Asset Protection

Asset Protection: Offshore Planning Options

By July 30, 2019 No Comments

International financial planning offers a wide variety of options that are not available domestically. Among the many vehicles that are common to offshore planning are:

  • Offshore Trust
  • Foreign Companies
  • Variable Universal Life Insurance
  • Investment Accounts

Offshore Trust

The offshore trust is, at least initially, a tax-neutral asset protection device designed to hold title outside the United States to assets that may be physically located in the U.S. or elsewhere. Offshore trustees do not have any offices or formal affiliations in the U.S. We can help you settle a trust under the laws of several jurisdictions; at this time, we find the Cook Islands, Antigua and Nevis to be among the most favorable jurisdictions.

Foreign Companies

There are a number of opportunities associated with ownership of foreign companies.

If you are engaged in a trade or business outside the U.S., you can achieve some income tax reduction, provided you have enough revenue to justify the cost and expense of setting up and managing the foreign company.

If you have substantial assets, you might consider using a foreign limited partnership (FLP) or a foreign limited liability company (FLLC) for estate and income tax planning. If your assets are significant enough, you should consider using an FLP or FLLC to achieve better results. A non-U.S. entity can be an attractive method to structure the way a family holds wealth. The family may find that an offshore entity provides greater control and certainty, and it may provide additional estate tax savings in appropriate cases.

Variable Universal Life Insurance

We can direct you to a number of companies that sell foreign variable universal life insurance (VUL or FVUL). VUL policies provide asset protection along with significant income tax savings.

The VUL is issued by a foreign insurance carrier who does not do business in the United States. Typically, under the laws of the country in which the insurance company is domiciled, the cash value of a life insurance policy is exempt from the claims of your creditors and those of your beneficiaries.

These policies typically offer very flexible investment options. The build-up in value of VUL policies is tax deferred and, in retirement, you can borrow against them without tax consequences. Accordingly, a VUL policy can be a powerful tax shelter.

Foreign policies have several advantages over their domestic counterparts:

  • You can play a bigger role in selection of the investment manager for the cash value.
  • You can borrow on the policy at no cost.
  • Typically, the insurance companies’ charges are lower.

Investment Accounts

Foreign investment accounts make good sense if you are doing business outside the U.S. or you wish to place some liquid assets outside the U.S. in a safe jurisdiction. If you want the highest level of safety of some amount of assets, you can settle an offshore trust and then have that trust establish an investment account with a foreign bank.

There are a number of caveats about the use of foreign banks so as not to run afoul of the U.S. Treasury Department, but as long as you file the appropriate paperwork, you will not violate any U.S. laws.