Consumers must be aware of asset protection scams which can result in fines or a jail term in some cases. Avoid planners who claim that they are capable of reducing or eliminating your tax liability. Every person who earns income must file an income tax return. Not reporting income is fraud. If your asset protection plan includes underreporting or not reporting income to the government there could be serious legal consequences.
Asset protection scams include:
Corporate Sole Scams
a corporate sole scam is a legal entity consisting of a single incorporated office, occupied by a single man or woman. A corporate sole is touted by some promoters as a method of asset protection and tax elimination. The truth is that if a person who is controlling a corporation is sued they may lose control of the corporation and its assets. Personal protection from a lawsuit is available if the liability takes place against the company. A corporation sole, like any corporation, must declare its income. The money paid by a corporate sole must be reported to the Internal Revenue Service as income.
Pure Trust Scams
This type of trust is also known as a Constitutional Trust or a Common Law Trust. This is the most common asset protection scam. The IRS has warned taxpayers against these fraudulent schemes in which claim bogus tax advantages.
This scheme is also referred to as the pyramid scheme. Individuals pay a large sum of money for a weekend class to be certified as asset protection consultants, however the professional designation is not recognized by the IRS.