Most top offshore banks are closed to Americans. In fact, 95% of the best foreign banks have shut their doors to us because of the costly reporting now required by the IRS. The only way you can get into the best banks in 2017 is through the back door.
Here’s how to gain access to top tier offshore banks, currency traders, and brokerage firms when you hold a US passport…
If you, a US citizen living in America, were to walk into a top bank in Switzerland, Germany, or Andorra, and ask open an account, one of two things would happen. If you’re in Switzerland, they’ll politely apologize and say no (that’s just their nature). Anywhere else and they might laugh at you and escort you to the door.
We Americans have a big scarlet letter A across our chests. The US IRS has fined top banks billions of dollars and turned bank tellers into unpaid agents required to report all transaction involving US persons.
In addition, the Foreign Account Tax Compliance Act now requires banks to spend hundreds of millions on computer systems to generate annual reports that go to the IRS. Foreign banks have stricter compliance and US reporting requirements than US banks do!
The bottom line is that no top tier bank wants to do business with Americans… at least, not directly.
The back door into these top offshore banks is a foreign trust. You, the US person, are the settlor and owner of the assets in the structure. You then appoint a foreign trustee, and possibly a “protector.” These people are responsible for protecting the trust assets for the benefit of your heirs. They’re also responsible for making investment altercations and selecting a custodian.
Next, the trustee or protector hires an investment advisor, usually one based in Switzerland. This person has master accounts at the largest investment banks and can get you in without all the scrutiny.
This multilevel approach gets you into the bank you want and increases the asset protection provided by your trust.
For asset protection purposes, you’re two or three levels removed from the management of your foreign trust. This will be a big plus and provide the strongest level of protection should a creditor file a claim against your structure.
It’s also possible to create this structure for a large IRAs or retirement plans. When you form an offshore IRA LLC, that company is owned by your account, not you personally. You can elect to become the manager of that LLC or you can appoint a foreign investment manager. For maximum protection and access to top tier banks, go with the independent investment adviser.
When you appoint a foreign investment manager, and draft an operating agreement with much of the asset protection verbiage found in offshore trust agreements, you can add a significant layer of security to your retirement account. Also, the foreign manager can give you access to top offshore banks, just as he does for a foreign trust.
Most of these managed accounts, be they for an IRA or foreign trust, will require an opening deposit of $500,000 to $2.5 million. There are only a few well connected advisors that will open an account at a top tier bank with a deposit of $500,000. There are several that can work with $2.5 million or more.
Of course, you can take any sized IRA offshore. There are plenty of smaller international banks that will be happy to open an account for your IRA LLC. If less than $500,000, I suggest you be listed as the manager to eliminate management fees.
One last comment on these managed accounts for offshore trusts… it’s possible to create a tax free or tax deferred account for a foreign trust. Basically, you can open a US compliant tax free account, similar to a giant ROTH IRA, without any of the contribution limits or distribution requirements. Here’s how:
Your foreign trust can use its capital to buy a private placement life insurance policy on the settlor (you). Any gains inside this policy, which is owned by the trust, are tax deferred until you liquidate the policy. If you never close the policy, then this money passes to your heirs tax free.
Under current law, your heirs will receive a step-up in basis when property and assets of the life policy are distributed to them. This means that they’ll pay no tax on the gains earned on those assets while in the trust.
This same structure can be used to create generational wealth, where the assets are held by the trust for generations to come and heirs receive monthly or quarterly distributions. For more on this, see: Offshore Dynasty Trusts Explained
I hope you’ve found this article on how foreign trusts can give you access to top offshore bank accounts to be helpful. For more on how to setup a foreign trust, or to move your retirement account or defined benefit plan offshore, please contact us at firstname.lastname@example.org or call us at (619) 483-1708.