Are you ready to take your IRA offshore? Do you want to invest your retirement savings outside of the United States? Do you want to protect your savings by moving it out of the reach of civil creditors? Do you want to trade crypto on foreign exchanges? Here’s what you need to know to take your IRA offshore.
You can move an IRA offshore once the account has vested. A vested retirement account is generally one from a previous employer. Each time you change jobs, you take your IRA with you and it vests. These accounts can be moved offshore at any time.
In some cases, an IRA with a current employer can be moved offshore. If you’ve been at the same job for many years, some of your retirement accounts may have vested. You should discuss this with your HR department.
Finally, certain types of Defined Benefit Plans can be converted to IRAs. If this was written into your DB plan, you can make the conversion and then take the resulting IRA offshore. You’ll need to discuss this with your plan administrator.
There are two ways to take a vested IRA offshore. You can make international investments through a US custodian or you can transfer your retirement account into an offshore IRA LLC.
Investing your IRA offshore through a US custodian is referred to as creating a self directed retirement account. You tell the custodian what to invest in and they generally agree to make those investments.
Most US custodians do not allow offshore investments. If you want to invest your IRA offshore through a self directed account, you need to search out those custodians that support international transfers.
Because of the low costs of moving to a self directed account, these are best suited to the following: 1) those with less than $80,000 they want to move abroad or protect, 2) those who don’t mind having a US custodian incharge of their account, 3) clients that will make one or two investments offshore, and 4) persons who will not actively trade the international component of their retirement account.
The second option to take your IRA offshore is to form an offshore IRA LLC. In this case, you move your entire retirement account out of the United States and in to the Limited Liability Company. That is, your custodian makes one and only one investment – they invest your IRA into your LLC. From here, what happens to the account is totally on you.
When you set up an offshore IRA LLC, you become the investment manager of your account. You make the investments and all of the decisions for the account. You become responsible to ensure all IRA rules are followed and you must always act in the best interest of the account.
Because it costs about $3,500 to setup an offshore IRA LLC, I suggest that only those with at least $80,000 should go this route. Of course, this is not a rule, just a suggestion. I’ve had many clients over the years setup LLCs for $25,000 or so because they had multiple reasons to invest abroad.
Note that a husband and wife can use the same LLC. Also, all of your IRA accounts can be combined in to the same LLC structure.
In addition to the amount to invest, an offshore IRA LLC is best suited to those who will 1) actively trade their accounts, 2) make multiple investments, 3) will invest in crypto or other advanced products where time to trade is important, and 4) those seeking asset protection and to control their own accounts.
Again, when you setup a self directed account, the custodian is the ultimate authority. They make the final investment decision. They are also the ones who sign documents and they can reverse or revoke the transaction when possible.
An offshore LLC puts the account totally under your control. You write the checks and you make the wire transfers. 100% of the gains and losses are on you and you alone.
The process to move to a self directed custodian is simple enough. You just need to find one that allows for international investments and fill in the paperwork. There should be no tax issues around a transfer (you don’t need to do a roll-over with all that complexity). I can connect you with an international custodian if you drop me a note to firstname.lastname@example.org
Creating an offshore IRA is more complex and should only be undertaken by those willing to put in the time to manage their account. You can form an offshore IRA in the following steps:
- Move your account to a US custodian that allows for offshore IRA LLCs, which is not necessarily the same as a custodian that allows for self directed foreign transfers.
- Incorporate an international LLC in a zero tax country such as Belize, Nevis, Cook Islands, etc.
- Make yourself, the beneficial owner of the IRA, the manager of the LLC.
- Open an offshore bank account in the name of the LLC and set you up as the signatory on the account.
- Instruct the custodian to transfer the balance of your IRA account(s) into the LLC bank account.
From here, you’re in total control of the account. You make the transfers and sign any agreements on behalf of the LLC. Note that the LLC is owned by your retirement account and you‘re the manager of the LLC. This is a structure very specific to offshore IRA accounts and must be incorporated by someone experienced in these formations.
I hope you’ve found this article on taking your IRA offshore to be helpful. For more information on setting up this structure, please contact me at email@example.com or call us at (619) 550-2743. All consultations are free and confidential.