Understanding Some Of The Benefits Of Foreign Trusts

If you have a large chunk of money that you want to place in a trust, then you may want to look at your options outside of the United States. These are referred to as offshore trusts and they do provide Americans with quite a few benefits over trusts established within the United States. Keep reading to learn about some of the more basic benefits.

Asset Protection

The main benefit of an offshore trust and the reason that many individuals seek them is the fact that they allow for the protection of assets. Specifically, the money you place in the trust is subject to the laws and regulations of the country in which the funds reside. So, creditors and legal entities, like someone seeking funds after a lawsuit, will be unable to gain access to the money.

Sometimes the funds will be anonymous, meaning that the account holder's name will not be revealed to an outside source. This, in essence, keeps your assets hidden, but in a legal manner. Anonymity does depend on the located where the trust is held. However, even if the financial holdings are revealed to be in your name, they cannot be accessed by anyone else. Plenty of security measures are utilized to ensure that this is the case.

Some of the more common locations for offshore trusts where security is paramount include the Cayman Islands, Bermuda, and the Cook Islands. To ensure that the country meets your offshore trust needs, speak with a financial advisor. 

Lower Taxation

Tax liabilities are incredibly complex when it comes to trusts, and many trusts that are created in the US with an individual in the US controlling the trust will be subjected to come taxation. The levels of taxation in relation to the specific trust can be explained by your financial advisor. 

When it comes to foreign trusts, taxation will often occur when the funds are distributed to the beneficiary. Taxes also must be paid if the money is transferred elsewhere, like if the funds are placed in a different trust. 

And while you may need to pay some taxes, the taxes are limited in scope and they are generally minimal in comparison to trusts held within the United States. Keep in mind that while many people have skirted taxation law in regards to foreign trusts, the IRS has started to crack down on individuals who are not abiding by the law. So, you do want to take advantage of the tax benefits and follow the law at the same time.