Offshore Estate Planning

Offshore Estate Planning

Although offshore trusts have the misperception of being only for those with a high net worth seeking to hide money from creditors, people, businesses or governmental taxing authorities, establishing an offshore trust has many legitimate estate planning and asset protection benefits.

Privacy

Offshore trusts, like any domestic trust, are private. In different states within the US and in many countries, a Will may be available for public view in case a court controlled probate process is required. Heirs may be informed of uneven distributions between them, of unknown beneficiaries of a person’s wealth or the name of a charity which may be receiving funds. If your assets are in a trust the distributions to beneficiaries are private, and could very well avoid future confrontation between beneficiaries and guarantee that the assets you decide to leave to your beneficiaries are distributed according to your desires and your wish for privacy.

More importantly, forced heirship is applicable to several countries; however, these rules do not apply to offshore trusts and after-death distributions will be made according to the terms of the trust. This would ensure that distributions are made according to your desires, without the influence of the laws and regulations of US and other foreign jurisdictions.

Asset Protection

While many US states allow for domestic asset protection trusts, they are for the most part not as protective as a trust with an offshore base. For instance, some foreign countries do not permit a lawsuit against a trust after the trust has been established for just twelve months. What is more, protection is further increased when a foreign country adds difficulty to the process of even filing a claim. For example, the creditor may not be able to hire ancillary offshore legal counsel in the country where the trust is located thus requiring a suing party to physically fly to the jurisdiction to sue. Alternatively, some jurisdictions make the legal, procedural process so daunting it almost makes it practically impossible to sue a trust in the first place.

Taxes

Generally, when you hear of an offshore trust running afoul of the law it is usually because the trust failed to report income and pay taxes of the jurisdictions which legally have a claim. The IRS does not care if you have an offshore trust so long as they are paid what the trust legally owes in taxes. The law firm of J.S. Burton, P.L.C. ensures that your offshore trust is established to file the appropriate tax filings in the proper jurisdictions. Typically, offshore trusts do not pay any more in taxes than simple domestic trusts do and may even reduce your overall annual tax liabilities.

Ease of Domestic Investment Allocation

Just because you have an offshore trust does not mean you cannot invest all of the trust assets in US stocks, bonds, mutual funds or ETFs. You can still maintain your domestic investment presence and keep the investments with your preferred investment company. You can even invest your tax qualified investments using offshore planning through a self directed IRA.

Protection

Although the selection of an offshore Trustee is critical, the law firm of J.S. Burton, P.L.C. will assist you in vetting the right trustee in the right jurisdiction. In addition, you can add a domestic trust protector, who can be an entity or someone known to you, with the power to remove a trustee if you believe it would be appropriate. The law firm of J.S. Burton, P.L.C. can also serve in the role of a trust protector.

There are many advantages of establishing an offshore estate planning presence in a stable jurisdiction. Contact J.S. Burton, P.L.C. for more information.

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    FAQs

    • What estate planning documents should I have?
      A comprehensive estate plan should include the following documents, prepared by an attorney based on in-depth counseling which takes into account your particular family and financial situation:

      A Living Trust can be used to hold legal title to and provide a mechanism to manage your property. You (and your spouse) are the Trustee(s) and beneficiaries of your trust during your lifetime. You also designate successor Trustees to carry out your instructions in case of death or incapacity. Unlike a will, a trust usually becomes effective immediately after incapacity or death. Your Living Trust is "revocable" which allows you to make changes and even to terminate it. One of the great benefits of a properly funded Living Trust is the fact that it will avoid or minimize the expense, delays, and publicity associated with probate.

      If you have a Living Trust-based estate plan, you also need a pour-over will. For those with minor children, the nomination of a guardian must be set forth in a will. The other major function of a pour-over will is that it allows the executor to transfer any assets owned by the decedent into the decedent's trust so that they are distributed according to its terms.

      A Will, also referred to as a Last Will and Testament, is primarily designed to transfer your assets according to your wishes. A Will also typically names someone to be your Executor, who is the person you designate to carry out your instructions. If you have minor children, you should also name a Guardian as well as alternate Guardians in case your first choice is unable or unwilling to serve. A Will only becomes effective upon your death, and after it is admitted by a probate court.

      A Durable Power of Attorney for Property allows your agent to carry on your financial affairs in the event that you become disabled. Unless you have a properly drafted power of attorney, it may be necessary to apply to a court to have a guardian or conservator appointed to make decisions for you during a period of incapacitation. This guardianship process is time-consuming, expensive, emotionally draining and often costs thousands of dollars.

      There are generally two types of durable powers of attorney: a present durable power of attorney in which the power is immediately transferred to your agent (also known as your attorney in fact); and a springing or future durable power of attorney that only comes into effect upon your subsequent disability as determined by your doctor. Anyone can be designated, most commonly your spouse or domestic partner, a trusted family member, or friend. Appointing an agent assures that your wishes are carried out exactly as you want them, allows you to decide who will make decisions for you, and is effective immediately upon subsequent disability.

      The law allows you to appoint someone you trust to decide about medical treatment options if you lose the ability to decide for yourself. You can do this by using a Durable Power of Attorney for Health Care or Health Care Proxy where you designate the person or persons to make such decisions on your behalf. You can allow your health care agent to decide about all health care or only about certain treatments. You may also give your agent instructions that he or she has to follow. Your agent can then ensure that health care professionals follow your wishes. Hospitals, doctors and other health care providers must follow your agent's decisions as if they were your own.

      A Living Will informs others of your preferred medical treatment should you become permanently unconscious, terminally ill, or otherwise unable to make or communicate decisions regarding treatment. In conjunction with other estate planning tools, it can bring peace of mind and security while avoiding unnecessary expense and delay in the event of future incapacity.

      Some medical providers have refused to release information, even to spouses and adult children authorized by durable medical powers of attorney, on the grounds that the 1996 Health Insurance Portability and Accountability Act, or HIPAA, prohibits such releases. In addition to the above documents, you should also sign a HIPAA authorization form that allows the release of medical information to your agents, your successor trustees, your family and other people whom you designate.
    • How do I name a guardian for my children?
      If you have children under the age of eighteen, you should designate a person or persons to be appointed guardian(s) over their person and property. Of course, if a surviving parent lives with the minor children (and has custody over them), he or she automatically continues to remain their sole guardian. This is true despite the fact that others may be named as the guardian in your estate planning documents. You should name at least one alternate guardian in case the primary guardian cannot serve or is not appointed by the court.
    • What does my estate include?

      Your estate is simply everything that you own, anywhere in the world, including:

      • Your home or any other real estate that you own
      • Your business
      • Your share of any joint accounts
      • The full value of your retirement accounts
      • Any life insurance policies that you own
      • Any property owned by a trust, over which you have a significant control
    • Why is it important to establish an estate plan?

      Sadly, many individuals don’t engage in formal estate planning because they don’t think that they have “a lot of assets” or mistakenly believe that their assets will be automatically shared among their children upon their passing. If you don’t make proper legal arrangements for the management of your assets and affairs after your passing, the state’s intestacy laws will take over upon your death. This often results in the wrong people getting your assets as well as higher estate taxes.

      If you pass away without establishing an estate plan, your estate would undergo probate, a public, court-supervised proceeding. Probate can be expensive and tie up the assets of the deceased for a prolonged period before beneficiaries can receive them. Even worse, your failure to outline your intentions through proper estate planning can tear apart your family as each person maneuvers to be appointed with the authority to manage your affairs. Further, it is not unusual for bitter family feuds to ensue over modest sums of money or a family heirloom.