Offshore Trusts and Foundations – 23 More Days

by Bobby Casey, Managing Director

December 7, 2012

Offshore trusts and foundations have been the main area of interest for our clients over the past couple of weeks. We have been bombarded with requests to set up a offshore trusts or foundations for clients who are seeking to escape the estate tax trap before the law changes on January 1st, 2013.

In case you are unaware, starting January 1st, 2013, the estate tax law will change dramatically….and not in you favor.

Right now, the estate tax is 35% of any assets over $5.12M. On January 1st, the estate tax goes to 55% of any assets over $1M. That is a HUGE increase in taxation.

For the next 23 days, you can take advantage of this opportunity by moving your assets into an offshore trust or foundation and escape the estate tax trap (if under $5.12M) forever.

What you need to do is set up the offshore trust or foundation and gift your assets up to $5.12M ($10.24M for a married couple) into the trust or foundation. Once the assets are inside, they can grow estate tax free forever.

Keep in mind that as trust grantor/settlor or foundation founder, you will have an income tax liability for any income produced inside the trust or foundation, but your heirs will thank you for the courtesy you have granted them by not making Uncle Sam their new business partner.

If you have an estate that exceeds $1M, you need to act today. If you don’t act, you WILL have very serious tax implications going forward.

If you want to learn more about the difference between an offshore trust and an offshore foundation, you may want to read our recent article titled, “Destruction of Perpetual Wealth – 40 More Days”. I don’t want to rehash this topic since you can read it there, but this would be a good place for you to get some clarification.

If you own real estate assets over $1M, you really need to do something now. With the vast amounts of money printing, real estate prices are poised to go up in value for decades.

One of the biggest areas of risk I see is farmland. Farmland has been steadily increasing in value over the past few decades no matter what is happening in the economy.

During the 2007-09 crisis while the stock markets and housing prices tumbled, farmland continued to go up in value year after year.

The reason: people need to eat. Just because you cannot afford a new house, car, or trip to the cinema doesn’t mean you are going to stop eating. It is just a matter of supply and demand.

Even a small time farmer with a 100ac farm likely has an asset worth more than $1M in value. What about the farmer with an 800ac farm worth $10M?

When the owner dies, this estate will be subject to huge amounts of estate tax. What are the heirs to do?

In many cases we will probably see the heirs sell all or part of the farm to pay the estate tax bill. While most farmers have a significant asset with their real estate, they are not typically cash rich. Do you really want to sell the family farm?

How do you solve this? We can deed the farm over into a Nevada LLC and assign the LLC membership interest over into an offshore trust or foundation.

By doing this, the first $5.12M ($10.24M if a couple) of value in your farm is no longer subject to estate tax. Even if the value of the farmland grows to $20M, it would not be subject to the estate tax because you gifted it away at a lower value in previous years.

However, farmers are not the only ones at risk.

Do you own;

  • Rental houses?
  • Apartment buildings?
  • Investment portfolios?
  • Businesses?

If you have any of these assets or a combination thereof that exceeds $1M, you need to consider setting up an offshore trust or foundation to make sure you don’t burden your heirs with this problem and make Uncle Sam their business partner.

Aside from estate planning, utilizing an offshore trust or foundation as the ultimate owner of your estate, has enormous asset protection benefits.

Once you gift away your assets into an offshore trust or foundation, those assets are no longer legally yours for the taking by future potential creditors.

This is an excellent tool and secondary benefit of using offshore trusts and foundation. You can create the veil of privacy around your assets as well as bulletproof you asset protection plan.

If you need assistance in setting up your own offshore trust or foundation, email us here to schedule an appointment today.

 

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Comments

  1. Delia Lopez says

    What about gifting it to your irrevocable trust with the WY LLC as your private family trust company. One trust per property however I think an IBC having a note (mortgage) on your property with payments to it at least annually is necessary if your property is not located in the asset protection trust state, judge can sell property in their jurisdiction if they decide to, is it legal? Not really but governments do a lot of illegal things.

    • You will most certainly run into issues if you own the LLC that is the “private trust company” as trustee of your irrevocable trust. It is a clear control issue and any court would pierce that veil.

  2. Why a Nevada LLC? Why not a Wyoming LLC? A Wyoming LLC does not make public the names of its members or managers and it costs a fraction of what a Nevada LLC costs.

    • We do both NV and WY LLC’s for our clients. In fact we do more WY than NV. However the cost is not a “fraction” as you say, but it is a bit cheaper.

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