We have been working for months with lawyers, banks, and government agencies in Panama and are finally ready to announce some great news for those seeking asset protection. You may now move your IRA or other retirement account to Panama and in to the best protection and estate planning tool available… the Panama Private Interest Foundation.
This represents the culmination of a great deal of negotiation and a titanic shift in the offshore IRA industry. While you were previously required to form an offshore LLC, you may now utilize a U.S. compliant Panama Foundation to hold your retirement account. This means you have access to all of the investment service providers, banks, and investment opportunities in Panama without being required to add a Panama corporation to your offshore LLC or getting your LLC licensed to do business in Panama… which is a major hassle costing thousands of dollars to complete.
This also means your IRA is in a Category III entity, which is much more advantageous for larger accounts and gives you access to a wider range of jurisdictions.
Let me explain. Before we created the Panama Foundation IRA, you were required to place your IRA in to an offshore LLC. This is because you needed to move it in to a disregarded entity for U.S. tax purposes to maintain the tax benefits of being a U.S. compliant retirement account. If you wanted to invest in a country that doesn’t have an LLC statute, you needed to create a subsidiary corporation under your offshore LLC. This increased the formation costs and maintenance, as well as the U.S. compliance required to move your IRA offshore. Most notably, the offshore corporation is required to file a U.S. tax return, IRS Form 5471, which creates too many headaches to list here.
* The only countries offering compatible offshore LLCs are Anguilla, Nevis, Belize, and the Cook Islands. Obviously, this limits your investment options unless you form an offshore corporation owned by the LLC.
Being what is referred to as a Category III entity, the Panama Foundation may open accounts and make investments in Panama (obviously) and other countries that have agreements with Panama. This includes Hong Kong and Cayman Islands. Cayman is universally regarded as the most advanced offshore banking jurisdictions for larger investors, but has no LLC statute. Structures from Anguilla, Belize, Nevis and Cook Islands are (basically) prohibited from opening accounts in Cayman, but a Panama Foundation has the same legal standing as a domestic entity… which is a major advantage.
* For more on Cayman, please see my article on this topic.
Also, when designing an offshore IRA structure, you want to ensure you are not required to file any U.S. tax forms. Eliminating filing requirements will save you thousands in compliance costs and greatly reduce the probability of being audited.
Moving your IRA in to the Panama Foundation structure we have created eliminates all U.S. filing obligations. Both an offshore LLC and our Panama Foundation structure are classified as disregarded entities for U.S. tax purposes and therefore not required to file a return… again, unless you add a corporation to the structure.
* There are times when a corporation and filing Form 5471 can be a major advantage. See my articles on UBIT blockers for more information.
I also note that the Foreign Bank Account Report (FBAR) is not required for a bank or brokerage account owned by a retirement account.
The above description covers just the basics of moving your retirement account in to a Panama Foundation. I will be releasing a detailed analysis of the structure and its legal basis in the U.S. in the next few days.
Please understand that the Panama Foundation IRA has a different objective than our typical asset protection structure. As this Foundation must meet all U.S. requirements for a retirement account, and we wish to prevent the need to file U.S. returns, it uses a different legal system than a Panama Foundation for protecting after tax income. That is to say, not all my comments and articles on the Panama Foundation apply to a Foundation which holds an IRA.
Basically, what we have done is take those aspects of the Panama Foundation that maximize asset protection and estate planning for U.S. persons, and convert them in to a structure that can support your retirement account. Once the account is inside the Panama Foundation, you are the manager and have complete control over the investments and the checkbook of the Foundation.
As the manager of the Foundation, and the fiduciary of the retirement account, it’s your job to manage the assets of the Foundation for the benefit of the retirement account, and not for your own gain. I will address this in more detail in my next post.
Our design also incorporates legal components from the U.S. business trust (which is quite different from a U.S. grantor trust) and the offshore LLC structures we have offered for the last several years.
The Panama Foundation IRA may hold any investment permitted under the U.S. IRA statutes. This includes physical gold, bank and brokerage accounts, and real estate. In fact, the Panama Foundation may hold land or other property to be improved by the Foundation, or a rental where the Foundation is to collect rents and pay expenses.
So, moving your IRA in to a Panama Foundation rather than an offshore LLC, will allow you to invest in and open accounts in Panama without a corporation or other expensive maneuvers. If Panama is where you would like to keep your investments, or you need access to other advanced markets (such as Cayman), you should consider forming a Panama Foundation IRA.
Please send an email to firstname.lastname@example.org for additional information. We will be happy to review this unique structure with you.
Stay tuned for my tax and legal analysis of the Panama Foundation IRA…