Generating a foreign trust is a good asset protection strategy that will add a strong layer of protection between your assets and any third party trying to get to your wealth. Its main difference, compared to a conventional trust, is that the foreign trust is often established in offshore jurisdictions which will offer additional benefits and protection.
Why establish a trust?
If you are storing all of your assets in your home country, any bureaucrat can freeze your assets with the click of a mouse. Your wealth is at risk no matter how honest and law abiding you are as a citizen. Having an offshore trust overseas is very much like storing all of your assets in a safely locked vault that is not owned by you. If someone goes after your assets and you have correctly set up a trust it doesnt matter if they try breaking down the vault door, because legally the assets inside dont belong to you anymore.
Setting Up A Trust
Establishing a foreign trust can be very complicated and expensive if you dont know what youre doing. But you should not be scared away by the paperwork involved. This is a big step towards building your independence and resilience. Any paperwork is worth the additional protection youll get from having your own trust. To set up a trust, you need capital. And while its fully possible to start your trust with as little as $5000 the yearly costs are prohibitive with such a small amount. So if you dont have a fair amount of capital already, truth to be told a trust may not be for you.
A point worth mentioning is that setting up an offshore trust is not about hiding your money from the tax man. It is about diversifying your sovereign risk, i.e. not betting all your money on one horse – your home country.
The first and most important step for establishing a foreign trust is to choose a jurisdiction. Youll often find many trust companies based in Panama, Seychelles, Switzerland, and the Cayman Islands. Which one to choose? That depends.
IRS Form 3520: Dont Forget!
In the event you intend to make an offshore trust as a US citizen it is extremely essential which you get acquainted with IRS Form 3520, which is required annually to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.
Who must file Form 3520?
If youre a US Citizen and fulfill one of the below circumstances you have to file Form 3520:
Produce or transfer cash or property to a foreign trust
Obtain (straight or indirectly) any distributions from a foreign trust
Obtain particular gifts or bequests from foreign entities
If you dont want to end up in jail with heavy fines, its very essential which you adhere to all reporting needs from the IRS. Discover more offshore assets.
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