Is offshore asset protection still possible? With the erosion of Swiss banking secrecy, the IRS is strongly against “secret” foreign accounts, and with the Americans receiving jail sentences for non-compliant bank accounts at HSBC and UBS, one might think it’s no longer a viable action plan. However, it is workable—provided it’s done correctly.

Offshore asset protection is effective against civil creditors if the offshore structure is tax compliant. In this post we’re going to look at four top insights on offshore asset protection.

Four Top Insights on Offshore Asset Protection

What is offshore asset protection? Before we get into insights, lets begin with the basics. Asset protection is simply the safeguarding of assets and wealth from attack by unsecured creditors. These assets can include the following:

• Liquid assets

• Real estate (commercial and residential)

• Professional practices

• Securities

• Art

• Jewelry

• Cars

• Boats

• Intellectual property

Offshore asset protection involves physically transferring pretty much anything of value to a foreign country. Of those listed above that can’t be moved is real estate. It is protected by turning it into cash, and then the funds are transferred offshore. This process of offshore asset protection is called equity stripping because the equity is separated from the property and then protected.

1. Offshore Asset Protection – How to Protect Your Assets

Protecting your assets involves transferring them to a corporation or trust that is created in a stable, secure, and confidential foreign country. The offshore asset protection strategy should be set up by a professional who is experienced with foreign assets. However, it’s imperative that the trust or corporation is set up carefully, and it must follow IRS rules governing foreign asset control.

2. Offshore Asset Protection – Stable, Secure and Confidential

Not all foreign countries are the same when it comes to stability, security, and confidentiality. This is why it’s important to ensure the safety of your offshore assets with well credentialed trustees, international banking institutions, and government officials at the highest levels in foreign countries. To ensure your foreign assets aren’t at risk, any offshore asset protection professional you hire must have long-standing relationships in the country you’re dealing with.

Some common foreign jurisdictions for offshore asset protection are the Cook Islands, the Isle of Man, the Cayman Islands, and Bermuda. This is because of their low (or non-) tax policies, their lack of currency restrictions, and their stable governments.

3. Offshore Asset Protection – The Foreign Trust

The advantages of a foreign trust is that its assets are insulated from civil law suits, matrimonial claims, non-payment of taxes, and forced inheritance. But it’s important to note that just about every offshore jurisdiction will honor treaties that require reciprocal enforcement of criminal convictions. Even though transferring assets to a foreign trust gives valuable offshore asset protection advantages to you, it’s important to note that there are arduous reporting requirements imposed by the small Business Job Protection Act of 1996; and the IRS is ready to impose substantial penalties to make sure these trusts aren’t used to avoid paying taxes.

As an American taxpayer, you must confine your offshore asset protection trust strategy exclusively to protecting your assets; and you must be ready to comply with the IRS taxation and reporting requirements. To ensure that your offshore asset protection strategy stays in place, all you have to do is continue to comply with United States tax compliancy.

4. Offshore Asset Protection – Be Aware of Tax Traps

Due to a need for asset protection, people have been securing their assets in countries that are considered tax havens for several years – since the 1970s. There was a need to guard personal wealth because of aggressive litigants, creditors, tax minimization, and ex-spouses. The United States government took note of this and started a campaign to stop this flow of wealth to offshore countries. Legislation was implemented to discourage American investors from sending their wealth overseas, creating the need for new offshore asset protection strategies.

To set up an offshore asset protection plan, it’s important to hire a qualified professional who is aware of the tax traps that are set up by the IRS. They must be experienced in U.S. tax law, as well as in international and domestic asset protection law.

Offshore asset protection is not as easy as it was, but it’s still a viable option, provided it’s set up correctly by an experienced professional. In other words, the trust must strictly follow the rules and regulations of the IRS, and the transaction must be done in a secure, stable, and confidential foreign country.