International Investments through Offshore Retirement Accounts

How to invest your IRA in foreign real estate
Christian Reeves

How to invest your IRA in foreign real estate

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In this post, we’ll look at how to invest your IRA in foreign real estate. That is real property outside of the United States, including a rental property, commercial property, raw land, and non-traditional high yield investments such as timber. Here’s everything you need to know to invest your IRA in foreign real estate.

First, let’s consider which IRA and 401K accounts can be invested in foreign real estate. Only a “vested” account can be invested in foreign real estate. A retirement account typically becomes vested when it moves from a previous employer to a new custodian… when you leave a job.

That is to say, a vested account is an account from a previous employer. When you left that job, the account left with you and is now under your control. A vested account can be moved to a US custodian that specializes in foreign real estate or into an offshore IRA LLC.

There are cases where a portion of your retirement account will vest if you’ve been with the same employer for many years. If you’ve been with the same company for a decade or so, you might want to discuss this with your human resources office.

There are also cases when a Defined Benefit Plan can be invested in foreign real estate. If you can convert your DB plan to an IRA, then it can be invested outside of the United States. You should ask your plan administrator if you can convert to an IRA.

Now that you know which of your retirement accounts have vested, here are the two methods that allow you to invest your IRA into foreign real estate:

  1. Move your retirement account to a US self directed IRA custodian that is experienced in foreign real estate investments, or
  2. Form an offshore IRA LLC and invest your retirement account into that LLC.

The first of these options has minimal costs while the offshore IRA LLC gives you maximum control over your retirement account.

Because your IRA has vested, you can move it to any licensed custodian in the United States. Yes, you must always have a US custodian, even if all of your investments are held abroad.

So, to invest in foreign real estate with minimal costs, you move your IRA from your current custodian to one that allows for investments in foreign real estate.We call these self directed accounts or SDIRAs.

I’d say 95% of custodians don’t allow for foreign investments. It takes effort to find a good SDIRA custodian experienced in these matters (we can introduce you to one at no cost – info@premieroffshore.com)

Fyi… the reason most custodians don’t allow for foreign real estate investments is that they make most of their money selling investments. When you buy foreign real estate with your self directed IRA, your custodian doesn’t make a commission. Thus, most custodians will try to dissuade you from investing abroad.

In contrast, self directed custodians that allow for foreign real estate in your IRA charge a monthly fee. Your costs are fixed and you keep 100% of the profits from your investments.

The second method of investing your IRA in foreign real estate is to form an offshore IRA LLC. In this structure, we form an international Limited Liability Company for you in a zero tax jurisdiction such as Belize, Cook Islands, Nevis, etc. We then open a bank account and appoint you as the administrator of that LLC.

Once the offshore IRA LLC is incorporated an the bank account is opened, your US custodian invests your retirement account into this LLC. From here, you’re the signor on the account and in total control. You send the wires and write the checks.

Because an offshore IRA LLC puts you in control, it’s best for those that want to manage an active investment account. For example, if you want to invest in cryptocurrency, gold, or trade stocks – in addition to buying foreign real estate – then an offshore IRA LLC is the way to go.

To put this another way, I recommend the offshore IRA LLC to active traders and those who want to hold crypto in their account. Because it costs about $3,500 to setup an offshore IRA LLC, it’s not cost effective for those with smaller accounts and those who plan to make only one or two foreign investments.

Lastly, there are a number of non-traditional high yield investments found outside of the United States open to IRA investors. The most popular are crypto and timber. Timber is interesting for many reasons. Because of its holding period an stable demand curve, some crypto investors are buying this asset as a hedge against volatility.

The reason I like timer is that you can realize a sold return AND get residency in a foreign country with your IRA. Invest $22,000 in Panama’s Friendly Nations Reforestation Visa and receive residency. After 5 years of residency you can apply for citizenship and a second passport.
I hope you’ve found this article on how to invest your IRA in foreign real estate to be helpful. For more information in forming an offshore IRA LLC or to be introduced to a custodian that’s experienced in foreign real estate transaction, please contact me at info@premieroffshore.com or call us at (619) 483-1708. We’ll be happy to help you to structure your international investments.

IRA Romney
Christian Reeves

What we can learn from Mitt Romney’s IRA

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Mitt Romney is expected to win the race for a Senate seat in Utah and could end up becoming one of the most powerful players in the United States Senate. Mr. Romney is a former governor of Massachusetts and ran for president in 2012 but lost to Barack Obama. With all of that said, the most interesting thing about Mr. Romney is his IRA account.

Estimates of Mr. Romney’s IRA account are as high as $101.6 million depending on who you ask. No matter the exact number, let’s agree that this is damned impressive considering the maximum contributions to a traditional IRA is relatively small.

According to the IRS website, for 2015, 2016, 2017 and 2018, your total contributions to all of your traditional and Roth IRAs cannot be more than $5,500 ($6,500 if you’re age 50 or older). Plus, your ROTH contribution is limited by your filing status and your income. We can assume Mr. Romney was well over this income level.

Because he didn’t qualify for a ROTH IRA, Mr. Romney used an ordinary IRA or simplified employee pension (SEP) IRA, which means he’ll have pay ordinary income tax on the gains, starting when he reaches 70 ½.

So, how the heck did Romney’s IRA account reach $100M?

While at Bain Capital, the investment management firm he founded, Romney made investments into startup companies that he thought would take off. He knew that Bain was making major investments into these pre-IPO companies, and, if they succeeded, he could make a fortune post IPO. He put a few thousand down knowing that Bain was investing millions, and he had all of Bains research.

You could have had the same returns buying Bitcoin in your IRA back in 2013. An investment of $100 would have gotten you 1 coin. That coin would have been worth nearly $19,000 at the peak and about $7,000 today. An investment of $5,000 (the contribution limit) would have earned you $94 million had you timed the market right.

The benefits of making the investment with a traditional IRA are 1) using the pre-tax money, and 2) no tax in trades until you reach 70.5 years of age. At that time, you pay ordinary income rates, which are about 37%. 3) tax deferral on all gains and use of your capital throughout the years.

Had you used savings rather than an IRA to buy that Bitcoin, you would have paid long-term capital gains when you sold your Bitcoin on December 16, 2017. This would have been at about 20%.

Had you made the investment through a ROTH IRA, you would pay income tax on your full salary, with no deduction for the retirement account. Then, the crypto would appreciate tax-deferred (as described above) and you would pay zero tax when you sold the Bitcoin. Obviously, if you qualify for a ROTH, this would be the tax-efficient vehicle for high yield investments.

It’s also been reported that Romney used offshore IRA LLCs and UBIT blockers to protect and enhance his IRA returns. Both of these have been used for decades by very high net-worth IRA investors.

An IRA LLC allows you to move some or all of your retirement account offshore. Once that’s done, you can invest in real estate, hard assets, high yield foreign stocks, most physical gold, and just about anything else you like. The most popular investments for high net-worth persons is offshore master/feeder funds.

Moving your IRA offshore should open up your account to higher returns from foreign markets. It will also put you in control of the account. You become the investment manager of your IRA – the Bain Capital if you will – you select the investments and write the checks.

An offshore IRA LLC is especially valuable to those who wish to invest in foreign real estate. Only you will be willing to travel and learn the country. Only you will spend the time and money to find the best opportunities abroad. So, if you’re going to make multiple foreign investments, you should be the investment manager of your retirement account.

If you’ll make only one or two investments, consider using an offshore self-directed account. In these, the custodian makes the investment for you and you save the $3,500 setup costs of an offshore IRA LLC. If you will make multiple investments or want control, then go with an LLC. For more on these differences, see: Self Directed IRA or Offshore IRA LLC?

And, once you have your IRA offshore, you may be able to use it to gain residency in a country like Panama. Invest $22,000 from your IRA into Panama’s friendly nation reforestation visa program, pay legal and other fees from your personal savings, and you can gain residency in Panama. After 5 years of residency, you can apply for citizenship.

For more ideas, see: Best IRA Investments for 2018

The other IRA tool Romney reportedly used is a UBIT blocker.  This one will require a bit of explanation.

When you earn ordinary income in an IRA from a business (not dividends), or make money using leverage, the profits generated are called Unrelated Business Income. UBI is taxed at ordinary rates in the US as earned, which is about 35%.

So, if you buy a rental property in the US, and half the money comes from your IRA and half from a non-recourse mortgage, about half your rental income and your gain when you sell the property will be taxed at 35%. The other 50% will flow into your IRA account tax deferred.

Enter into this same transaction offshore, and add a UBIT blocker corporation to your IRA LLC, and you pay zero tax. UBI is converted to passive income and blocked from Uncle Sam.

I note that these tax benefits for IRAs are ONLY available outside of the United States. Using a blocker corporation in the United States, or with US real estate, subjects you to tax at the corporate level. See: How to invest your IRA into offshore hedge funds and active businesses.

I hope you’ve found this article on what we can learn from Mitt Romney’s IRA to be helpful. For more information on moving your retirement account offshore, please contact me at info@premieroffshore.com or call us at (619) 483-1708.

Ready to take your IRA offshore?
Christian Reeves

Ready to take your IRA offshore?

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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 info@premieroffshore.com

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:

  1. 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.
  2. Incorporate an international LLC in a zero tax country such as Belize, Nevis, Cook Islands, etc.
  3. Make yourself, the beneficial owner of the IRA, the manager of the LLC.
  4. Open an offshore bank account in the name of the LLC and set you up as the signatory on the account.
  5. 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 info@premieroffshore.com or call us at (619) 483-1708.

Best IRA Investments for 2018
Christian Reeves

Best IRA Investments for 2018

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The best IRA investments for 2018 are all offshore. If you want higher returns in your retirement account, you need to invest offshore. If you want to move some of your IRA out of the United States, you need to invest your account offshore. With that in mind, here are the best IRA investments for 2018.

To start, let me note that you can only place a vested retirement account offshore. A vested account is usually one from a previous employer. If you can move the account from one custodian to another, it’s vested. If you can’t move the account because it’s held at your current employer’s custodian, it’s not vested.

Second, keep in mind that most custodians don’t want you to invest your IRA offshore. They want you to buy their mutual funds, annuities, and whatever else they make a nice commission on. When you invest offshore, your custodian makes zero on the buy/sell. They make nada on your gains and get no management fees.

With that in mind, here are the best IRA investments for 2018:

  1. Foreign real estate in countries with low capital gains rates,
  2. International ICOs,
  3. Crypto trades at foreign exchanges with better rates (difference in bid /ask),
  4. Investments that lead to foreign residency, and
  5. Leveraged investments no available in the United States.

The most popular international IRA investment for 2018 is real estate. Foreign real estate offers a higher yield compared to the United States and is a relatively low-risk investment. While other offshore IRA investments are higher risk with massive upsides (such as crypto below), real estate is true to the IRA mantra of steady and conservative.

Foreign real estate is the best IRA investment in 2018 for those willing to put in the time, effort, and expense to find deals. Yes, returns are higher abroad if you find the right area and the correct tax structure. But, finding these deals means hitting the streets to learn the target country, the city, and finally the neighborhood.

And the best IRA investment for 2018 will usually be in a country with a low capital gains rate. Because you won’t pay tax on the gain in the United States, you don’t care about the foreign tax credit. Therefore, you want to invest in a country that will minimize your worldwide tax costs.

When you invest non-IRA funds, you pay 20% to the US on long-term gains. If you invest in a country with a 20% capital gains rate, you pay zero to the US because the Foreign tax credit gives you a dollar for dollar credit on your US return. When you invest in a country with a 10% rate, you pay 10% to that country and 10% to the US.

When you invest using your IRA, your US rate is basically zero and the foreign tax credit doesn’t apply (in most cases). Thus, you want to buy in a zero tax country like Belize or a low tax country like Colombia (capital gains rate is 10% but the tax on rental income is 33%). For more, see: Where to Buy International Real Estate.

See also: Which Countries Tax Worldwide Income?

The second most popular category of foreign IRA investments for 2018 is cryptocurrency and ICOs. The United States has forced US exchanges to report all sales, creating a tax nightmare for many. Also, the US SEC is pushing the majority of ICOs offshore. If you want to get in on the ground floor of an ICO, before all the vulture capitalists have picked it clean, then you need to invest offshore.

For these reasons, the best IRA investments for those looking to get into crypto, smaller coins, and most ICOs, are offshore in 2018. For more see: Take your IRA offshore and invest in cryptocurrency.

The third most popular investment for your IRA is one that can be paired with residency or citizenship. In some countries, you can gain residency with an investment. If that investment can be held by your IRA, you can use retirement funds to secure residency.

However, you need to be careful. You can make the investment using IRA money. Then you need to pay all costs associated with the residency application with personal savings (not IRA money). If you were to pay for residency with IRA funds, this would be an improper benefit.

For example, you can get residency in Panama with a real estate investment of at least $350,000 or an investment in an authorized reforestation plantation of $20,000. For more on this, see Best Panama Residency by Investment Program.

The fourth best IRA investment for 2018 is only for very sophisticated IRA investors. It is any leveraged purchase or foreign real estate with a mortgage. This is because these investments are only possible outside of the United States.

When you invest your IRA in the US using leverage or a mortgage, you must pay Unrelated Business Income Tax at about 35%. That is to say, all gains from leverage or a mortgage are taxed at 35% before being passed through to your retirement account.

For example, you buy a house in California using your IRA. 50% of the money comes from your IRA and 50% from a non-recourse loan (the only type of loan an IRA can accept). When you sell that home, half the capital gain will be taxed at 35% and half will flow into your IRA tax-free.

When you invest using a mortgage or leverage (maybe in a crypto account) outside of the United States, you can block and avoid this tax. Set up a UBIT blocker corporation along with an offshore IRA LLC and eliminate UBIT in your international IRA transactions.

I hope you’ve found this article on why the best IRA investments for 2018 are all offshore to be helpful. For more on converting your retirement account to a self-directed IRA or forming an offshore IRA LLC, please contact us at info@premieroffshore.com or call us at (619) 483-1708.

How to trade cryptocurrency and manage investments for others without a license
Christian Reeves

How to trade cryptocurrency and manage investments for others without a license

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I get a number of emails from readers each week asking how they can manage money for friends and family offshore. They want to trade cryptocurrency and make investments for others without going to the expense of setting up a licensed and regulated exchange. So, here’s how to trade cryptocurrency and manage investments for others without a license.

When you want to trade crypto or other assets for anyone other than yourself, you need an account that allows you to hold other people’s money. Banks are very cautious when it comes to those trading on behalf of others or managing investments without a license.

First, banks don’t want to be fined for facilitating money laundering. Banks paid hundreds of millions in the last few years for “allowing” their customers to avoid taxes and launder illicit gains. The bank might not have had any idea what was going on, but their due diligence procedures weren’t stringent enough to catch the wrongdoers, so they were fined big time.

Second, banks and governments don’t want anyone without a license managing other people’s money. Brokerage and investment management licenses and regulation is big business. If you don’t want to pay, you won’t be allowed to play.

Third, banks must follow strict Know Your Client (KYC) rules. When you open an account, the bank checks you out and thereby knows you, their customer. If you then receive friends and family or customer money in your bank account, the bank doesn’t “know” the true beneficial owner of the money. The actual owner is one level removed from the person the bank “knows.”

Setting up an offshore corporation and hoping for the best is not a good idea in today’s world. Banks are watching for the source of funds on most wires. They will check outflows and for anyone using their account to manage OPM. If you try to hide, you’ll be caught and kicked to the curb.

Against that backdrop, here’s how to trade cryptocurrency and manage investments for others without a license.

When you don’t want to set up a regulated exchange, which can cost $35,000 to $250,000, depending on the country, you can use offshore LLCs and a trading corporation to accomplish your goals.

You, the trader form an investment corporation and a management LLC. Then, each and every client forms an offshore LLC. Yes, every single client, friend, or family, must have their own offshore corporation. Only a husband and wife can have a joint LLC.

Next, all of these structures open offshore accounts at the same international bank. In this way, the bank has done its due diligence on you and your customers. Everyone has been reviewed and approved by the bank and transfers will be permitted between the group of companies.

Once everyone has been approved, the client LLCs can issue a Power of Attorney to your management LLC. With this Power of Attorney on file with the bank, you will be allowed to manage the investments of these clients and transfer funds into your investment corporation.

This multi LLC offshore investment management structure ticks all the right boxes. It allows you to manage client funds and for the bank to do its KYC on everyone involved. Because all the accounts are at the same bank, transfer costs are minimized and the source of funds won’t be questioned.

A separate LLC system to trade cryptocurrency and manage investments for others without a license works well with large investors. Because of the setup costs, it’s not efficient for smaller clients or selling investments to the general public.

This practical limitation is positive for banks. They don’t want someone operating an unregulated offshore hedge fund selling to mom and pop investors. This will only bring trouble and litigation to the bank. They like larger accounts, larger deals, and sophisticated investors.

This system also allows sophisticated investors to put more advanced structures in place. For example, they might want to trade within an international trust for estate and asset protection reasons. High net worth investors might want to hold the LLC inside an offshore life insurance company to eliminate US tax on the capital gains.

You can also use this structures to create private entities in countries with public registries. For example, let’s say you want to invest in Panama. That country has a public registry of corporate shareholders and directors and a list of beneficial owners of foundations (their version of a trust).

To keep your name out of the registry, you can set up an offshore LLC in a country like Nevis or Belize that doesn’t have a public registry. Then, this LLC can be the founder of a foundation or the officer and director of a Panama corporation. In this way, the beneficial owner (you) won’t be listed in the registry.

When someone searches the Panama database, all they’ll see is the name of your Belize LLC. When they go to Belize for more information, they’ll hit a brick wall.

Whether this offshore LLC structure is cost-effective will depend on how many clients/friends and family you plan to manage. In most cases, the base corporation might cost $3,500 and each LLC $2,000 to $2,900 to set up (not including bank fees).

The largest structure I’ve seen like this was 3,400 LLCs and two management corporations in Switzerland. Why, you ask, would someone spend that kind of money on LLCs? Because they don’t want to go through all the compliance and regulation that comes with a fully licensed exchange.

Had they decided to operate as an investment manager in Switzerland, they would have had to hire someone with the necessary Swiss licenses and go through a very arduous registration process. The multi LLC model eliminated both of these requirements.

Plus, once you have a license, you have quarterly filing, KYC and AML compliance, and all manner of regulations to contend with. When you use separate offshore LLCs, it’s a private transaction between you and your friend/client.

Finally, this system allows some clients to move their retirement accounts offshore. They could form an offshore IRA LLC and transfer some or all of their vested retirement savings into that entity. Then, that LLC could issue a POA to you, the trader.

As you can see, this multi offshore LLC approach to trading cryptocurrency and managing OPM for others without a license can be a very powerful tool.

I hope you’ve found this article on how to trade cryptocurrency and investments for others without a license to be helpful. For more information on setting up a regulated or unregulated crypto trading business, please contact me at info@premieroffshore.com or call us at (619) 483-1708. We’ll be happy to assist you with an offshore structure and banking.

Take your IRA offshore and invest in cryptocurrency
Christian Reeves

Take your IRA offshore and invest in cryptocurrency

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I expect cryptocurrency to remain a hot IRA investment in 2018. Almost every call we get these days is about investing in cryptocurrency offshore. Clients want to manage their crypto offshore in private and avoid the IRS audits we all know are coming. So, here’s how to take your IRA offshore and invest in cryptocurrency.

When I talk about cryptocurrency, I don’t mean only bitcoin and ethereum. What’s hot are all the altcoins and forks. Altcoins like AAC, ACT, Bitcoin Cash, Monero, Ardor, sia coin, and others. And, we see about 20 forks coming in 2018. A few exchanges, such as OurDax.com, guarantee that they’ll pass along all of these forks to their users.

The best way to avoid IRS audits of your crypto account, and the coming war in the United States, is to setup your account offshore. The way to gain access to the best trading platforms is through an offshore company. The best way to gain access to altcoins and forks is to take your IRA offshore and invest in cryptocurrency. The way to participate in top ICOs is to invest through an offshore structure.

So, here’s how to take your IRA offshore.

The first step is to move your account(s) to a custodian that allows for international investments. This is usually a US custodian that supports offshore LLCs like Midland IRA or Entrust. The most popular custodian for crypto investors is Midland, but there are several which offer this service. Neither of these companies is associated with Premier.

The reason I say you’ll probably need to move to a new custodian is that none of the big firms support offshore investments. The big guys, like Fidelity and Merrill Lynch, make their money by selling you their investments. When you go offshore, the custodian no longer is in control and doesn’t earn a commission on your trades.

And not all self-directed custodians allow for international investments. Firms like IRA Services in California allow US LLCs but not offshore LLCs. In order to move your retirement account out of the United States, you need a US custodian that is experienced in offshore structures.

Once your account is with the right custodian, we can form your offshore IRA LLC. We will work with you to select the best jurisdiction, form the company, draft the operating agreement and other documents, and open your bank and/or crypto accounts.

In most cases, we’ll open both a bank account and a crypto account. You will sell your US investments and transfer cash offshore. It’s rare that a US custodian allows for like-kind exchanges. Though, we have seen some with self-directed accounts move offshore by transferring crypto, thereby avoiding tax on the sale.

Once your IRA LLC is set up and funded, you can trade cryptocurrency in private. You’ll also have access to a number of smaller altcoins that are not available in the United States.

The same goes for ICOs. The US SEC has pushed most ICOs out of the country. Only the very largest and best-funded companies can issue a US compliant ICO. This means that US ICOs will be from companies that have already gone through many rounds of funding, with venture capitalists taking big bites of the pie.

If you want to invest in a true startup, then you need to do so offshore. If you want to invest as a VC, and get in on the ground floor, you need to invest offshore using an IRA LLC.

And, of course, you’re not limited to investing in cryptocurrency. You can buy gold, hold multiple currencies, invest in foreign real estate, and just about anything else you wish. You must follow all US IRA rules, but you’re in control and you select the investments that fit your risk tolerance.

Note that you can’t buy a house and live in it with retirement money. You can invest in rental properties, with the rental profits and gains flowing back into your retirement account. For more on this, see: Can I buy foreign real estate with my IRA?

One popular hedge offshore is to purchase physical gold in your IRA. You can buy gold through a bank, such as Caye Bank in Belize, and hold it as a hedge against crypto and fiat currencies.

And some banks, such as Caye, allow you to borrow against your physical gold. We have clients purchasing gold and borrowing against it to trade crypto. For more on the rules around buying gold with your retirement account, see: IRA Gold Rules.

But, watch out for IRA lending rules and UBIT. When you borrow in an IRA, you must use a non-recourse loan. Also, Unrelated Business Income Tax can apply if you don’t have a UBIT blocker corporation in place.  For these reasons, I recommend that only the most sophisticated IRA investors use leverage in their account.

The bottom line is that taking your IRA offshore will give you access to the best altcoins, ICOs, forks (IFOs), exchanges, and high yield investments. Add to this the max privacy and asset protection you get, and you see why offshore IRA LLCs are so hot in 2018.

I hope you’ve found this article on why you should take your IRA offshore to invest in cryptocurrency to be helpful. For more information, please contact us at info@premieroffshore.com or call us at (619) 483-1708 for a confidential consultation.

IRA Rules Premier
Christian Reeves

IRA Rules and Prohibited Transactions for Offshore IRA LLCs

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When you take your IRA out of the United States and invest it into an offshore IRA LLC, you become the custodian for the account. In this capacity, you’re responsible for following all US IRA rules. Here are the basic IRA rules and prohibited transactions you must watch out for when you operate an offshore IRA LLC.

First, a few comments on the process of taking your IRA offshore. This will give you some background on why these rules apply.

You can move any vested IRA or 401-K out of the United States. Likewise, if you can convert a defined benefit plan into an IRA, you can move that offshore.

The first step in this process is forming an offshore IRA LLC in a zero tax max privacy asset protection country. Most popular are Nevis, Belize, Cook Islands and Seychelles. These are the top asset protection jurisdictions with single member LLC statutes.

With the LLC up and running, we open an offshore bank account in the name of the LLC and your US custodian transfers your cash into that account. You’re the signer on the account and in control of all investments and transactions. Your custodian has no access to the offshore bank account and does not get involved in your investment decisions.

For more on this process, see: Here’s how to take your IRA offshore in 6 steps

As the manager of the LLC, and the person responsible for making investment decisions for the IRA, you’re in total control. You’re basically the investment advisor to the IRA and, as such, must always act in the best interest of the account. That is to say, you’re jobs are to 1) increase the value of the account and 2) protect the account. You are not allowed not to personally benefit from this position.

The two main risk areas for an IRA investment advisor are 1) prohibited transactions and 2) prohibited investments.

Failure to follow these rules can result in your IRA being dissolved and major taxes and penalties being applied. Per the IRS website, “…if an IRA owner or his or her beneficiaries engage in a prohibited transaction in connection with an IRA account at any time during the year, the account stops being an IRA as of the first day of that year. The effect of this is the account is treated as distributing all its assets to the IRA owner at their fair market values on the first day of the year. If the total of those values is more than the basis in the IRA, the IRA owner will have a taxable gain that is includible in his or her income.”

Prohibited Transactions in an Offshore IRA LLC

Generally, a prohibited transaction in an IRA is any improper use of an IRA account by the owner, investment advisor, his or her beneficiary, or any disqualified person. Disqualified persons include you and your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).

The following are examples of prohibited transactions with an IRA.

  • Borrowing money from it
  • Selling property to it
  • Using it as security for a loan
  • Buying property for personal use (present or future) with IRA funds

Prohibited Investments in an Offshore IRA LLC

Your offshore IRA LLC is not allowed to invest in life insurance or collectibles. If you get caught buying prohibited investments, the amount invested is considered distributed in the year invested and you may have to pay a 10% additional tax on early distributions.

Here are some examples of collectibles:

  • Artwork,
  • Rugs,
  • Antiques,
  • Metals – with exceptions for certain kinds of bullion,
  • Gems,
  • Stamps,
  • Coins – (but there are exceptions for certain coins),
  • Alcoholic beverages, and
  • Certain other tangible personal property.

For more on gold, see: IRA Gold Rules

The logic behind prohibited investments is similar to that of prohibited transactions. You could buy artwork, rugs, or antiques and display them in your home. You would then be getting a personal benefit from those investments.

I hope you’ve found this article on the basic IRA rules and prohibited transactions you must watch out for when you operate an offshore IRA LLC to be helpful. For assistance in taking your IRA offshore, you can reach me at info@premieroffshore.com or (619) 483-1708. 

take your IRA offshore
Christian Reeves

Take your IRA offshore to invest in ICOs and Bitcoin

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The United States has forced most ICOs out and will launch an all out attack on Bitcoin in 2018. If you want to hold Bitcoin in your IRA, you should first move your retirement account offshore. Here’s how and why to take your IRA offshore and invest in ICOs and Bitcoin in 2018.

In 2017, the US Securities and Exchange Commission ruled that ICOs were investments akin to traditional Initial Public Offerings. This determination means that the SEC has authority over ICOs and that ICOs must follow the same rules as an IPO.

This also means that the legal and compliance costs to issue an ICO are about the same as they are for an IPO. While a boon for lawyers and CPAs, these costs mean that smaller high value, and early stage ICOs will never see the light of day in the United States.

ICOs have two options in 2018: 1) go through several rounds of funding (angel plus 2 or 3 rounds of VC) before going public, or 2) move offshore and don’t market in the United States.

VCs are sure to have stripped out most of the pure “startup value” from these ICOs by the time of the offering. Plus, adding hundreds of thousands of dollars, or even a million or more, to the startup costs, means only the largest ICOs will get to market.

Of course, coming into a deal in the late rounds is safer, but most ICO investors are looking for looking for a clean deal. One of the primary objectives of the ICO model was to avoid the costs and greed of angels and VCs.

The SEC will push early stage ICOs out of the United States in 2018. Look for the best ICOs to be offered in Mexico and offshore in jurisdictions like St. Lucia, Dominica, Cayman, Jersey and Guernsey.

At the same time, the IRS is doing it’s best to push high net worth investors offshore. The Service is planning all out assault on Bitcoin in 2018, with most of the early targets coming from Coinbase. This site will be turning over more than 14,000 clients to the IRS in 2018 and the audits will begin.

Because the best way to eliminate US tax on your Bitcoin trades is to buy in your IRA, a lot of investors are creating digital IRAs. I expect this trend to hold and increase in 2018.

There are two ways to create a digital IRA. You can setup a self directed account in the US with a custodian that allows you to invest in Bitcoin, or you can setup an offshore IRA LLC. With a self directed account, you’re limited to US investments and the account is under the control of the custodian. With an offshore IRA LLC, the account is out of the US and is under your control.

There is one way to protect your IRA from government overreach – move your retirement account offshore and into an offshore IRA LLC. For more on buying Bitcoin in an IRA, see: Protect your IRA by moving it onto the blockchain.

As I said above, to buy crypto in the United States, you need a self directed IRA. To take your retirement account offshore, you need to add an offshore IRA LLC to this self directed account. Your custodian invests your IRA into an LLC incorporated in Belize, Cook Islands, Nevis, or some other tax free jurisdiction, and appoints you as the manager of this LLC.

With a self directed account, your custodian follows your investment instructions, but he or she has the ultimate say on how the account is invested. Most custodians don’t allow for offshore investments in a self directed account because they can’t or won’t do the due diligence necessary to review those transactions.

Because a US custodian can be held liable if your investments go south, they avoid risk. To eliminate this liability, you form an LLC and the custodian transfers funds to that structure. What happens from here is totally up to you. The liability and decision making is transferred from the custodian to you, the account owner, with an offshore IRA LLC.

The steps to take your IRA offshore are as follows:

First, you can only move a vested account offshore. A vested account is usually one from a previous employer. When you change jobs, or retire, your IRA account vests and you can move it to a new custodian… one that allows for the offshore IRA LLC structure.

Once you’re account is with a friendly custodian, we can form your offshore IRA LLC. This is a single member LLC where the member of the LLC is your retirement account. That is to say, the owner of the LLC is your IRA.

  • Note that a husband and wife can use the same LLC. You can move multiple accounts into a single LLC structure.

Next, the LLC appoints you as the manager of the structure. Again, the IRA is the owner of the LLC and you are the manager. In this capacity, you have total control over the bank accounts, crypto wallets, and investments.

Once the LLC and bank accounts are in place, the US custodian transfers the cash from your IRA to the international bank. You generally can’t transfer stocks or other assets offshore (like kind transfers). You should be moving US dollars into an offshore account.

Finally, you move those dollars into an international crypto trading platform. Now you have control over the account and are the investment manager of the LLC. As such, you must follow all US IRA rules and always act in the best interest of the account, just as a professional investment advisor would.

I hope you’ve found this article on taking your IRA offshore to invest in ICOs and Bitcoin to be helpful. For more information on moving your retirement account offshore, please contact me at info@premieroffshore.com or call us at (619) 483-1708. 

protect your IRA
Christian Reeves

Protect your IRA by moving it onto the blockchain

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The new “offshore” is in the cloud. The new asset protection tool is the blockchain. The best way to protect your IRA is by moving it onto the blockchain and behind and offshore structure. Get your retirement savings out of the United States, on to the cloud, and out of the reach of creditors before it’s too late.

As of today, you can freely move your IRA and other liquid assets out of the United States and behind the protective wall of an offshore structure. But, don’t expect this freedom to last long. As the tax reduction plans of President Trump come through, these loopholes will close.

The US will likely reduce US taxes and then eliminate the ability to retain earnings offshore. When that happens, all manner of regulations and new reporting requirements will be unleashed on offshore accounts. Only those who are already offshore will be spared.

You should be grandfathered in and not required to report the transfer. Also, you should not be required to pay any exit tax or transfer tax as we see with intellectual property transfers under IRC Section 482.

In most cases, the transfer of intellectual property to an offshore entity is a taxable event. The IP must be valued and tax paid on that fair market value as if you had sold it to the foreign entity. We expect this treatment to apply to all types of property in the near future.

To support this position, I note that the IRS has already ruled that cryptocurrency is property and not cash or a cash equivalent. This is why they can tax each and every sale as a capital gain. For more on this, see: Tax on Bitcoin Transactions.

In fact, the US government is all over cryptocurrency. The IRS is taxing transactions as capital gains. At the same time, the SEC claims Bitcoin is a currency and thus it has the right to regulate ICOs as it does IPOs.

You can expect the government to close the door to IRA transfers in the near future. If you want to get your retirement account on the blockchain and out of harm’s way, you’ll need to act quickly.

So, how do you get your IRA offshore? How can you move your IRA onto the blockchain? That’s easy enough.

The first step is to form an offshore IRA LLC in an offshore jurisdiction that 1) maximizes asset protection and privacy, 2) won’t tax your transactions, and 3) allows for single member LLCs. We need all three of these to build a proper retirement account structure.

As a result, the number of jurisdictions is limited. We usually work in Nevis, Belize, Cook Islands, and Seychelles. After 15 years in the industry, these countries are the most reliable.

Second, you likely need to transfer your IRA to a new US custodian. All IRAs require a US custodian, even those invested in cryptocurrency offshore. And the large custodians don’t want you investing offshore. They make money selling you their funds, so they prohibit international transfers.

Third, once your IRA is with a custodian that allows for international transfers, you instruct them to send a wire transfer to your offshore wallet or to your international bank account. If you will invest only in cryptocurrency, you might only need a wallet. If you want to diversify, you  probably need an offshore bank account.

Fourth, once you have your structure, an agreeable custodian, and your offshore company is funded, we install you as the manager. You’re responsible for writing the checks or sending the transfers. You’re in control of the IRA and the account grows based on your investment choices.

And that’s all you need to get your IRA onto the blockchain and out of the reach of governments and civil creditors. A proper offshore structure, a US custodian, a quality international wallet or trading platform, and the documents required to install you as the manager of the account.

I should point out that buying Bitcoin in your retirement account will allow you to avoid US tax on these transactions. If you buy and sell crypto within a ROTH, the trades are tax free. If within a traditional account, they’re tax deferred – you pay US tax as you take distributions.

However, if you buy using leverage, you may still have a taxable event. Whenever you buy and sell in an IRA with a loan or on margin, the gain attributed to that leverage is taxable at ordinary rates.

You can eliminate this tax if you’re offshore, but not if you’re investing in the United States. Offshore traders can set up a UBIT Blocker in addition to their IRA LLC and eliminate UBI on their cryptocurrency trades. For more on this, see: What is UBIT in an IRA?

UBIT blockers a very advanced IRA tool only available offshore. Only sophisticated investors should deploy these structures.

I hope you’ve found this article on moving your IRA onto the blockchain to be helpful. For more on setting up an offshore IRA, please contact me at info@premieroffshore.com or call us at (619) 483-1708. 

offshore company
Christian Reeves

What is Required to Form an Offshore Company

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Quality jurisdictions are asking for more and more information on those setting up offshore companies. If you’re going to structure an international business or an IRA, you’ll need to collect a number of documents before you can form an offshore company.

There are a 4 primary offshore company structures. They are:

  1. Offshore corporation,
  2. Offshore trust or foundation,
  3. Offshore Limited Liability Company (LLC), and
  4. Offshore IRA LLC

Each of these structures has a different purpose and slightly different documents will be required.

An offshore corporation is generally used to hold an active business. This is because a corporation can retain earnings and is this a valuable tax planning tool.

In contacts, a offshore Limited Liability Company is a pass-through entity. An LLC can’t regain earnings and is best suited to passive investments. Some small businesses also select an LLC.

For example, if you’re living abroad, qualify for the Foreign Earned Income Exclusion, and won’t net more than $100,000 in your business an LLC is a good choice. A business that has no need to retain earnings tax deferred might choose an LLC for the lower compliance costs.

An offshore IRA LLC is a unique and complex version of a standard LLC. When structured properly, and IRA LLC allows you to move your retirement account out of the United States and installs you as the manager of that account. Once complete, you have total control of the investments of your retirement account.

When you need asset protection and estate planning for passive and active investments, you need an offshore trust or an offshore foundation. These entities are similar, but the trust has a lot of advanced features compared to a foundation. For a comparison, see: Offshore Trust or Panama Foundation?

Some countries (such as Panama) maintain a public database of the officers and directors of their structures and some do not. You can use an LLC in conjunction with an offshore company to build a bearer share company.

With this in mind, here’s what you will need to provide to your incorporator and resident agent.

  • Your name and any names you’ve used in the past
  • Your date of birth
  • Social Security / National Insurance Number
  • Current primary residence and whether it’s leased or owned
  • Landline phone number at your home
  • Other phone numbers
  • Country of citizenship
  • Passport number and country
  • Profession
  • Details, if any, of any arrests/indictments or convictions  (Exclude minor traffic offenses)
  • Details, if any, of any proceeding brought involving the SEC, FTC, Federal Reserve Board, a Stock Exchange or their equivalents elsewhere, to which you or any associated business was a party
  • Details, if any, of any known investigation of yourself by a government agency or regulatory entity
  • Details, if any, of any search warrant issued with regard to your home, office or other premises occupied
  • Details of any past or current litigation
  • Details, if any, of any subpoena to provide records or testify in civil proceedings
  • Details, if any, if you or  your businesses has ever declared bankruptcy, including date of discharge
  • List any Outstanding Judgments against you or your associated businesses
  • details, if any, of any liens, attachments, garnishments, receiverships or other orders filed against you or any business with which you are or were associated
  • List professional or charitable associations of which you have been a director, trustee or member
  • Details, if any, of any professional organizations from which you have been expelled, suspended or disciplined
  • List all political parties of which you have been a member
  • List any government or political office ever held by you or an immediate family member
  • Details of any expulsions, suspensions or disciplinary actions in respect of a government position held by yourself or an immediate family member

That’s quite a list, and we’re just getting started. You will also need to provide the following documents in original (by courier):

  • Certified copies of Passport of every Director and Shareholder of the Company
  • Original Bankers Reference for each Director and Shareholder of the Company
  • Original Legal or Accountant and professional references for each Director and Shareholder of the Company
  • US or Non US tax declaration
  • Notarized copy of a utility bill reflecting the name and home address of each Director and Shareholder of the company
  • US tax forms as applicable such as W-8 or W-8BEN (actual form varies based on your citizenship)

Only after all of these documents have been received, and your name has been cleared through a database like World Check will a company be formed.

I hope this list of the information required to form an offshore company has been helpful. For more, and assistance with an offshore corporation, LLC, IRA LLC, trust or foundation, please contact me at info@premieroffshore.com or call us at (619) 483-1708. 

IRS Targets Bitcoin
Christian Reeves

The US Government is Targeting Bitcoin

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The US government has launched an all out war on Bitcoin and battles are raging on several fronts. The purpose of this war is to either kill Bitcoin so that the dollar remains dominant or, failing that, to control Bitcoin such that the government maximized taxable income and eliminates your ability to transact in private.

It’s early days yet in the war on Bitcoin. But, the writing’s on the wall. The only way for you to salvage some level of privacy is to move your Bitcoin offshore. Set up an offshore company and hold your crypto account in the name of the company.

Here are the 4 primary lines of attack the US government has on Bitcoin today. You can rest assured that new agencies will jump into the fray once they find a way to take what’s yours.

  1. IRS taxing bitcoin as a capital asset and not a monetary instrument.
  2. The SEC treating bitcoin as cash so they can regulate ICOs.
  3. Applying civil asset forfeiture rules to Bitcoin.
  4. Requiring you to report your Bitcoin every time you enter or exit the United States.

Let’s start with the IRS. The Service recently declared that Bitcoin and cryptocurrency are assets, not cash and not currency. This means that, when you exchange Bitcoin for FIAT currency, you must pay tax on the gain.

If you held the Bitcoin for less than a year, you pay short term capital gains tax at your standard rate. This is probably around 35%. If you held the Bitcoin for more than a year, you pay the long term capital gains rate on your profit, which is probably 23.5% (20% if Trump repeals Obamacare taxes). These are the Federal rates and your State will also tax the gain.

Had the IRS classified Bitcoin as a currency, they wouldn’t be able to tax you when you convert Bitcoin to dollars. By calling Bitcoin an asset, the IRS can tax the conversion (or more properly, the sale of the asset).

  • Only currency investments are taxable, such as FX traders, and not basic conversions. That is to say, if you buy foreign currency as an investment, then the gains are taxable.

Then there’s the Securities and Exchange Commission (SEC). If the regulator had determined Bitcoin to be an asset, rather than a cash or cash equivalent, they might not have had jurisdiction to control ICOs. For the reasons why this might have been the case, see: Crowd Sale vs ICO – What’s Legal?

Suffice it to say, if Bitcoin were an asset, all ICOs might have been considered crowd sales and thus outside the purview of the SEC. Of course, this is unacceptable… all investments must be watched over and controlled by our government – so, Bitcoin is cash to the SEC.

To those of us who write on these topics, both of these lines of attack were obvious. Each US agency will define Bitcoin in whatever way allows them to exert control and levy fines to generate more income. That’s the nature of the beast… to a hammer, everything looks like a nail.

Here’s the regulation of Bitcoin that no one saw coming:

Introduced last month, the Combating Money Laundering, Terrorist Financing and Counterfeiting Act of 2017, will force you to report your Bitcoin each time you leave or enter the United States. That’s right, you will be required to fill out a form telling the government how much Bitcoin and cryptocurrency you have each and every time you cross our border.

When I first saw comments on this legislation, I didn’t believe it. I’ve been writing about government overreach since 2000 and still thought this must be an error. It took me days, and a lot of research, to accept that this level of insanity was possible.

When you cross a US border with $10,000 or more in cash or cash equivalents (diamonds, coins, checks, letters of credit, etc), you must report to the government by filling out a form. Of course, filing this form will likely subject you to scrutiny at the airport and unwanted attention from the IRS later.

In most cases, the government has been reasonable in applying this rule. For example, if you’re traveling with collectable coins, you only report if the face value of those coins is over $10,000. So, reporting was generally for those transporting cash and very rarely intruded into the lives of everyday Americans.

The new rules targeting Bitcoin basically allege that cryptocurrency is always with you. Unlike an offshore bank account, where cash is held outside of the US and must be reported once a year, Bitcoin is literally travels with you inside of your laptop. Regulators believe that Bitcoin is stored in your laptop, phone, hard drive, or USB storage device, and is thus crossing the border with you.

This claim that Bitcoin is always with you is key to the government’s attempt to force reporting. If Bitcoin, which is cash or cash equivalent and not an asset in this case, travels with you, the government can force you to report. If it’s cash sitting on the blockchain, and all you have on your laptop are the codes to access that “cash,” no reporting can be required.

That is to say, you don’t need to report how much you have in your bank accounts simply because you’re username and password to access those accounts is stored on the laptop. You can only be required to report what you are physically carrying with you carrying when you cross the border.

And the same law that requires you to report your Bitcoin allows the government to take it from you. Bitcoin will become subject to the asset forfeiture laws. The government can seize your Bitcoin if 1) you fail to report it, or 2) you report it and they believe you obtained it illegally.

Note that I said, they “believe.” The government can take your Bitcoin and then force you to prove how you earned it. The burden of proof falls on you in a civil asset forfeiture case (YouTube video by John Oliver)… and you must be willing to spend big money on lawyers to have any chance of success.

What can you do to protect your Bitcoin?

These are all the ways the US government is targeting Bitcoin. And the only thing you can do to protect your coins is to move them out of the United States and out of the government’s reach. Remember that the US government can seize any cryptocurrency “stored” in a US exchange by issuing a levy or seizure order.

The US government can’t easily seize assets held outside it’s borders. For example, the IRS can levy any bank or brokerage in the US, and any institution that has a branch in the US. So, if you have cash in a bank in Panama, and that bank has a branch in the US, you’re at risk.

The solution is to form an offshore corporation or trust to hold your wallet. Then use only Bitcoin firms located out of the United States… those without ANY ties to the US and can’t be intimidated by Uncle Sam.

The same goes for buying Bitcoin in your retirement account. First, form an offshore IRA LLC. Then move your account into an international bank that doesn’t have a branch in the United States. Then setup an offshore wallet and buy your coins.

I should point out that buying Bitcoin in your IRA is one way to beat the IRS at their own game. Because crypto is an asset, you pay capital gains tax on each and every transaction. However, if you buy Bitcoin in your IRA, you defer or eliminate capital gains tax. Because cryptocurrency is an asset, you can buy and sell it inside an IRA.  For more, see How to move your IRA offshore in 2017.

The fact that Bitcoin is an asset also means you can take advantage of the tax benefits available in the US territory of Puerto Rico. Basically, if you move to Puerto Rico, spend 183 days a year on the island, and qualify for Act 22, all crypto gains on coins acquired after you become a resident will be tax free. See: Move to Puerto Rico and Pay Zero Capital Gains Tax.

I hope you’ve found this article on how the government is targeting Bitcoin to be helpful. For more information on taking your IRA offshore, setting up an asset protection structure, or moving to Puerto Rico, please contact us at info@premieroffshore.com or call (619) 483-1708. We’ll be happy to assist you to protect your coins and keep more of those crypto profits.

take your IRA offshor
Christian Reeves

Here’s how to take your IRA offshore in 6 steps

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In this article I’ll list the steps necessary to take your US retirement account offshore. Whether you’re looking for asset protection, privacy, or investment diversification, here’s how to take your IRA offshore in 6 steps.

Step 1: Determine if your IRA is eligible to go offshore

Before you can move your cash, you must determine which of your retirement accounts are eligible to go offshore. Only accounts that are vested can be moved out of the United States.

A vested account is one that’s under your control. In most cases, an account vests when you leave your employer and take the IRA with you. So, a vested account is typically a retirement account from a previous employer.

It’s possible that a portion of your account with a current employer has vested. If you’ve been working at the same company for 10+ years, you might be able to move a portion of the account offshore. You should speak with HR to see if any of your IRA has vested.

You can also take certain defined benefit plans offshore. If the plan can be converted into an IRA, and in doing so becomes vested, you can move that plan offshore. Eligibility will depend on your defined benefit plan documents. You’ll need to check with your administrator.

Step 2: Move your IRA to a custodian that allows for offshore transfers

Once you know which accounts are eligible to go offshore, you’ll most likely need to move them to a different custodian. Most US firms make money selling you investments. They earn a commission managing your IRA account and don’t want you to move it out from under their control.

There are a few custodians that allow for offshore IRA LLCs. They charge a fixed annual fee of $400 to $600 rather than making money selling investments.

Note that this move must be done as a transfer and not a rollover. If you have multiple accounts, recent changes to the IRS rules make the rollover a problem. However, you can make an unlimited number of transfer of your retirement account (moving it from one custodian to another). Remember that a transfer is not a rollover.

We’ll be happy to introduce you to a custodian that supports offshore accounts.  

Step 3: Setup an offshore IRA LLC owned by the IRA

Once you have an account number at your new custodian you can form an offshore IRA LLC. The owner of this account will be your IRA… not you personally and not the custodian.

For example, if your custodian is Midland IRA, the owner of the IRA LLC might be as follows: “Midland IRA, Inc. FBO John Smith #55-5555555” with  the number representing your account at Midland. FBO = for the benefit of.

The offshore LLC must be formed in a zero tax jurisdiction, one that allows for single member limited liability companies. The single member of your IRA LLC is your IRA account.

We also focus on countries with strong asset protection laws. For this reason, I like the Cook Islands, Nevis and Belize. The final selection will depend on your banking needs and other factors.

If you’re very concerned about asset protection, you might read the following on using the Cook Islands for maximum protection: Protect Your IRA by Converting it into an Offshore Trust

Step 4: Draft a custom operating agreement establishing you as the manager of the offshore IRA LLC

Now we need to establish you (the beneficial owner of the IRA account) as the manager of the offshore IRA LLC. This is done by drafting a custom operating agreement which lists in great detail your rights and responsibilities.

The bottom line is that you must manage the money in the IRA LLC just as a professional investment advisor would. You should make decisions based on what will maximize returns to the IRA… and those decisions should not benefit you personally.

For example, you can’t borrow from the IRA LLC, can’t use it to buy a home to live in it (even if you pay fair market rent), and can’t use the funds to pay personal expenses

Likewise, you can’t guarantee any of the investments of the IRA. This means you can’t guarantee a loan made to your IRA LLC. All loans taken out by the LLC must be non-recourse secured only by IRA money without a personal guarantee from the beneficial owner.

Step 5: Open an offshore bank account for your IRA LLC

Your IRA is sitting with a custodian that allows for offshore investments, your IRA LLC is incorporated in a secure offshore jurisdiction, and you have a detailed operating agreement giving you control of that LLC. Now it’s time to open an offshore bank account.

The bank selected will depend on the size of the account. If you plan to invest in real estate, and will thus maintain a minimum balance in your offshore account, I recommend Caye Bank in Belize. This bank has high fees but low minimum balances. For more, see: http://www.cayebank.bz/

For accounts of $20,000 and up I recommend Capital Security bank in the Cook Islands (https://www.capitalsecuritybank.com).

  • Because CSB does not have branches in the U.S., they have a good handle on FATCA, focus on U.S. clients, and offer a wide range of investment options, I often suggest clients plant their first flag offshore with these banks and then open brokerage accounts or diversify from there.
  • Another benefit of Cook Islands is that you do not need to travel there to open the account. All of the recommendations below require you visit the bank in person.
  • Finally, CSB is unique in that they don’t lend against client funds. See CSB Low Risk Profile.

In Panama, I recommend Banistmo (https://www.banistmo.com/en), Uni Bank (https://www.unibank.com.pa/en/index.html), and Multibank (https://www.multibank.com.pa/en/default.html). I also suggest Banco General (which is our bank), Santander, Banesco,  if you have a local office.

For private vault storage, I recommend Best Safety Boxes in Panama. See http://bestsafetyboxes.com/

For managed accounts over $2m, I recommend Andbanc in Androa or their branch in Panama (http://www.andbanc.com/).

If you prefer a financial advisor and bank in Europe, I recommend Swiss Partners in Geneva. Their website is http://swisspartners-advisors.com. The minimum account size is about $2.5 million.

Step 6: Transfer your IRA cash from the custodian to your offshore bank account

Once you’re account is opened, the custodian will send a wire from their bank to yours. This will move some or all of your cash out of the United States and into an international account that’s under your control.

  • You can chose to move all or a portion of your IRA offshore. You can leave some cash with the custodian if you want to make US investments or are new to international banking and want take it slow.

As the manager of the LLC, and the only signatory to the offshore bank account, all investment decisions rest with you. You’re the only person who can send a wire or write a check… which is why we call this an Offshore Checkbook IRA LLC.

This also means that it’s your responsibility to follow the various rules of IRA management. Here are a few articles you might find useful:

If you have a Defined Benefit Plan that you might want to convert to an IRA, see: Maximum Asset Protection for a Defined Benefit Plan

You will also find that there are many tax benefits for sophisticated IRA investors which are only available offshore. For example, the ability to use a UBIT blocker to eliminate US tax in your IRA from leveraged investments. Also the ability to own a portion of an active business, which is operated outside of the United States, whereby the income from the business flows into your IRA tax free.

Of course the main reasons clients take their retirement accounts offshore is to diversify out of the United States, invest in higher returning opportunities, and protect their assets from civil creditors and uncertain times. These are the core principals of the offshore IRA model and goals we can assist you to achieve.

I hope this article on how to take your IRA offshore in 6 steps has been helpful. For more information, please contact us at info@premieroffshore.com or call (619) 483-1708. We’ll be happy to assist to structure your affairs abroad.

asset protection for defined benefit plan
Christian Reeves

Maximum Asset Protection for a Defined Benefit Plan

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Defined benefit plans are excellent tools to put a lot of pre-tax money away quickly. Because of they don’t have the same contribution limits as IRAs, they allow the business owner to build up savings and reduce taxes efficiently.

Because defined benefit plans build cash quickly, they’re big time targets of lawyers and civil creditors. In this article I’ll show you how to provide maximum asset protection for a defined benefit plan.

The best asset protection for a defined benefit plan is to move it offshore and inside a “trust like” structure. Get it out of the reach of creditors and judges by moving it out of the US and behind the walls of an advanced asset protection structure.

The first step in moving a defined benefit plan is to figure out if it’s eligible to go offshore. In most cases, a plan from a previous employer with a cash value can be protected. If it’s a defined benefit plan from your current employer, and the plan documents allow for a conversion or to be invested abroad, then it too can be placed inside an international asset protection structure.

Sometimes DB plans are in subsidiary companies, or can otherwise be separated from the main business. If this sub can be closed down, the plan might then vest and be eligible to go offshore.

The way you get a defined benefit plan offshore is to convert it into an IRA (either a ROTH or traditional). Then you place that into an offshore IRA LLC. I’ll explain how to do this below. First, you need to find out if your plan can be converted into an IRA.

The bottom line is that you’ll need to ask your plan administrator if your DB plan can be converted into an IRA. They might not know how to take it offshore, but, if they can advise you how to convert it into an IRA, that’s all you need from them.

Assuming you get a positive answer, you need to ask your administrator to convert the defined benefit plan into an IRA.

  • If your administrator says it’s impossible to convert to an IRA, and he’s making money managing your investments, you might seek out a second opinion. I’ve seen many cases where DB plan administrators put their financial well being ahead of their clients.

Once the cash is an IRA, you can move that account or accounts from your current custodian to one that allows for foreign structures and investments. Not all IRA custodians allow for offshore LLCs and international investments. This is a very specialized area.

Now you can finally get the defined benefit plan offshore. We setup an offshore IRA LLC, open an international bank account, and the custodian transfers the money into this structure. As the manager of the LLC, you will have checkbook control of the account. You’ll make all transfers and be responsible for all investment decisions.

All of the above gets you basic offshore asset protection of your defined benefit plan. If you want maximum protection, we can customize your LLC with features you would normally find in an offshore asset protection trust.

You can’t put an IRA or defined benefit plan into a trust, but we can create an LLC that acts like a trust.

The way we do this is by forming the IRA LLC in the Cook Islands, the top offshore asset protection trust jurisdiction. We then build an LLC operating agreement molded after a Cook Islands asset protection trust.

For example, an offshore trust uses an independent trustee, a protector, and has clauses that make it impossible for the trustee to make payments to creditors. Even if one gets a judgement against you in the United States, there’s no way for them to collect on it in the Cook Islands.

To copy these protection elements, we install an independent LLC manager in the Cook Islands LLC. We also set up a protector who takes over should you (the beneficial owner, similar to a settlor) comes under duress.

To support these professional advisors, the LLC operating agreement includes terms that prohibit the manager from transferring money to the custodian or owner if they’re under duress. The agreement basically creates the defense of impossibility in the Cook Islands to protect the assets of the LLC.

I should point out here that setting up this maximum asset protection structure for a defined benefit plan means that you must also follow the same rules that apply to international trusts. For example, rules around fraudulent conveyance.

In its most basic form, a fraudulent conveyance is when you send money out of the United States to keep it away from a current or reasonably anticipated creditor. If you injure someone today and fund an offshore trust or IRA LLC tomorrow, you’ve probably fraudulently conveyed money into the structure.

Thus, your defined benefit plan must be moved offshore well before you have any legal problems. In a perfect world, it is moved offshore 1 or 2 years before a dispute arises. That is, 1 or 2 years before the harm occurs, not before the plaintiff files a claim against you.

I hope you’ve found this article on how to max protect your defined benefit plan by moving it offshore to be helpful. For more information, please send me an email at info@premieroffshore.com or call us at (619) 483-1708. 

move your IRA offshore
Christian Reeves

How to move your IRA offshore in 2017

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If you’re looking to diversify your account out of the US, protect your savings offshore, or purchase foreign real estate, here’s everything you need to know to move your IRA offshore in 2017. When done right, moving an IRA offshore is relatively simple.

The first step in moving your IRA offshore is to determine if your account(s) are eligible to be moved. You can move your IRA offshore if the account has vested. This usually means an account from a previous employer… an account that has been transferred from the employer to you.

From time to time, we see clients who have been at the same job for many years. If you’ve been at the company for 10+ years, some of your IRA may have vested. You can check with Human Resources to find out.

Note that you don’t need to be of any particular age to have a vested account. Each IRA from a previous employer is fully vested and eligible to be moved offshore.

Once you have your vested accounts in order, you can begin the process of moving them offshore.

The first step in taking your IRA offshore is to transfer it from your current custodian to one that allows for foreign structures and investments. Most IRA custodians make money selling you investments. So, they don’t want you moving cash out of their control. Note that this is a transfer and not a roll-over. No restrictions apply.

So, you need to move your account to a custodian who charges a flat annual fee, that doesn’t sell investments, and who allows for offshore structures. We recommend Midland, NuView and SunTrust, but there are many good custodians out there.

Once your custodial account is setup, you contact us to form an offshore IRA LLC for you. We incorporate the company, draft the operating agreement, and handle the structuring side of the process.

We also open an offshore bank account for you. Once the LLC and account are ready, your custodian transfers the cash in your IRA to this international bank account.

Your LLC is owned by your retirement account and you’re the manager of that company. That means you have total control over the bank account. You make the investments, send the wires, and write the checks. Your custodian has no control over the bank account.

The asset protection component of the structure comes from the fact that the LLC and bank account are outside of the US and out of the reach of a US creditor. Also, the fact that the custodian has no right to force you to return the money to the US provides an increased level of protection.

That’s everything you need to know to take your IRA offshore in 2017.

The most common question we get at this point is, what size IRA can go offshore?

The answer is that it’s up to you. The costs of moving a retirement account offshore are fixed. They don’t change based on the size of the account. Here’s a summary of those costs:

  • Your US custodian will probably charge a flat fee off $300 per account per year.
  • The cost to form the IRA LLC is around $3,000 depending on the country.
  • The cost to open an offshore bank account is $500
  • The annual fee to maintain the LLC is $500 depending on the country (beginning in year 2)

If you have a reason to take an account of $30,000 offshore and pay these fees, then go ahead. I’d say most clients have $50,000 or more they wish to protect, but everyone’s objectives and investment strategies are different.

I’ll close with a few suggestions for your IRA when you get it offshore. Note that my firm makes money setting up the structure. We don’t sell investments and we don’t earn a commission if you make an investment.

This tip can increase your ROI by 30% or more: When using your IRA, invest in low tax countries! Remember that profits from rental properties or capital gains will flow into your IRA tax free. Investing in a high tax country will lower these returns significantly.

So, hold your stock, FX, and trading accounts in a country that won’t tax your gains. Buy real estate in a country with a low capital gains rate. For example, Belize has a 0% rate, which is about as low as you’ll find!

Next, use your IRA to get a second residency. You can invest $20,000 in Panama, or $35,000 in Nicaragua, using your IRA and get residency for free.

Nicaragua is a great deal if you want to live there. If you spend 6 months a year for two years in country, you qualify for citizenship and a second passport. For more, see: The Best Second Residency Program in 2017

If you want residency without a physical presence requirement, look to Panama. Here you can apply for citizenship after 5 years. For more, see: Best Panama Residency by Investment Program

I hope you’ve found this article on how to take your IRA offshore in 2017 to be helpful. For more information, please contact me at info@premieroffshore.com or call us at (619) 483-1708. 

international real estate in 2017
Christian Reeves

Where to buy international real estate in 2017

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President Trump has promised to rewrite the US tax code as it applies to international business and foreign investment. He has also promised to lower both the capital gains rate and the personal income tax rate. With that in mind, this article will help you figure out where to buy international real estate in 2017.

You might be thinking, what the heck does any of this have to do with where I should buy international real estate. Well, the tips I’ll give you below can increase your returns by as much as 20%. Coordinating US tax policy with your foreign investment portfolio can make a very big difference.

We Americans are taxed on our worldwide income no matter where it’s earned. If we pay tax in a foreign country, we get a foreign tax credit from Uncle Sam to avoid double taxation. However, we will always pay at least the US rate.

The US rate for long term capital gains is currently 20%. It might go down to 10% or 15% under Trump. This is the minimum tax we will pay on gains from foreign investments.

For example, you buy a property in Colombia for $100,000 and sell it for $200,000 after 5 years. Your gain is $100,000. Colombia’s capital gains tax rate is 10%, so you will pay this to the local government. This leaves 10% available for the IRS.

So, even when you invest in a country with a 10% rate, you will pay a total of 20% because you’re a US citizen in 2017. Hopefully this will go down in 2018.

If the US rate goes to 10%, you will pay the same 10% to Colombia and nothing to the United States. Likewise, if the US rate goes to 15%, you will pay 10% to Colombia and 5% to Uncle Sam.

So, the key to tax efficiency in international real estate investing is to purchase in a country with a tax rate equal to or lower than the United States. You’ll always pay the US rate, but you never want to pay more than this.

With Trump looking to cut the US capital gains rate, international real estate investors need to rethink their strategies. Focus on countries with low tax rates to maximize your after tax ROI.

The same goes for local taxation of rental income. You’ll always pay the US ordinary income tax rate on rental profits. You don’t want significant rental income in a country with a rate significantly higher than the United States.

This isn’t always so easy to figure out. If you’re at the top of the US income brackets, just about every country will have a rate equal to or lower than your US effective tax rate. If you don’t have much ordinary income, then you want to watch your foreign tax rate carefully.

For example, Colombia taxes rental income at 33%. Also, they don’t allow you to deduct depreciation. So, Colombia’s tax rate on rental income can be much higher than your US rate, depending on your situation.

Someone focused on capital gains might like Colombia while someone focused on cash flow should look elsewhere.

This all goes double for US investors buying international real estate in 2017 using their retirement accounts. When you buy foreign real estate in your US IRA, you pay zero tax if it’s a ROTH and get significant tax deferral if a traditional account.

Thus, any foreign taxes paid are a waste of money because there’s no offsetting foreign tax credit and no minimum tax floor set by the US capital gains rate. IRA investors should focus on countries like Belize with zero capital gains tax or Nicaragua with a 10% rate.

Coordinating your US tax bill with the tax rate of the country where you purchase real estate can significantly increase your net return. If Trump’s tax cuts come through, those who have invested in low tax countries will be rewarded.

I hope you’ve found this article on where to buy international real estate in 2017 to be helpful. For more information, or to take your IRA offshore, please contact us at info@premieroffshore..com or call us at (619) 483-1708.

UBIT in an IRA
Christian Reeves

What is UBIT in an IRA?

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UBIT in an IRA is a real pain in the rear… at least if you’re IRA is onshore. When you take an IRA offshore, UBIT is not big deal. Here’s an explanation of UBIT in an IRA and how to deal with it.

UBIT stands for Unrelated Business Income Tax. We call this type of income in an IRA UBI and the tax you pay on that income is UBIT. We investors hate UBIT because it results in our IRA investments being taxed at around 35%.

That’s right, not all investments made by an IRA are tax free (ROTH) or tax deferred (traditional account). Some investments are taxable before they reach your IRA account. UBIT is the name for the tax assessed on profits derived from certain investments in your IRA or other plans (401-k, etc.).

UBIT applies to three types of investments in your IRA:

  1. When you buy real estate with a mortgage,
  2. When you buy stocks or other assets with leverage, and
  3. When you invest in an active business that’s not taxed at the corporate level.

When you buy a rental property with a mortgage, income and capital gains attributable to that mortgage are considered UBI. Thus you will pay 35% in UBIT on these profits before they reach your IRA.

For example, you buy a rental property in your IRA. 50% of the money for the purchase comes from your IRA account and 50% from a nonrecourse mortgage.

Because 50% of the money came from a loan, half of the net rental profits each year are UBI and taxable. The other half flow into your IRA tax free.

Likewise, when you sell the property, half of the capital gain is taxed at 35% and the other half flows into your IRA tax free.

  • Yes, that’s correct. A UBI capital gain is taxed at ordinary income rates and not the 20% long term capital gain rate.

The same goes for stocks and other investments made with leverage. Any income earned on that leverage is taxable at 35%, not long term capital gains rates.

This can get really bad in high leverage accounts like as currency / FX trading. I’ve seen leverage at 100 to 300% offshore. Basically all the gains are UBI and you pay UBIT at 35% on each trade.

Last but certainly not least are investments into active businesses from your IRA. When you invest in an active business that passes untaxed income to you, this is UBI and taxable at ordinary income rates.

For example, you invest in a US partnership using IRA money. The partnership issues a K-1 to your IRA LLC reporting net profits. If that K-1 was issued to an individual, he or she would add it to their tax return and pay tax on the profit.

The same goes for an IRA account. You don’t get to deposit untaxed business income into your IRA. You must pay tax on those profits first, just as an individual would. Of the three categories, this one makes the most sense. Without it, all businesses would be held in IRAs and no one would ever pay tax on the profits.

If that same business were operated through a US corporation rather than a partnership, the entity would pay corporate tax at 35% and pass a dividend to your IRA. This is not UBI because the income was taxed at the corporate level. A dividend from a corporation is not UBI while a K-1 or other distribution of pretax money is UBI.

When you have UBIT in an IRA, you must file IRS Form 990-T to report the gain. Your IRA pays this tax, not you (the IRA owner). So, you better have enough cash in the account to cover the bill.

Above and in other articles I always refer to UBIT in an IRA as being taxed at ordinary income rates. This is the simple way to say it… one we can all relate to. Technically, the UBIT rate for an IRA is found in the Trust and Estate tax table, not the ordinary income tax tables.

Trusts and estates have a sliding such that most UBIT will be taxed at 33% or 39%. This is basically the same as the ordinary income rate… certainly close enough for a free blog article!

That’s everything you need to know to understand UBIT in an IRA. Now, here’s how to avoid paying it.

Any time you invest in the United States with leverage, or in an active business using your IRA, you will pay UBIT. There’s no way around it. If you make those investments outside of the United States, you can eliminate UBIT by forming a UBIT blocker corporation.

The same US rules apply to IRAs offshore that apply onshore. Therefore, a distribution of untaxed business profits from a foreign partnership to an offshore IRA LLC is taxable as UBI.

Also like the US, a dividend from a foreign corporation is not UBI and not taxable when it reaches the offshore IRA LLC.

So, if you will make an investment into a foreign business, or are using leverage, you can place an offshore corporation in between the investment and your IRA. Your IRA invests into the corporation and the corporation invests into the business or buys the rental property.

Money flows from the investment back to the corporation. Then the corporation issues a dividend to the offshore IRA LLC. Because dividends are not UBI, no UBIT is payable. We call this a UBIT blocker corporation.

You might be thinking to yourself, hey, that’s pretty slick. Why can’t I do the same thing in the United States? Why are UBIT blockers only available offshore?

Because, when you put a US corporation in between your IRA and your investment, that corporation must pay tax on any gains derived. The US corporation pays 35% corporate tax on US source income. All you’ve done is converted UBI into corporate income taxable at corporate rates instead of trust and estate rates.

The key to an offshore UBIT blocker is that the corporation must be set up in a tax free jurisdiction. If you pay zero corporate tax, you can pass profits from the investment to the corporation and then to the LLC tax free. Once converted from ordinary income into a dividend, UBI is eliminated and the IRA gets to receive the transfer tax free.

I hope you’ve found this article on UBIT in an IRA interesting. For more information on how to setup an offshore IRA LLC with UBIT blocker, please contact me at info@premieroffshore.com or call us at (619) 483-1708. 

foreign real estate with my IRA
Christian Reeves

Can I buy foreign real estate with my IRA?

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The number one question I get on offshore IRAs, is “can I buy foreign real estate with my retirement account?”  The answer is a resounding yes. You can buy raw land, a home, condo, office building, or anything else you like outside of the United States within your retirement account.

In fact, you can buy or invest in just about anything offshore. The only limitations on your IRA are found in Section 408 of the Internal Revenue Code. This says you are prohibited from investing in life insurance, collectibles, and certain coins (collectable coins that are not 99.99% pure).  Other than that, you can place whatever you like in your IRA.

Foreign real estate is the most popular investment with our offshore IRA LLC clients. They choose real estate as a way to further diversify out of the US and out of the dollar. To take some cash off the gambling table in the time of Trump and to help grow retirement wealth or turn it into income from rental profits.

There are two ways to buy foreign real estate in your IRA. You can setup a self directed IRA and ask your custodian to make the investment. This is best if you will have only one international investment and don’t want to open a foreign bank account for your retirement account.

The other option is to take your entire retirement account offshore. Get rid of your custodian and take over management of your IRA. Get the entire account out of the United States and under your control.

You can do this by forming an offshore IRA LLC owned by your retirement account. Then this LLC appoints you as the manager and opens international bank accounts at institutions that understand US IRA rules.

The last step is to instruct your custodian to invest your entire IRA into this newly formed offshore IRA LLC. Once the cash is transferred into the IRA LLC bank account, the custodian’s control ends and yours begins.

From here you can buy and sell foreign real estate, trade stocks, buy physical gold, and generally manage the assets of the account for the benefit of your IRA. You are to act as a professional investment manager and “always work in the best interest of the account.”

Once you’re installed as the manager of your offshore IRA LLC, you’re responsible to follow all of the US rules imposed on professional investment managers. This basically means that you can’t personally benefit from your retirement account.

So, you can’t buy a house and live in it, can’t borrow from the account, can’t use IRA funds to pay off an existing or personal mortgage, and can’t combine IRA money with after tax money in one offshore account.

These rules are detailed in IRC Section 4975 and referred to as prohibited transactions. A prohibited transaction is any improper use of an IRA by the account owner or account manager (both of whom are now you), beneficiaries, or any disqualified person.  

Examples of prohibited transactions include:

  • Borrowing money from your IRA
  • Selling your property to your IRA
  • Using your IRA as security for a loan
  • Buying property for personal use

Most of these are self explanatory. I should point out that you are allowed to use loans to by foreign real estate in your IRA. You are just prohibited from pledging your account as collateral for that loan. To put it another way, you can borrow money to buy foreign real estate with a nonrecourse loan. You can’t borrow with a recourse loan that’s guaranteed by the IRA or by you personally.

Above I said that these rules apply to you, beneficiaries and disqualified persons. Disqualified persons are defined in IRC Section 4975(e)(2). Here are the most common disqualified persons:

  • The account owner (obviously)
  • A person providing services to the plan such as an attorney, CPA, real estate agent, investment advisor, etc.
  • A business, corporation, partnership or trust of which you own 50% or more (ownership or control / voting rights)
  • Your spouse, parents, grandparents and great-grandparents, children (and their spouses), grandchildren and great-grandchildren (and their spouses).

The term “disqualified person” does not include siblings (brothers and sisters) or aunts, uncles and cousins of the IRA owner.

With all of those caveats, you are absolutely allowed to by foreign real estate in your IRA. You can do it through a custodian, if you don’t mind having him in control of the property, or setup an offshore IRA LLC to handle the transaction.

I hope you’ve found this article on whether you can buy foreign real estate in your IRA to be helpful. For more information on taking your account offshore, please contact me at info@premieroffshore.com or call us at (619) 483-1708. We have been assisting clients get their accounts offshore since 2002 and will be happy to work with you.

Just remember that there are risks in taking your IRA offshore. You must follow all the IRS rules and act in the best interest of the account. This means you’ll need ongoing support and an incorporator / advisor who’s an expert in these US rules. If you don’t hire Premier, hire someone in the United States. For more on why you need a US expert, see: Risks in Taking Your IRA Offshore.

protect IRA
Christian Reeves

Enhanced Protection for Your IRA

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Many people think that IRAs are protected from civil creditors and the IRS… many people are wrong. Here’s how to get enhanced protection for your IRA and take control of your investments.

IRA assets are protected to varying degrees by each of the states and under the federal bankruptcy law. In order to secure 100% protection from all creditors and the IRS, you need an enhanced protection plan for your IRA. Remove your retirement account from the United States and get it away from US judges and creditors.

First, let’s look at what protection your IRA has. I’ll focus on California here, knowing that many states have similar rules.

In California, 401(k)s and profit-sharing plans are protected from civil creditors but not the IRS. IRAs are not as protected as 401(k)s because they are not covered by federal statutes. Therefore, a civil creditor’s ability to get your retirement account in California will depend on what type of account you have and how much you have in it.

401(k) accounts have better protection is because federal law prohibits civil creditors from going after pension plans that were set up under the Employee Retirement Income Security Act (ERISA). Examples of ERISA-qualified pension plans and benefit plans:

  • 401(K) accounts
  • pension and profit-sharing plans
  • group health and life insurance plans
  • dental and vision plans, and
  • HRAs, HSAs, and accidental death or disability plans

Plans not covered by ERISA include IRAs, Roth IRAs, SEPs, and SIMPLE IRAs. These are covered by state law only, which offers far less protection than federal law.

California protects only that portion of your IRA which a judge believes you need to survive. This is the amount necessary for the support of you and your dependents at the time you retire. Yes, standard of living you’ll be allowed in your old age is at the discretion of the judge.

In deciding how much to “allow” you to keep from your IRA, the judge will consider the following questions:

  • Do you need the retirement funds now, and if so, how much?
  • Will you be able to replenish your retirement account if it’s awarded to a creditor?

Bottom line is, if you have a job and are under age 65, the court is likely to take all of your retirement savings. If you’re retired and in poor health, they’ll leave you enough to support yourself… not necessarily enough to maintain your current standard of living, but enough to keep you alive (think welfare recipient lifestyle without all of the Obama benefits).

Keep in mind that none of these plans are protected from IRS levy!

The most efficient way to enhance the protection of your IRA is to move it offshore. Get your retirement account away from US judges while maintaining the tax benefits. Take it offshore and out of the reach of future civil creditors and IRS levy.

It’s important to note that your IRA will retain its tax deferred (traditional) or tax free (ROTH) status. So long as you follow the rules, you can invest your IRA as you see fit, which includes  offshore. The fact that this enhances your protection is a side benefit of investing abroad, not the sole motivating factor.

Here’s how to take your IRA offshore…

We first move your account from your current custodian to one that allows for international investments. Most custodians, such as Vanguard, Fidelity, and Chase don’t allow foreign investments. They want you to buy their bonds and those products on which they earn the highest commission. When you go offshore, your custodian gets no commission and has no control over your investments.

Note that changing custodians is done by transferring your account. It doesn’t involve a roll over and has no limitations.

Next, we form an offshore LLC in a max security jurisdiction like Cook Islands, Belize, Nevis, etc. This LLC is owned by your retirement account and you’re named as the manager of this company.

Then the LLC opens an offshore bank account and your custodian invests your account into the LLC by transferring cash to this foreign bank account. You’re the signer on the account and the one in control over all transfers and investments originating from it. That is to say, you have checkbook control over your IRA once it’s in an offshore LLC.

Tip: The IRS can levy your foreign account if your bank has a branch in the United States. For this reason, I recommend international banks that don’t have branches in the US.

Once your IRA is offshore, it’s your responsibility to manage the money for the benefit of your account, just as a professional advisor would (or should) do. This means you can’t borrow against it, use it for your personal expenses, buy home and live in it, etc.

You’ll find that the rules around offshore LLCs are simple. So long as you transact at arm’s length and act in the best interest of your IRA, you’ll stay out of trouble.

I hope you’ve found this article on how to enhance the protection of your IRA by moving it offshore to be helpful. For more information, and assistance in taking your retirement account offshore, please contact me at info@premieroffshore.com or call us at (619) 483-1708 for confidential consultation.