Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
The Price Of Oil Exposes The True State Of The Economy - 27th Nov 14
Brazilian Bovespa Stock Market Technical Analysis - 27th Nov 14
Gold Price Would Soar on Possible Swiss Yes Vote - 27th Nov 14
Crude Oil Asset Bubble Trouble - 27th Nov 14
Thanksgiving and Puritan Geopolitics in the Americas - 27th Nov 14
The Dow Jones Stocks Index - Beautiful Tree in the Desert - 27th Nov 14
The Digital World, The Opiate of The People - 27th Nov 14
Harry Dent's Simple Strategy for Surviving Withdrawals from Markets on Crack - 27th Nov 14
Socialist France Just Cannot Compete Against Google Freedom - 27th Nov 14
A Short Tale About the Grand Manipulation of Crude Oil Prices - 26th Nov 14
China Secret Gold Buying ... How Could It Happen? - 26th Nov 14
Gold Price Spikes to $1,467.50/oz on Computer Glitch? - 26th Nov 14
Gold - So Bad It's Good: Surviving 2014 - 26th Nov 14
TrueShopping.co.uk Real Customer Experience Review - Online Shopping Lessons - 26th Nov 14
Is There A New Global Consensus About Cheating Investors To Reboot Employment? - 26th Nov 14
EUR/USD – Currency Bulls Don’t Give Up - 26th Nov 14
Swiss Gold Referendum A Golden Opportunity for Switzerland - 25th Nov 14
Silver: What COT Analysis Tells Us - 25th Nov 14
Stock Market Big, Bold and Ugly - 25th Nov 14
U.S. Dollar Near Top? Gold and Silver Trading, Platinum Breakout Invalidation - 25th Nov 14
Buy Fear - Easily Pick Up Profits on Stock Market Dips - 25th Nov 14
The Islamic State Reshapes the Middle East - 25th Nov 14
Gold Price Forecast 2015 - 25th Nov 14
The Swiss Referendum On Gold: What’s Missing From The Debate - 25th Nov 14
Clash of Generations - Why Millennials Still Live at Home; Not Jobs, Student Debt, or Housing - 25th Nov 14
Stock Market Reminiscent of Pompeii - 25th Nov 14
Once Upon A Time There Were Philosopher Kings - 24th Nov 14
The 2014 Crude Oil Price Crash Explained - 24th Nov 14
China Stock Investing - Follow the Money! - 24th Nov 14
122 Tonnes of Gold Secretly Repatriated to Netherlands - 24th Nov 14
What Causes the U.S. Dollar to Move? - 24th Nov 14
Stock Market Indexes New Highs - Will Uptrend Extend Even Further? - 24th Nov 14
All Hail the King U.S. Dollar - Trend Forecast - 24th Nov 14
Where Is China Economy On The Map Exactly? - 24th Nov 14
Most of The World Economies Panic - Is The US Next? - 24th Nov 14
Stock Market Exhaustion Gap? - 24th Nov 14
Gold Golden Gains Come After The Pain - 24th Nov 14
Crude Oil and Stock Market Setting The Stage For The Next Recession - 23rd Nov 14
This Publicly-Owned Bank Is Outperforming Wall Street - 23rd Nov 14
Who’s Ready For $30 Crude Oil Price? - 23rd Nov 14
Strategic, Methodological and Developmental Importance of Knowledge Consumption - 23rd Nov 14
Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - 23rd Nov 14
Gold Price 2015 - 22nd Nov 14
Stock Market Medium Term Top? - 22nd Nov 14
Is the Gold And Silver Golden Rule Broken? - 22nd Nov 14
Malaysia's Subsidy and Budget Deficit Conundrum - 22nd Nov 14
Investors Hated Gold at Precisely the Wrong Time: What About Now? - 22nd Nov 14
Gold and GLD ETF Selloff - 22nd Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold Report 2015

The Five-Million-Dollar Reason for Investors to Go Offshore

Personal_Finance / Investing 2011 Apr 01, 2011 - 02:46 AM GMT

By: Terry_Coxon

Personal_Finance

Best Financial Markets Analysis ArticleTerry Coxon, co-editor of The Casey Report, is president of Passport Financial, Inc., and for over 30 years has advised clients on legal ways to internationalize their assets to optimize tax, wealth protection and estate planning goals. Read here how you can take advantage of a U.S. tax act and save a lot of money in the process…


Just when you thought there was nothing more the U.S. government could do to motivate you to ship your financial life offshore, they came up with another one. And if you have a sizeable net worth, it’s a big one; you could save your family $2.2 million in taxes by acting on the opportunity during the next 21 months. A husband-and-wife effort could save twice as much.

Included in the 2010 Tax Act passed by Congress late last year are gift and estate tax rules that apply only in 2011 and 2012. Compared to the rules they replaced, and compared to the rules that will take effect in 2013, they are especially permissive. The tax savings come from exploiting those interim rules before they expire.

For this year and next, you are granted a $5 million exemption from gift tax. If your bank account can handle it, you could write a check today for $5 million to someone in the next generation and incur no gift tax.

But it’s a use-it-or-lose-it opportunity. Starting in 2013, the exemption from gift and estate tax drops to $1 million, and the top tax rate on gifts and estates rises to 55%. (That’s substantially a reversion to the rules in effect in 2002.) So if you do nothing, you lose a free opportunity to reduce your taxable estate by a net amount of $4 million – which, at a 55% tax rate, means your family loses an opportunity to avoid $2.2 million in estate tax.   

Impediments

Estate tax has always been an avoidable levy. Regardless of the level of wealth, for those who planned well and planned early, the tax eventually incurred was trivial. The 2010 Tax Act doesn’t change that fact, it just makes it easier, until the end of next year, to exploit the fact. Even so, most people will let the $5 million opportunity slip by, as people always do with estate-tax saving opportunities. Because I hope you won't be one of them, let’s look at the practical impediments to effective estate planning, the things that get in the way and eventually cost the survivors so much in unnecessary tax.

Haven’t Gotten to It. Estate planning is not the kind of topic that draws most people in. And it’s generally about the far future, so it’s easy to tell yourself there will be plenty of time to deal with it later. If that sounds like you, maybe the $5 million opportunity that Congress is offering for just the next 21 months will spark some action.

Already Did It. If you’ve already done your estate planning homework, you probably don’t want to reopen the matter. But if you have a large estate, making that effort could save your heirs $2.2 million in estate tax.

They’ll Waste It. The thought of your 16-year-old grandson touring America on a $50,000 motorcycle likely does not live up to your highest hopes for posterity. Many wealthy individuals hold back from making gifts to younger generations because they don’t want to see the money wasted. Concern that gifts would remove capital from the control of the family’s most astute investor and cunning financial manager also discourages gifts. But such concerns are easily dealt with by using a trust. You can make a gift to an irrevocable trust of which you are the trustee. The property escapes the reach of estate tax, but you continue to decide how the money is invested and when it turns into spendable cash for the beneficiaries.

I Might Need It. You don’t want to do such a thorough job of estate planning that you plan yourself into the poorhouse. It’s pleasant to contemplate the financial head start you can provide for future generations, but not if you see yourself at the margin of the picture signing up for food stamps.

Offshore Solution

Those are the four reasons the government is able to collect billions of dollars in otherwise avoidable estate taxes every year. There's a way to shrink every one of those reasons and keep your family from eventually contributing to the government’s annual take: use an offshore trust. Here's what happens when you put an offshore trust at the center of your financial planning.

Haven’t Gotten to It. For reasons I’ll touch on, an offshore trust is the optimal environment for estate planning. But that’s really just a footnote.

An offshore trust is a cornucopia of benefits you can enjoy now. It provides unbeatable protection for your assets – protection from aggressive lawsuits, protection from lightning asset seizures and protection from the possible gold confiscation and currency controls that have many investors worried. It gives you entry to all types of foreign financial institutions, most of which no longer want to deal directly with Americans. That means more and better opportunities for profit and for truly effective diversification, and it means access to tax-efficient investment products you can’t get in the U.S.

Because those benefits begin right from the start, they counter the psychology of procrastination. And once you’ve established an offshore trust to gain those benefits, it only takes about 5 minutes of your attention to use the trust to capture the $5 million advantage I’ve been discussing.

Already Did It. An offshore trust can accommodate every estate-planning strategy your lawyer has told you about. You won't need to reinvent your estate plan, you'll just need to relocate it. And while you're doing so, you can bring it up to date to exploit the opportunity that was handed to you by the 2010 Tax Act.

Moving your estate plan offshore achieves an additional, highly attractive advantage. After your lifetime, the trust completely disconnects from the U.S. tax system. Distributions to your survivors will be reportable and partly taxable, but no one will be subject to U.S. tax on earnings the trust accumulates. The trust needn't be in anyone's taxable estate ever again. And no one will have a U.S. reporting obligation for the trust itself. That's as out of town as money can lawfully get.

They'll Waste It. An offshore trust can do as well as a domestic trust in dealing with the spendthrift problem, and maybe a little better. It has an edge because it provides better protection from the creditors some of your heirs someday might attract. In the meantime, it allows you to continue to manage the underlying investments just as you do now.

I Might Need It. Here is where an offshore trust shines for anyone who wants to exploit the $5 million opportunity.

If you transfer money to a trust, whether offshore or not, and you include yourself as a discretionary beneficiary (one who is eligible to receive a distribution but who has no fixed right to demand a distribution), and you later discover that you need the money for yourself, the trustee will have the power to give it to you. But if the trust is formed in the U.S., the money in the trust probably will remain in your taxable estate, because courts in the U.S. generally will tap into such a trust to satisfy your creditors.

By the standards of U.S. gift tax rules, if something is still available to your creditors, you haven't really given it away. (A few states have passed laws that attempt to protect such a trust from the grantor's creditors, but those laws can't protect a trust formed in the U.S. from lawsuits against the grantor in federal courts. The money is still available to at least some of the grantor's creditors, so it is still in the grantor's estate.)

The situation in some offshore jurisdictions is different. You can include yourself as a discretionary beneficiary of your trust, and if you later have a problem with a creditor, the courts there will tell your creditor to go away. Because the trust is protected from your personal creditors, your transfers to it move the money out of your taxable estate – even though the trustee has the authority to give the money back to you if you later need it.

With an offshore trust, the money's continued availability for your own support makes it far easier to exploit the $5 million opportunity that Congress has handed to you. And if you are married, it's a $10 million opportunity, but it runs out at the end of 2012.

 [The editors of The Casey Report – among them investing legend Doug Casey – leave no stone unturned to inform investors of the profit opportunities hidden in today’s volatile markets. While the U.S. dollar is losing more of its value every year and the economic crisis continues unabated, there are strategies to stave off the slow drip-drain on your bank account. Read the details here.]

© 2011 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014