I’m not a tax expert; if the truth be known, my tax return is so large and complex that I just sign what my CPA gives me and make a check out. Nor am I a legal expert. Although I’m going to tell you about something that is extremely important, I’m not going into the technical aspects of it all.
We live in a world today where it’s become quite dangerous to own wealth in your own name. You may have your assets seized by some government agency for violating a law you didn’t know existed. You may be subjected to an asset-stripping by a concupiscent spouse. You may be sued for any real or imagined insult or action by someone who sees what you have and wants it. These are just a few of the reasons why many people have always used trusts to insulate themselves from risk. And with the nature of society today, it’s far more important than ever to do so.
The simplest way to insulate yourself from these and other risks, as well as secure some other significant benefits in a legally and ethically sound manner, has been to set up an international trust. Properly structured, assets you place in an international trust are completely insulated both in theory and as a practical matter from the actions of government and litigants. These parties may present a far greater risk to your financial well-being than the most radical fluctuations of the market. This aspect of an international trust is pretty cut and dried.
My understanding is that there are no unfavorable tax consequences to putting your assets into an international trust. While you’re alive, all interest, capital gains, and the like are taxable to you as if you still owned them. You must report transfers to an international trust and state the trust’s income, but these things don’t add to your taxes. I’m not referring to some kind of secret trust which supposedly eliminates taxes; this is strictly by the book.
But there can be tax benefits. The main tax benefit is realized after you die, at which time the trust, being a foreign entity, is totally out of the US tax system—even though it is liable for estate tax. Subsequent to that it will live tax-free. This is a tremendous benefit to your beneficiaries.
The only problem with an international trust in the past has been the considerable, and unnecessary, expense of setting one up. Lawyers and promoters in the business typically got tens of thousands of dollars for shuffling the papers, the trust company got a significant upfront fee, and there were continuing flat and percentage fees each year forward. It was often foolish to consider setting one up with less than seven figures.
Terry Coxon, however—a very old and trusted friend—has solved these practical problems. In essence, Terry has made having an international trust as simple and low-cost as having mutual funds or an IRA.
There is almost certainly a limited window of opportunity to protect yourself before the US implements some form of official capital controls that could make funding an international trust difficult or impossible. The way I see it, there is little in the way of costs and disadvantages, and very large advantages from several directions. As with almost everything I write about, establishing an international trust is something I have done.