arises in the event of conflict situations with relatives or other close people to whom real estate is legally registered, he adds.

In the event of the death of the real owner of the property, unfortunately, there is never any guarantee that a friend, relative, business partner will behave in good faith and transfer the assets to the owner’s heirs (recall the story of Boris Berezovsky, who claimed that some of his property was recorded in  Badri Patarkatsishvili and tried to sue her from the heirs of Badri after his death). Ultimately, property owners in such circumstances risk losing it in the battle for confidentiality, Demin cites the example.

Offshore. Another way to “hide” property is to issue it to a company registered in an offshore zone, experts continue.

When registering real estate for an offshore company, there are various options for building a property ownership scheme, Demina explains. “For example, the beneficiary company registered in the British Virgin Islands is at the topmost level. Next, the offshore beneficiary establishes the company in another offshore jurisdiction, for example, in Cyprus. That, in turn, is in England, and the British company ultimately owns a Russian legal entity that owns real estate, “she models the scheme.

The ability to hide from third parties the fact of ownership of certain assets is the main feature of “offshore” territories. Another important sign of such legislation is the minimum amount or no tax burden, adds Smolokurov.

Legislatively, the ban on the dissemination of information is fixed in Nevis, the Cayman Islands, as well as in Belize, the British Virgin Islands and the islands of St. Vincent and the Grenadines. “It is worth noting that in addition to property responsibility for disclosing information, in some of them, the law also establishes criminal liability (BVI, Nevis, Cayman Islands),” he stresses.

Trust. As for the trust, continues Demina, it is used to protect assets in countries where the legislation is based on the Anglo-Saxon legal system. A feature of such a legal relationship is the transfer of property (usually irrevocable) from the owner to the trustee, but the owner or the person specified by him receives income from the use of the property. It is through the transfer of ownership from the original owner of the property (founder) to the manager that it is possible to protect assets from any claims. Click https://www.assetprotectionplanners.com/articles/truth/homestead-exemptions-by-state/ to read more.

“A trust has always been considered almost an ideal option to hide assets, including real estate: even if it is found, it is almost impossible to take it away. As an alternative to a trust, the so-called Foundation, which is created in continental countries, may be appropriate Austria) “, – emphasizes Demina.

The classic case is the Rosewood Trust case (Isle of Man), says Maalouf Ashford & Talbot Ltd senior partner Maxim Tafintsev. In 1997, a major oil tycoon died, he did not leave a will. In this case, the heirs managed to establish that he was the beneficiary of two trusts. However, the trust company declined to provide asset information to its heirs. The court of first instance issued an order to disclose it, the appellate court overturned the order, indicating that even the late Sh. Himself had no right to receive such information since he was only the “object of distributional powers” of the trustee in a discretionary trust. However, when it came to the highest court – the Privy Council under the Queen of England. At the conclusion of the Privy Council, The discretionary nature of trust in itself does not deprive the beneficiary of the right to judicial protection, and disclosure of information is one aspect of the supervisory function of the court. Thus, the decision of the court of the first instance was restored.

Thus, the Institute of trust provides sufficient tools that allow not to disclose the ultimate owner, says Tafintsev. Disclosure of information about beneficiaries is possible in exceptional cases and only by a court decision, which is an advantage for those who unfairly use the legal possibilities of this institution. “On the other hand, the practical complexity of disclosing the final beneficiary can cause serious problems for the heirs of this beneficiary in the event of his death,” he emphasizes.

Exotic. To conceal assets, you can also use a foreign company with bearer shares (Bearer Share) – shares of a company that do not contain the name of the owner, explains Tafintsi. For the realization of all the rights that it provides, the identification of the owner is not required. Simply put, the property belongs to the company, and the company belongs to the person who is currently holding the shares. The owner of such shares is not obliged to register in the register of shareholders of the company. Thus, with the help of this scheme, it is possible to completely hide the owner.

What are dangerous “hide and seek”

All of these schemes carry a certain amount of risk, experts warn and talk about the trap in which those who want to hide their property can fall.

First of all, the risk of liability in the event that the state reveals an asset and the corresponding failure to fulfill tax liabilities, argues Smolokurov. “It is also worth noting that the state applies both carrots and sticks in this matter. On the one hand, the state (represented by the FTS ) is looking for (and finding) new ways to identify unrecorded assets (automatic exchange of tax information), on the other hand, establishes a preferential procedure for the voluntary declaration of foreign assets, freeing them from responsibility for concealing them, “the expert adds.

Risks are present in any approach to hide property, including those located abroad, adds private detective Yevgeny Gvozdev. “The political situation is changing regularly, respectively, and the relationship of the official authorities of countries can be constructively changed, and an expat may at any time become a victim of his trust in the authorities of another state, especially if he is not used to living and working under the law,” he explains.

However, foreign courts still have more opportunities to find “hidden” real estate. At the moment, our bureau is conducting a major divorce process in the United States, which includes, among other things, finding an offshore property: as part of a dispute, a spouse appealed to an American court to somehow identify offshore companies and spouse’s property using court inquiries, Smolokurov says. In the US, the real estate market is fairly transparent. Previously, we had a similar dispute in England.

Caught miser

The 100% guarantee that the owner of the “hidden” real estate will not be identified does not provide any of the above schemes, experts explain.

Lately, privacy in the world is becoming less and less, keeping secrets more and more difficult, warns Demina. “Changes in legislation aimed at deoffshorizing the economy is a global trend, which is typical not only for ours but for many other countries,” she said. The international automatic exchange of financial information between countries in the framework of the OECD Standard is, of course, a key tool for de-offshore, which he earned in Russia in 2018.

This means that information relating to trusts and other similar structures will now be available to the tax authorities in the country of residence of the beneficiary. All this will shed light on the relationship of certain individuals, will provide an opportunity to determine who is the true owner (UBO, ultimate beneficial owner), the expert says.

There is also an unofficial way of disclosing information about real estate – through non-state economic security services and private detectives, adds Gvozdyov. The latter are often united in international detective organizations with good mutual communication.

“But there are a number of nuances: firstly, information obtained informally cannot be subsequently used as evidence in court and other bodies (that is, it’s a good option to highlight the information, to indicate the exact and correct directions of subsequent official requests And secondly, detectives will try to give their assessment of the customer’s intentions, and if there is an assumption that the information obtained can be used in the course of committing a further crime, he could very likely help ut refuse, “- explains the expert.

Now we are seeing how our clients, who have long and carefully accumulated assets, including real estate, in the past, voluntarily make disclosure decisions, participate in the second wave of capital amnesty, declare bank accounts abroad and declare participation in controlled foreign companies, says Demina.

The owners of the states, according to her, do not feel as protected in offshore before, they feel the vulnerability of their hidden assets and prefer to make a move first because the risks are too uncertain.