There are various reasons to establish an offshore entity like a foreign trust or corporation, including asset protection, tax minimization, global investing and diversification. Other reasons include owning foreign real estate and owning and protecting intellectual property. Whatever your reason, you will need a qualified, experienced attorney to guide you through the process. One misstep, such as choosing the wrong jurisdiction, or not taking into account a significant tax consequence, and the offshore strategy could be in jeopardy.
While it might appear that setting up an offshore entity is rife with dangers, don’t be scared away. Properly established offshore structures, set up by experienced and qualified counsel, will ensure ironclad asset protection and effective, legal tax savings.
One issue to consider is where the entity should be established. Your offshore advisor must be knowledgeable about changes in foreign jurisdictions, such as recent tax treaties or revisions to confidentiality laws. Would you be surprised to learn that neither Switzerland nor the Cayman Islands offer full confidentiality? Your offshore advisor should guide you to the best foreign jurisdictions. For example, Rubinstein & Rubinstein, LLP, recently drafted legislation which will make Antigua the premier foreign jurisdiction in the areas of asset protection and confidentiality.
Another issue to consider is political climate. Is the country vulnerable to pressure from larger, more powerful countries? Does the country have a history of independence, of democracy, of economic stability? Obviously you will want to avoid countries plagued by political corruption, or those that are known to harbor suspiciously obtained moneys.
Again, your choice of offshore advisor is critical. You will want an attorney with contacts at the highest levels in the foreign jurisdiction. You will want an attorney who has done his homework for you, and vetted foreign trustees, foreign banks and other service providers.
Of course, you will also need to consider the effects that your offshore entity will have back home. For example, the IRS has set up various “tax traps” which may snare Americans who set up the wrong structures, or who fail to provide correct and timely tax disclosure. Again, your attorney should be well aware of tax consequences, at home and overseas. Your attorney should set up the correct tax-compliant offshore structure. A good offshore attorney will know how to properly navigate through the tax law, and set up an offshore entity that protects your assets and minimizes your taxes in a fully legal manner.
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