As you grow your wealth, it’s important that you learn to protect your money.
There are a number of reasons to do this, and one of the best ways to protect your money is through an offshore asset protection trust. You’ll need to learn the ins and outs of these trusts, how they can help you, and what you need to do to set them up.
Follow these points so that you’re able to learn as much as you can about these trusts.
Reasons to Form an Offshore Asset Protection Trust
First off, what is an offshore asset protection trust?
This is a financial account set up with contingencies and agreements, structured under the laws of foreign governments. There are a number of points that you need to learn about these trusts so that you’re able to set them up on your terms.
Check out these reasons to form an offshore asset protection trust:
1. Avoid Litigation
Many people and companies set up these trusts to avoid potential litigation.
There are all sorts of legal entanglements that can come about during the course of running a business and accumulating wealth. For instance, you might want to set aside some money that can’t be seized in criminal and civil cases.
It might also make sense to set aside money in a trust so that you can put in stipulations that ensure it won’t get mishandled. For instance, if you are putting aside money for descendants, the trust will keep them out of US court and will cut out any sort of confusion.
Since legal battles can become pricey, bitter and cumbersome, setting up a trust can be one of the best courses of action to take.
2. To Protect Yourself From Liabilities
There are a number of liabilities you can avoid when it’s time to set up a trust. For example, you will avoid probate costs and other fees that can come about when you transfer money.
This way, you’re able to keep more of that money without it eating into your bank account. It’s important to understand the tax enforcement implications before setting up your trust.
3. To Build & Protect Wealth
The main reason that people set up offshore asset trusts is to protect their wealth.
Since the trust is set up under the terms of a foreign government, you won’t be subject to seizures that you would deal with under normal circumstances. Whether you are trying to save money for your retirement or simply protect your assets as you grow, a trust can come in handy.
Be sure that you understand the reporting requirements for your offshore trust.
4. You’re Facing a Big Life Change
Certain life changes, such as getting married or divorced, can leave you open to seizure of assets.
When you’re undergoing a divorce, it can be a great time to look into setting up a trust. However, it’s important that you look into the divorce laws in your state, since you may still have to disclose money that is part of an offshore trust.
States always differ when it comes to divorce laws and what constitutes marital property, so seek the help of a divorce attorney that can let you know for sure.
5. You Recieve an Inheritance or Other Lump Sum Payout
When you’ve just gotten an inheritance, or if you’re waiting for a payout, this could be a suitable time to create a trust.
This ensures that your money is protected and that you can use it how you need. Aside from inheritances, using a trust makes sense when you are dealing with the succession of a business, transfer of assets from an investment, buy-outs, and other such matters.
Consider setting up an offshore trust if you are getting some form of a lump-sum payout.
6. New Laws in Place That Could Hurt You Financially
You’ll definitely want to consider setting up a trust if there are new laws in place that can hurt you from a business standpoint.
Governmental liabilities can potentially cripple your businesses and tie up your finances when you have to protect yourself. Managing your trust can help you skirt laws that aren’t advantageous to your business and financial needs.
Whether you’re trying to avoid tax issues or have some serious business concerns you’d like to stay on top of, a trust can be the best-case scenario.
How to Set Up Offshore Protection
You’ll need to give yourself the chance to set up the offshore trust works for you. Consider these points when you’re looking to create the right agreement.
1. Determine Exactly Why You Want to Use It
The reason for setting up a trust will dictate the type that you end up purchasing. Rather than setting up just any kind of offshore trust, move forward with the right information so you can create the best situation for your finances.
Your reasons for creating a trust will also dictate the location and governing laws you choose to subject yourself to.
For example, some of the best locations for setting up an offshore trust include Belize, the Grand Cayman Islands, British Virgin Islands, Luxembourg, Isle of Man, Switzerland, Germany, the Cook Islands, and Nevis.
These countries have laws that are friendly to account holders and make it easy for you to access your money on your terms.
2. Research the Different Types of Offshore Trusts
you might pay between $5,000 and $10,000 to set up an offshore trust bank account.
Because there are fees for entry and obligations you’re signing on for, you’ll need to take your time and ensure that you are setting up the type of trust that is most advantageous to you.
Some examples of offshore trusts that you can set up include a hybrid trust, fixed trust, irrevocable trust, discretionary trust, and revocable offshore trust. Each has a variety of terms that you’ll need to be cognizant of, so do your research upfront to understand which terms you’ll be subject to.
For example, a revocable offshore trust has a set of ground rules in place that dictates exactly how and when you are able to liquidate the account. With an irrevocable trust, it’s against the rules to liquidate the account.
With a fixed trust, the rules for bequeathing money to beneficiaries is set up on the front end. A discretionary trust lets you decide how you want to transfer the money. A hybrid trust contains protocol similar to both fixed and discretionary accounts.
By learning the various terms of these trusts, you’ll have the right information to move forward.
3. Handle the Initial Capital For Creating an Offshore Trust
It takes some capital on the front end to make sure that you are able to build the trust that will beneficial to you.
If you don’t have a good deal of capital to put into the trust, it’s best to wait and let it grow. Otherwise, the costs of running the trust can be prohibitive and eat up your funds.
Be sure that you understand what sort of assets you are planning to include in your trust. For instance, you might include cash, stocks, bonds, real estate or mutual funds.
4. Fill Out the Proper Paperwork
There’s a litany of paperwork that you need to have in place for your offshore trust to be created.
With more attention being paid to things like homeland security and anti-money laundering, you’ll need to be thorough anytime that you are helming these sorts of international transactions.
Some of the documentation that you will need to have in place include copies of your United States passport and a letter of reference from your bank. You will also need to look into getting an affidavit of solvency, thorough paperwork for the trust, and a series of other documents that will let you process your new trust on your terms.
You’ll need to reach out to a notary for some of these documents to be sure that they are handled with a credible witness present. You can hire an independent notary or visit your local bank branch to get some of these documents notarized.
Since you’re dealing with international finances, you’ll also need to keep your tax information handy. You might have to look into getting your hands on certain IRS forms, such as Form 8832 or Form 5471.
Never skip steps when it comes to reporting these accounts to the IRS so you don’t run into potential tax problems moving forward.
5. Bring in Professional Assistance
Anytime that you’re going to set up an offshore trust, you will need to get the help of legal professionals that can go over everything for you with a fine-toothed comb.
They will navigate the decision with you from start to finish, by first helping you decide what you want and laying out the terms. An attorney will assist you in choosing the best government for your offshore trust and will facilitate communication with different entities.
Your lawyer can also help you to create a company for your trust so that you are structuring it in a way that is sound. A lawyer will help you find a government jurisdiction that is tax-exempt, with plenty of stability and a sound reputation.
They’ll also help you to manage any maintenance costs and ensure you’re choosing a country with strong privacy laws (ie the Cook Islands, Belize, or Nevis).
Look into the different tax planning/estate planning law firms that handle offshore trusts so that you can get their representation without having it also eat into your finances. Research the firm thoroughly and make sure that you choose an advocate that you can trust.
6. Understand the Requirements
There are always requirements you’ll need to stick to when it comes to creating an offshore asset protection trust.
On top of registering your trust with the IRS, you should know what it does and doesn’t protect. For one, setting up a trust isn’t something that you should be setting up with the expectation that you can skirt paying taxes to the United States.
You’ll also need to understand the terms you are signing up for. Come to grips with definitions such as the settlor, trust entity, trust deed, foreign trustee, beneficiaries, and other information.
Ask your attorney if you don’t understand any of these terms since you’ll be bound to them based on the agreement that you sign.
7. Manage the Trust Accordingly
Finally, take the time to manage your trust every step of the way.
Disclose the account to the IRS swiftly and stay above board with this sort of information so that you never get hit with any penalties. You’ll want to have the assistance of a lawyer and an accountant that can help you manage the trust, and should keep up with every report you get.
Don’t hesitate to make changes to beneficiaries or any other segments of the account whenever you choose to.
Set Up an Offshore Asset Protection Trust
When you’re setting up an offshore asset protection trust, these are the tips that’ll be valuable for you.
As you can see, creating an asset protection trust can be a savvy financial decision that can protect your wealth and propel you to new heights. There are lots of points you’ll need to understand every step of the way, including handling your obligations to the IRS and the US courts.
If you need help with anything, we’re the company that you need to turn to so that you’re handling each step properly.
Take time to contact us if you need help with offshore accounts, taxes and more.