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Are there disadvantages to foreign trusts?

Foreign Asset Protection – the Pros and Cons

If you are planning ahead for retirement, you will want to consider all of your options when it comes to getting the most out of your money. Whether it is through investing, speculating or good old-fashioned savings, you want to be proactive in providing for your family and children. You are probably already familiar with those options, but have you thought about getting a foreign trust.

Shrouded with many misconceptions such as being absolutely undetectable to the IRS, foreign trusts can sound mysterious yet very promising to those not experienced in international banking. However, nothing is guaranteed in the world of finances without plenty of research and strategy and the same holds true for foreign trusts. Simply put, trusts governed by the laws of another country, are affordable for anyone. Dependent upon the country and where it is established, a foreign trust can offer protection for assets from creditors including commercial, matrimonial, forced inheritance claims and even civil government actions such as tax evasion. Clearly the pros of having a foreign trust are attractive, but what about the cons? Though the benefits are many, there still are some drawbacks to consider. To fully understand the possibilities of a foreign trust, you must ask yourself: what are the disadvantages of foreign trusts?

Trust Arrangements Can Come Under Fire

One of the few disadvantages of foreign trusts is the risk of being accused of having an “abusive trust arrangement.” Coming under fire in Congress in recent years, abusive trust agreements are any trust schemes that seek to reduce or eliminate federal income taxes. Since the IRS has enacted a special task force dedicated to scrutinizing foreign trusts for possible abusive schemes, foreign trusts are increasingly being mandated to adhere to clarifying rules and expanding disclosure requirements. Failure to do so will result in specific penalties against trusts.

Another disadvantage is the complex tax consequences of having a foreign trust. From complicated regulations to scrutiny by the IRS, foreign trusts may require more paperwork and reporting than other modes of investing. As a result, you will want to take time to weigh the pros and cons as well as evaluate your motivations for establishing a foreign trust.

Is it worth it?

After comparing the pros and cons, will a foreign trust be worth the effort? If you want to ensure your assets are protected and reap some tax benefits as well, then yes! However, the key to making sure your foreign trust is above board and fully legal, you will want an expert to guide you through the process.

Thoroughly experienced in full-service estate planning, the Jeffrey M. Verdon Law Group is the expert in legal aspects of living wills and trusts. Whether you are just beginning your search for asset protection or are finally ready to make the first step to establishing a foreign trust, Jeffrey M. Verdon and his associates are ready to help you meet your financial goals. In the skilled and professional hands of the Jeffrey M. Verdon Law Group, the security of your assets will be guaranteed, and nothing compares to the peace of mind you will have knowing your financial future is secure!  

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