The Young Man's Guide to Protecting Wealth

Keeping your plunder safe from gold diggers

If the money keeps rolling in, what's a girl to do?
Cream a little off the top for expenses—wouldn't you?
But where on earth can people hide their little piece of heaven?
Thank God for Switzerland!
- Evita

I'm one of the members of the Tortuga Society with several successes under my belt. I've built and sold a number of companies with eight and nine digit exits, run a hedge fund, and I'm currently helping to advise a number of our members on how to build for their future—since Tortuga isn't just about job stacking, that's just one path to financial security.

But today I'm here to offer some advice to aspirational young ambitious sorts looking ahead down that road toward success and wealth.

You may be fortunate enough to find yourself in a position of relative comfort and wealth - by having your own company that happens to spin off a good amount of cash, through job stacking, simply holding a good job with restricted stock units or stock options or a solid bonus/profit-sharing program, or some piece of equity in a firm that is acquired, goes public, or otherwise has a profitable liquidity event. Or even by the old fashioned means of inheriting it. Don’t count on winning the lottery. And if you’re planning on marrying into money, well, ask advice from someone more attractive than me.

Usually I give advice from the other side of that equation, though: if you have some money and you’re attracting suitors, how do you ensure that they’re not just trying to fleece you?

The best way, of course, is to be good at assessing someone’s character - but this is one of those sorts of traits that doesn’t often come intuitively: as the saying goes, good judgement is gained from experience, and experience is gained from bad judgement. Learning to cold-read people is a skill, and a valuable one, but it is one that even if you know how to do it well, you may not actually do so while in the midst of a romantic whirlwind. It requires a certain detachment to be able to still assess people calmly when your blood is up.

Incidentally, there is a pretty good way to do this (which people still don’t do) - if you have a trusted wingman, who you know has your own best interests at heart and is not competing with you for the prize, and he warns you off, take his advice. But when you’re infatuated and your best friend is telling you “yo, I don’t know: I think your girl is playing tic-tac-toe” it’s frequent that you’ll only have eyes for your inamorata and ignore any good advice to the contrary.

It’s pragmatic to ask “is this person legitimately interested in me for me” but you can easily get too far down the rabbit hole of second-guessing people. Do you have chemistry? Do you have some mutual interests without being obsessively joined? Do you still have fun together when you’re not spending buckets of money on impressing them?

A relatively straightforward screening question (and kind of a fun discussion in general) is “what is your idea of the good life?”

Have you got similar visions for life: are you socially compatible, do you both want similar things culturally and from the future and from a family, do you want to live the same sorts of lifestyle and in the same sorts of places? Homesteaders and penthouse nouveau riche are going to need to work some things out; Broadway musical fans aren’t likely to gel smoothly with the country music crowd (yes, this is basically the city mouse / country mouse perspective in both cases); if you’re of different religious or political beliefs, expect that might be worth some discussion about how to and where to make those decisions.

OK, “know yourself” is always good advice - but that, and various dating strategies to keep from becoming too attached to the wrong person aside, how about the more concrete end of it?

Pop culture has glommed on to the concept of the prenuptial agreement - a contract entered into at marriage time that limits resource division if there’s a divorce or separation - and there’s the significantly less common postnuptial agreement where such a contract is entered into between the spouses after marriage (sometimes as a part of defining how a separation is going to work.) These contracts can theoretically specify what assets are separate, how property will be divided upon divorce, and even agree on spousal support ahead of time. This can protect your pre-marital assets and clarify financial expectations.

This is … often less helpful than you’d think.

You don’t want to always want to be trying to out-bluff your spouse

First, it’s rather tremendously disruptive to tell your bride-to-be that she needs to sign off on an agreement before marriage that basically implies she’s a mercenary. You’re only really likely to have any social leverage allowing you to do this if the money in question isn’t actually yours: if you’re inheriting it, and you can present it as “this isn’t what I’m looking for honey, this is what that the family insists on for me to be able to inherit the estate and the big bucks, but if you say no I’ll still marry you and we can elope and get married by Elvis in Las Vegas, it doesn’t matter if we live in poverty and eat ramen together as long as I have you, that’s more important than living in luxury, but if you do agree then of course I’ll be able to take care of you and the kids in a grand lifestyle.” (If she says yes and you’re actually up for it, you can always put your money in a trust and go backpacking across the country with her, then reinvent your lifestyle at the homestead level - but really, do have that conversation first - because YOU may be the one who gets driven crazy by this and your new Mormon tradwife may think the quaint little farmhouse and sewing machine lifestyle is peachy.)

Second, and probably more important: that really only works for assets you bring into the marriage, at least in most (community property) states. If you make a good annual income after you are married (from a single high paying job, a good bonus program, profit sharing, job-stacking, stock options, restricted stock units, dividends, or the like), that’s most likely up for grabs; likewise, if you get rich in some sort of life-changing-wealth fashion like selling/IPOing your company or generally even inheriting after you are married, that prenuptual agreement will not likely protect your nest egg and certainly won’t cover whatever level of wealth wasn’t in the original agreement! And, of course, some states are community property law and others aren’t, so precisely where you get separated might be critically important.

I mean, the lawyers will fight about it, and about child support, and anything else they can - generally, lawyers are paid by the hour, so they’ll be happy the more that either side would like to dispute. But in general, you shouldn’t count on “just have good lawyers” as the answer here, because if your spouse is out to ransack you, they will also have figured out that they should have good lawyers, and they’ll be spending from the same bank account.

Switzerland is lovely, if rather expensive, to visit. But it’s much less the place to stash your cash (anymore) than pop culture made it out to be.

What about the thought that we opened with then: how about hiding your money in Switzerland? That’s … really not going to work. That’s mostly a Cold War era story, so it made good potboilers (or even actual history) back in the day but that mindset is contemporaneous with thinking that the Warsaw Pact is going to cross the Fulda Gap through West Germany, or that you can put yourself through college with the income from an easily obtained part-time job - that era has come and gone.

Even in the days where you might have effectively offshored your wealth into a Swiss bank account, you would have had to be pretty capable about actually concealing your money from your spouse, your accountant, the tax man, and any number of prying eyes - and there’s a lot of interest in busting you if you’re trying any sort of out-and-out tax evasion. But even if you were good at that and had a sufficiently shady accountant and banker… well, the polite way to put that is that Swiss bank accounts are no longer as opaque (or secretive) as they once were due to several changes in international banking laws and regulations over the past few decades. Here's a brief overview:

In 2013, Switzerland partially lifted its bank secrecy for foreign clients, allowing its banks to share information with foreign tax authorities in cases of tax evasion. This was seen as “the end of bank secrecy” and while not completely the case, certainly made it a lot more problematic if you had intentions of stashing money overseas.

Then in 2014, the U.S. passed the Foreign Account Tax Compliance Act (FATCA), requiring foreign financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. Switzerland has agreed to comply with FATCA, and in general this basically means Swiss banks just stopped doing business with Americans (seriously, you could have hundreds of millions of dollars and it was not worth the hassle for them - they’d kick you to their US subsidiary out of New York or leave you out in the cold entirely, this even held up international investment funds with US partial ownership.)

Switzerland, like many other countries, has adopted the Automatic Exchange of Information (AEOI) standard. Since 2018, Swiss banks are required to automatically share account information with the tax authorities of the account holders' home countries if those countries have agreements in place. This significantly reduces the secrecy of Swiss bank accounts for tax purposes. That may not impact you from a asset protection standpoint, but it does mean it’s very hard to actually conceal the existence of an asset.

Beyond that, various legal reforms in Switzerland have also aimed at combating money laundering, tax evasion, and terrorism financing, which includes stricter oversight and transparency requirements for banks. Credit Suisse was still fairly cavalier for a while, but they are notably a smoking crater in the ground these days, so don’t get any bright ideas - UBS bought what remains of Credit Suisse and UBS plays by the rules.

However, while the secrecy around Swiss bank accounts has diminished, there still are a lot of merits to banking in Switzerland if you can navigate all the necessary processes required to do so.

Swiss banks still offer a high level of privacy within the bounds of these new regulations. Information is not freely accessible but shared under specific legal frameworks.

For asset protection purposes, Swiss banks continue to be attractive due to Switzerland's political stability, strong legal system, and banking expertise.

Even with these changes, Swiss banks maintain confidentiality unless legally compelled to disclose information. And, for various reasons, it can be harder to compel them. If you need details on that, I’m afraid I’m going to have to say: consult a lawyer, I’m really not qualified to speak as to the finer points of this; I’m a man of many talents but I’m not licensed to practice law… and if I were, I wouldn’t do it online for free.

But you will definitely have to jump through hoops to get a Swiss bank account, and it is not a magic box in which to hide your treasure. A nuanced summary is probably more along the lines of “Swiss bank accounts are not the completely secret havens they once were but they still offer significant privacy while complying with international law.” If you're considering a Swiss bank account, it's advisable to consult with a financial advisor or legal expert because you’re not likely to get one without some effort, unless you happen to already be Swiss.

So that’s Switzerland. What about other options? Pop culture and stupid Hollywood dramas tell us people hide money offshore in the Caribbean, right? Or in cryptocoins? This is a little like taking advice from Miami Vice or Breaking Bad. No, guys, you can’t hide or launder your money through the Cayman Islands; they are an international money center and your favorite hedge funds will have a feeder fund there for international investors (and for tax-exempt domestic investors, like foundations or charities) to keep pools of capital separate by tax class, but it’s all highly audited.

Bermuda or Antigua? Vanuatu? Panama? For better or worse, the Panama Papers, the Pandora Papers, the Mauritius Leaks, and similar information leaks have punched a bunch of holes in the secrecy of the various offshore financial havens. You can still make some efforts at secrecy here; it does take some effort and expense, and you should be careful not to run afoul of your own nation’s laws and regulations - getting nailed for tax evasion is not likely to improve your case in divorce court.

Now, people who specialize in dealing with divorce situations - attorneys and mediators and so forth - are going to point at things like property tracking, title and account designations, and insurance planning. I’ll mention those - ask a professional for further details, but I consider these to be less important in the grand scheme of things; the professionals will be happy to tell you why I’m wrong. But very briefly, for title and account designations: ensure valuable assets are not jointly owned or titled unless you intend for them to be marital property. This includes real estate, bank accounts, and investment accounts. For property tracking, keep assets you owned before marriage or received as gifts or inheritance as separate property. Maintain clear records to prove this distinction, especially in community property states. This is mostly key for things like art or other high net worth items. And as far as insurance planning, designate beneficiaries other than your spouse for life insurance policies or retirement accounts if you wish to protect these from being part of a divorce settlement. “The kids” are usually the sane choice here.

But if I were instead to try to point you at a general strategy, though, it would be the use of trust structures - and, explicitly, you should carve out a piece up front for each of your family members including your kids and your spouse, because this protects you and protects them, and also lets everyone know where they stand. Everyone in your family should feel safe that if something bad happens to you tomorrow, they’re taken care of. And as a parent, you presumably want that too.

Asset protection through trusts involves structuring your assets in ways that can shield them from creditors, lawsuits, or other financial risks while still allowing you to control or benefit from them. Here are several strategies using trusts; there are many others, but I’d start here.

Nevada, Delaware, South Dakota, and Alaska, possibly other states, have a class of trust called the Domestic Asset Protection Trust (DAPT). DAPTs allow individuals to establish trusts where they can be both the grantor and a beneficiary.

They provide protection against future creditors by setting up a trust in a state with favorable laws. Once assets are transferred, they are often out of reach for most creditors, depending on the state's laws. The trust must be irrevocable, meaning you can't easily take back the assets. There are also specific statutes of limitations for fraudulent conveyance that must be observed.

There is also a similar and more expensive but generally more resilient class of trust which is unsurpisingly the Foreign Asset Protection Trust (FAPT). Similar to DAPTs but established in jurisdictions outside the U.S. like the Cook Islands, Nevis, or Belize, where asset protection laws are even more stringent. These offer potentially higher levels of protection due to less cooperative legal systems with U.S. courts, making it harder for creditors to access trust assets. But they are more complex to set up and manage, involves dealing with foreign law, potential tax implications, and logistical issues. It's also more expensive and might raise flags with U.S. tax authorities.

More readily, you can get a spendthrift trust. This class of trust includes provisions that restrict the beneficiary's ability to assign or transfer their interest in the trust, thereby protecting the assets from the beneficiary's creditors. This type of trust protects the assets from the beneficiary's creditors, even if the beneficiary is imprudent with money or has creditor issues. But it must be carefully drafted; and the protection extends only to the extent that the beneficiary does not have direct access or control over the assets. So keep in mind that you are to a reasonable extent putting the money outside your direct control here.

There are a bunch of other classes of trust and asset protection mechanisms that could be helpful, but this is an introduction. Perhaps we can talk about advanced asset protection at one of the Tortuga seminars - this barely scratches the surface, but I know a lot of people are very curious about the topic and it turns out I’ve acquired a fair bit of knowledge about it over the years.

Feel free to ping me in Tortuga Chat and we can either get something added to the Codex, give you a quick answer, or if it will take a bit, make sure it gets covered in a future presentation or writeup.