Protect Your IRA by Converting it into an Offshore Trust

Protect Your IRA by Converting it into an Offshore Trust

05/28/2016 - 3:41 PM
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protect your IRA

You know that offshore asset protection trusts offer the best security available. They’re an excellent way to protect your after tax savings. But, what of your retirement account? In this post I’ll show you how to protect your IRA by converting it into an offshore trust.

Let me start by talking about where to build your fortress, then we’ll review the safety features of an offshore trust. Finally, we will get to how to protect your IRA by adding those features to an offshore IRA LLC structure.

Here are the pillars to solid offshore asset protection:

Jurisdiction: Where you incorporate your offshore trust or LLC is just as important as how you build it out.

History: Select a country with a long history of standing up for plaintiffs rights. One that has been offering international trust services for decades without being broken and at a high / professional level.

Case Law: Select a country where offshore asset protection statutes have been tested in many court battles. If those cases have been heard in both the US and in the foreign jurisdiction, all the better.

Quality Local Representatives: Hire a trust company and protector service staffed by quality attorneys with licenses from major jurisdictions.

For all of the above reasons, Cook Islands is the best country in which to build an offshore asset protection structure. The best jurisdiction in which to make your stand.

A Cook Islands Trust is the strongest form of asset protection worldwide.  It has the most proven asset protection case law history in the world. Representatives in Cook Islands are New Zealand or Australian attorneys with decades of experience defending client’s assets. The Cook Islands ticks every box.

Next, let’s talk about the structure of an offshore trust for asset protection. What we call the “trust” is comprised of several components.

Settlor: The settlor of the trust is the owner of the assets going and the person creating the trust. The person funding the trust / transferring their assets to the trust.

Trustee: The person or firm outside of the United States that will manage your trust and handle local filing and compliance. Should you pass away, the trustee will distribute your assets per your letter of wishes (see below).

Protector: The protector, also based outside of the United States, steps in to manage your assets within the Trust if you come under duress. If someone sues you, then you transfer management responsibilities to the protector.

Offshore LLC Management Company: Most clients want to maintain control of their assets until and unless they come under duress. For this reason, we form an offshore LLC to manage the trust. The trust transfers its cash to this asset management firm, which happens to be owned and controlled by the settlor. If the settlor comes under duress or attack, he returns this responsibility to the trust and then the protector.

Trust Document: The trust document is the very long and detailed contract between the settlor, trustee and protector. It’s the heart of your asset protection plan and what must stand up to US, IRS, and creditor scrutiny.

Beneficiaries: Those who will receive the assets of the trust should something happen to the settlor(s).

Letter of Wishes: A letter sent by the settlor to the trustee telling him or her how to disburse the trust assets at your passing. This letter can be as simple or complex as you like.

That’s a very brief summary of how to structure an offshore trust. Now we are ready to apply those tools to protect your IRA. For more information on trusts, see my International Trust page for more detailed information.

Remember there are a bunch of IRA rules to follow to ensure your account remains tax deferred in the United States. So, this is not as simple as forming a trust and putting your IRA money in that trust. That would be an improper distribution resulting in taxes and penalties on your retirement money.

  • See my Offshore IRA page for the basics of moving your retirement account offshore.

When we take an IRA offshore we form an LLC in a foreign country that won’t tax your investments. When we want to maximize the protection for your IRA, we form that LLC in the Cook Islands.

In this way, the same history, law and professional services will apply to your Limited Liability Company as give the offshore asset protection trust it’s standing.

The offshore IRA LLC has a Member (like a Settlor) and a Manager (like a Protector). By using a Cook Islands protector as the Manager, we maximize protection. The LLC will also have a detailed Operating Agreement which uses many of the same asset protection tools as is found in an international trust agreement.

Before I get to that, let’s talk about the Member. This is a rather strange concept when we have an IRA and an LLC.

In most situations, the Member of an LLC is the person or persons who will control the company. Not in the case of an offshore IRA LLC.

IRA rules dictate that the Member must be the IRA account… not a person, nor you the beneficial owner of the account. The account itself owns the LLC. That is to say, the Member is the owner of the underlying assets of the company, and that owner is the account, not you.

The ownership statement of your offshore IRA LLC will look something like this: IRA Custodian Company, Inc. FBO Bob Smith IRA Account #55-55555555

  • Remember that all offshore IRA LLCs must have a US custodian. For more on that, see my Offshore IRA page.
  • FBO = For the Benefit of

It’s the Manager and the Operating Agreement where we have room to maneuver. We’ve spent many weeks working with experts around the world to convert our strongest offshore trust document into an offshore IRA LLC Operating Agreement.

We’ve also contracted with the very best protectors in the business, who are based in the Cook Islands, to act as the Manager of your offshore IRA LLC. They will manage your IRA investments to your specifications and create a solid barrier between your account and any civil creditors.

By combining the benefits of an offshore trust with the IRA rules, we have developed a custom max protect solution you will not find anywhere else. If you have a high risk of litigation, or otherwise believe your retirement assets will be at risk if under your direct control, we can help you protect your IRA by going offshore through a Cook Islands LLC and adding on a Cook Islands protector as your Manager.

I hope you’ve found this post on how to convert your IRA into an offshore trust to be helpful. Please contact me at info@premieroffshore.com or call (619) 550-2743 for a free and confidential consultation on how to max protect your IRA when going offshore.

These services are meant to protect your IRA from future civil creditors. We will not build a structure to hide assets from the IRS or the US Government. Also, offshore asset protection is only available if you are not currently in litigation. Going offshore after the harm is done could be a fraudulent conveyance and thus illegal.

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