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Stealth wealth is the practice of minimizing the publicly available information about one’s income, assets, and net-worth in order to maximize privacy. This level of secrecy typically extends to family, friends, or potential business partners. There are a number of benefits to stealth wealth, including personal privacy and wealth preservation.
If your income, assets, or net worth can be easily ascertained, you may become the target of frivolous lawsuits. Under the widespread doctrine of joint and several liability, if more than one defendant is responsible for a plaintiff’s injury, any one of them may be held liable for the full amount of the damage award. This means that a lawyer will often concentrate on the person with the highest net worth, instead of the one most at fault.
Stealth wealth is important not just in preserving wealth, but accumulating it. Stealth wealth is based on the concept of information asymmetry, where one party in a transaction or event has better information than the other. It is always advantageous to have better information than another party, whether in your personal life or professional career. This is commonly demonstrated when people negotiate their salaries with a new employer. Prospective employees typically lose ground in salary negotiations if their prospective employer knows their exact current salary or can gauge their personal financial stability.
Our current society thrives on excess and ostentatious displays of wealth. Social media platforms such as Facebook or Instagram have largely devolved to platforms where people go to show off what they own and what luxury experiences they are having at the moment. However, this willingness to share personal financial information can lead to the decimation of any wealth you have created.
In the book “The Millionaire Next Door,” Thomas J. Stanley and his team studied the wealthiest households in America and made an interesting observation:
“Twenty years ago we began studying how people become wealthy. Initially, we did it just as you might imagine, by surveying people in so-called upscale neighborhoods across the country. In time, we discovered something odd. Many people who live in expensive homes and drive luxury cars do not actually have much wealth. Then, we discovered something even odder: Many people who have a great deal of wealth do not even live in upscale neighborhoods.”
The wealthiest households in America do not act like they are wealthy (or at least most people’s perceptions of being wealthy). Many practice stealth wealth and try to fly below the radar. Successfully doing so allows them to better enjoy their money as they face less scrutiny and jealousy from family and friends, develop meaningful relationships that are not influenced by money, and reduces anxiety by minimizing the risk of being victimized due to their wealth.
10 Ways to Conceal Your Income, Assets, and Net Worth to Maintain Privacy
- Never reveal your income. Not only will this put you at a disadvantage during salary negotiations but it will alter your relationships with those around you. People will begin expecting you to cover dinners, vacations, and generally expect you to alter your savings habits to subsidize their lifestyle. Friends and family that don’t ask for handouts, may still be feel bitter or resentful if they learn you make more than they do. They may also incorrectly infer your net worth or the amount of disposable income you have. You may make $90,000 per year, but if you spend nearly half of that paying for the care of an elderly relative, you probably don’t have a lot to use to help out friends (and they may not be aware of your obligations). If you are dating, you may attract people who are more interested in your money than you. You yourself may even begin to associate your income with your social status and personal identity, which can prove problematic in the modern workplace where workers of all incomes are considered disposable.Money destroys relationships and alters the dynamics of personal interactions. There is almost never a good reason to disclose your income.
- Don’t post or brag on social media. I feel like this should be obvious, but despite the constant warnings about social media eroding user privacy, people keep sharing more and more content on social media. In addition to be annoying, you will identify yourself as a prime target for frivolous lawsuits or home burglaries. Take Instagram for example. People post pictures of their cars, luxury goods, and essentially document their spending. This is all conveniently geotagged so anyone can know your whereabouts. Geotagging is a technical term for storing the latitude and longitude of your current location with your photo. This data is collected by the GPS device in your phone or tablet and is accessible to Instagram. This presents a number of risks:
- Stalkers can use this information to harass people or obsess over every personal detail of someone else’s life.
- Lawyers/creditors/ex-spouses can use this to locate assets that they may later claim ownership of due to a financial dispute.
- Robbers can track your location, know precisely what luxury goods you have in your home, where your home is, whether you are home or not, and even establish a layout of your home and its security systems.
3. Closely monitor the personal information data brokers post online (typically without your knowledge or consent). If you’re not familiar with the data brokering industry, it’s no accident. Data brokers typically eschew all things consumer-facing and opt instead to harvest information on people in secret, trading it among themselves like the valuable asset it has become.
These companies encroach on the privacy of millions by harvesting and monetizing personal data without consumer knowledge or consent. Worse still, many fail to securely store this sensitive information, inevitably leading to data breaches like Equifax that put millions at risk of identity theft, stalking, fraud and other dangers for years to come.
By scraping public records, buying or licensing data rights, third-party brokers can assemble billions of detailed consumer profiles with thousands of classifications per individual. Often used to build audiences for targeted advertising, it’s not difficult for companies to determine if you’re pregnant, where you’ve been, what medicine you take and even how you interact with your smartphone. It can be used to identify the quality of your lifestyle, and even to establish your eligibility for a job opening.
Take all measures possible to secure your personal information and either hire an experienced professional to remove the information, or take the time to submit take-down requests yourself.
4. Be careful when disclosing personal information to companies providing any sort of service aimed at the mass affluent or UHNW individuals. A company providing services to the “mass affluent” can be a major hacking target, and even if the company handles your personal data properly, is vulnerable to cyber attacks. An example would be a premium food delivery service company. Assuming the company is honest and trustworthy (which is hard to say, given that it only takes a single dishonest or lazy employee to cause a data breach) and does not sell your data (which many do), there is always the chance of an inadvertent data breach. This type of data set is highly sought after because it is essentially a massive database of sales leads, that marketers (both legitimate and criminal) will target. This is not to say you shouldn’t ever use high end services. But you should probably assume any information you give them (addresses, credit cards, bank accounts, automobile information, past purchases, etc.) can and will be leaked over a long enough period of time.
5. Use business entities such as LLCs and trusts to obscure ownership. Using an LLC to protect assets such as businesses or real estate is advantageous for many reasons. If your business is a sole proprietorship or a partnership, you and your business are legally the same “person.” Your business debts are also your personal debts. And if your business partner or employee is accused of negligence, your personal assets might be at risk.
An LLC limits this personal liability because an LLC is legally separate from its owners. LLCs are responsible for their own debts and obligations, and although you can lose the money you have invested in the company, personal assets such as your home and bank account can’t be used to collect on business debts. Your personal assets are also protected if an employee, business partner or the business itself is sued for negligence.
LLCs are not all created equal when it comes to stealth wealth. Delaware, Nevada, and Wyoming are known as perhaps the most business-friendly states for an LLC. They are also known as corporate “havens” — especially the state of Delaware.
Delaware is one of the easiest places in the world to set up an anonymous company, making it a great place to establish an LLC to do business that you don’t want anyone to know about or you don’t want to be easily connected to.
Setting up a company in Delaware is extremely quick, easy and inexpensive. Openness advocates like the Financial Transparency Coalition point out that a person needs to provide more personal information to register for a library card than to register an LLC in Delaware. Delaware LLCs are so effective that massive FBI money laundering investigations have been halted due to the true anonymity a Delaware LLC creates.
While Nevada and Wyoming offer some unique benefits, Delaware has a 100+ year history of protecting business privacy. And the state is unlikely to change this stance. One reason Delaware has resisted any change to this system: It’s a huge part of the state’s income. According to The New York Times, taxes and fees from these absentee businesses accounted for a quarter of the state’s budget in 2011.
While not as easy and far more expensive than Delaware LLCs, Cook Island Trusts are extraordinarily effective. Cook Island Trusts offer anonymity as well as legal protections. The value of the assets in these trusts is not disclosed and it is against the law in the Cooks to identify who owns the trusts or to provide any information about them. No litigant on earth has been able to break a Cook Islands trust, including the U.S. government, which has repeatedly been unable to collect on multi-million-dollar judgments against fraudsters convicted in federal court.
6. Diversify your assets. If someone has all their wealth concentrated in one particular assets class (real estate, a chain of local businesses, most of their money invested with a single hedge fund, etc.) it is much easier for other people to identify that wealth and much more attractive to a lawyer looking for an easy payday. If possible, your assets should be divided into numerous sectors. Geographic diversity is also important. When a creditor, disgruntled business partner, ex-spouse or lawyer goes after your money, they typically perform an asset search. If you have followed most of the other tips in this guide, hopefully there is little indication of your true wealth, which will deter expensive investigation and forensic accounting to ascertain your true wealth. But if this fails, diversification of assets is key, because it becomes exponentially more difficult and expensive for a creditor to pursue assets that are owned by multiple legal entities (not in your name), located in different states (ideally with strict privacy laws-making the assets hard to find), or possibly owned by offshore entities that do not necessarily comply with every civil dispute judgement issued in the United States.
7. If possible, say it’s fake. If you do insist on showing off your luxury goods in public, you can always tell people it’s fake. All of a sudden that $5,000 watch or handbag is no longer likely to be an interesting gossip tidbit that is later used as a lead to identify who is wealthy.
8. Do not disclose your home address. For many people their home is their largest and most easily identifiable asset. After scrubbing existing traces of your address (Step 3) and possibly even transferring ownership to an LLC (Step 5), you can take things a step further by routing your mail to a P.O. Box. In addition, you should claim your Zillow address and load a random image of a crappy house. Also, unless you built your own home or inherited a home that’s never been listed, chances are there are realtor sites that cache images of prior for sale listings, that include your home. This could include photos, videos, and even 3D tours of what should be a private home. You can try to reach out to these sites individually or contact an experienced company.
9. Be humble and praise others for their successes. This is also just a good way to live your life, but it can also be a powerful tool, stopping people from even looking into your income, assets, and net worth in the first place.
10. Maintain some financial liabilities. This one is somewhat counter-intuitive but maintaining financial liabilities can be quite advantageous. Refinancing your real estate to strip the equity may not seemingly make financial sense, even when it makes legal sense. But a home equity loan or line of credit always makes sense. If your home is worth $200,000 and has no mortgage, you might arrange for a $150,000 home equity loan or line of credit against your home. You owe your lender nothing until you actually draw down your credit line. You would do this only when you are sued. Still, a prospective litigant searching for your assets would see only $50,000 equity in your home because the $150,000 mortgage would be public record. You are then a considerably less attractive lawsuit candidate because you have reduced your visible net worth. You lower your exposure to future lawsuits, and gain leverage to negotiate a lower settlement if you do get sued. If you own any real estate, get an equity loan to cover as much of your property equity as possible. Then arrange for standby second or third mortgages to encumber whatever remaining equity is still exposed. You’ll pay a few dollars for loan fees, but this is sound lawsuit protection.