Foreign Pension
Christian Reeves

The Foreign Pension Tax Trap

/in , /by

If you’re working abroad for a foreign company, watch out for the foreign pension tax trap.  If you get caught, you might be paying double tax on your retirement income… once when earned by the U.S. and once at distribution in your country of residence.

First, let me say that this is not meant as a definitive guide on foreign pensions.  A proper analysis would review every tax treaty out there and thus be longer than War and Peace.  My intent is to identify the issues faced by U.S. expats with a foreign pension so that you may go to your local tax person, or Human Resources department, to discuss how to avoid the foreign pension trap.

Second, these issues do not concern expat entrepreneurs or business owners.  Presumably, you would utilize a U.S. qualified pension plan or defined benefit plan for yourself and avoid these problems.

Of course, if you are operating a small business, and your income is less than the Foreign Earned Income Exclusion ($99,200 in 2014), you don’t need to be concerned with a pension, be it foreign or domestic.

Now that I’ve buried the lead in the 5th paragraph, let’s talk about the foreign pension tax trap.  If you work for a foreign company, and have the option of taking a foreign pension, you need to understand the general rules (described here), the foreign tax credits available, timing issues, and specific tax treaty provisions between your country of employment and the United States, before agreeing to put cash in to a retirement program.

The reason a foreign pension can become a tax trap for the American expat is:

1) some foreign pensions are not compatible with the U.S. tax codes, 2) no treaty applies, and 3) your income is taxed in the U.S. as earned and taxed at distribution in your country of residence, which means the foreign tax credit may not be available.

So, while the foreign pension may appear to give you better tax treatment in your country of employment, if may result in double taxation.  Here’s why:

The general rule is that a foreign pension is not a qualified retirement plan (QRP) for U.S. tax purposes.  Therefore, contributions are not deductible on your U.S. tax return.

Because you are taxed on your worldwide income as earned, and because the income which flows in to the nonqualified plan is not deductible, it is included in your U.S. adjusted gross income and taxable here.

So, if you are earning $50,000 in salary and 15,000 in retirement benefits in France, the income reported on your U.S. tax return is $65,000.  You might have foreign tax credits to offset the $50,000, but no credits to cover the $15,000.

Then, when you withdraw that $15,000 from your account in France, you pay tax on it there.  Well, more than three years has likely passed and you are no longer able to amend your U.S. personal income tax returns to claim this credit.  So, you were taxed once in the U.S. when earned and then again in France when distributed.

That is to say, these general rules require a U.S. expat in a foreign pension plan to include in income the amount of the contributions made by him or her, as well as any contributions made by the employer to the extent vested.  Because you will probably need to pay tax in the foreign country when you take a distribution from the plan, it is possible that the contribution will be double taxed… but at different times.  This timing issue creates a mismatch of income and the availability of the foreign tax credit in the United States.

Relief may be available to some U.S. expats, but not all.  Several U.S. tax treaties cover foreign pension plans and, at least, eliminate double taxation.  You should discuss the availability of a tax treaty with your pension coordinator before signing up and getting caught in the foreign pension tax trap.

And, even if these treaty provisions exist, they will be limited to U.S. IRA amounts.  That is to say, they are limited to U.S. QRP levels of contribution from you and your employer, AGI limitations, and will have distribution requirements.  If your foreign pension is more generous, or has terms that are significantly different than a U.S. IRA, you are in for a very complex tax situation.

If you’re really lucky, you’re working in a country with an advanced pension treaty.  These exclude contributions to a foreign pension plan from your U.S. income, just as if the plan were in the United States.  Though, such treaties are typically with countries that offer retirement plans on terms similar to those found in the U.S., and whose tax rate is higher or about the same as in America.

At the time of this post, the countries with advanced pension provisions in their tax treaties are the U.K., Germany, the Netherlands and Belgium.

Another area of concern with a foreign pension is whether a withholding tax will be levied on you by your country of employment.  As an expat worker in a foreign land, it is likely the government will want to ensure your compliance by withholding any taxes payable… especially if you have returned to the U.S. after retiring or completing your work contract.

In many cases, the default rate of withholding is 30%.  If a tax treaty applies, this might be reduced to 15% (such as in the U.S. – Canada treaty).  There are even some treaties that eliminate the withholding tax all together, so be sure to discuss this issue with your representative.

The last consideration facing expats with foreign pensions are your U.S. reporting obligations.  It is possible you will need to file a foreign trust return (IRS Form 3520 and 3520 – A) to report the existence of the foreign pension.  If you have signature authority over the account, you probably need to report it on your Foreign Bank Account Report.  In some cases, IRS Forms 8938 and 8606 may apply.  Your filing obligations on your country’s applicable treaty and how your foreign pension is structured.  All I can tell you with certainty is that you should look carefully before getting in to a foreign pension arrangement and seek out the counsel of a qualified representative.

As you can see, tax planning for a foreign pension or foreign retirement plan is a complex business.  We at Premier do not offer foreign pension plans.  We can help the U.S. entrepreneur to form his own U.S. QRP or defined benefit plan and maximize the value of being offshore.

Likewise, if you already have a U.S. retirement plan, and are moving or investing offshore, we can help get your IRA out of the United States.  This is usually done by forming an offshore LLC or Panama Foundation and investing your U.S. IRA in to that structure.  Once this is complete, you’ll have checkbook control over the account and your investments.  Though, you are required to follow U.S. rules governing investments, act as the fiduciary of the account, and on distribution.

If you would like more information on taking a U.S. IRA offshore, pleas see my Self Directed IRA page (upper right menu of this site).  If you would like to set up an offshore corporation, or create a QRP for your international business, and you qualify for the Foreign Earned Income Exclusion (are a U.S. expat), we will be happy to work with you.  Please give us a call or send an email to info@premieroffshore.com.

Dollar Will Fail
Christian Reeves

Why the Dollar Will Fail

/in /by

With Russia and France working hard to push the U.S. dollar from its perch as the world’s currency, there is the risk of a major revolution of the dollar.  While it might not result in a total collapse, most experts agree that the U.S. dollar will be devalued by 11% to 45%.  Here’s why the dollar will fail and take your retirement account down with it.

First, let’s talk about France.  The U.S. has pushed this nation, and the European Union, way too far.  We’ll pay for this impudence soon.  Here’s why America recently levied a $9 billion dollar fine on France’s BNP Paribas bank for engaging in transactions with the country of Sudan while the United States had issued sanctions against that country.

While you might think, ok, they paid a fine because they violated the law by doing business with Sudan, that’s what they get.  Well, France and the EU had no sanctions or problems with Sudan.  It was only the United States who had that country on its hit list.  Also, the transactions that BNP Paribas did with Sudan had no connection to the United States.  No U.S. goods were sold or transferred, no U.S. persons were involved, and no business was transacted through an office or branch in the United States.  The trades involved were between a bank in France and the country of Sudan… again, there were no limitations in France or the EU on doing business with Sudan… only the U.S. had these regulations.

So, why did the U.S. claim authority over the transactions and the bank?  What gave Uncle Sam the right to fine a bank for something that had no connection to the United States?  What made America the ultimate arbiter of ethics and business practices?

The contracts between the bank and Sudan used the United States dollar as the transactional currency.  That’s right, the only connection between the U.S. and the trades at issue was that the price was listed in USD.  The United States claims it has the authority to regulate any transaction completed or denominated in USD, and therefore has the right to fine BNP Paribas for entering in to a contract with a prohibited country.

Of course, the country of France has come out strongly against this attack on their financial sovereignty by the United States.  They issued a number of regulations and press releases pushing to remove the United States dollar as the transactional currency in their banking and international trades.

Such a change, especially if adopted by the entire EU, could result in the U.S. dollar failing.  Removing trillions in demand for dollars from the system will send our currency spiraling.  Even if the results aren’t catastrophic, they certainly will mean a realignment of the U.S. dollar and a significant devaluation of your investments, retirement accounts, and other assets held in dollars.

* For more on this story, please check out www.premieroffshore.com or The Financial Times.

Before moving on to Russia, I would like to say that, you don’t need to believe in a catastrophic system failure to think that the dollar will fail or slip.  It is possible that the system will continue on without our dollars, but will look very different.

If you are like me, and believe that a significant realignment is (at least) possible, then you should consider diversifying out of the United States and out of the U.S. dollar.  This might mean moving your IRA offshore, holding currencies other than the dollar, buying real estate or other assets, and purchasing gold as a hedge against inflation or devaluation.

Ok, now on to Russia who is really pushing against the U.S. dollar (petrodollar).  Here’s why Russia could threaten your retirement in 2015.  If you follow world events, you know the path Russia is on.  I don’t think it will surprise anyone that, with the dollar on the ropes, Russia will be happy to push it over and is leading the effort to replace it as the world’s reserve currency.

Let’s start by noting that the economic power of the United States is based on its being the reserve currency of the world.  This status is largely due to its being the ONLY currency with which oil trades may be conducted in… which is why we call it the petrodollar.

* Many claim the primary reason for the Iraq war was that Iraq began denominating its oil transactions in euros.  I don’t know about that, but it was just a few months later that the U.S. went in.

In to this landscape comes a reinvigorated Russia.  They are demanding to denominate their natural gas contracts with Europe in a petroruble or petroeuro.  Today, all gas contacts are priced in dollars.

If successful, Russia will effectively decouple all of its trade from the dollar… which again amounts to trillions in demand.  For example, trade in hydrocarbons alone is $1 trillion.  Removing Russia from the petrodollar, and thus the dollar, will reduce the demand for dollars and, once countries like France see weakness in America and its control over world transactions, you can be assured that they will follow.

And such a decoupling doesn’t need the EU to succeed.  If Russia and its group of nations (BRICS) dumped the dollar, it would completely cripple our currency.  These countries currently account for tens of trillions of dollars of demand and could start a major revaluation.

You can take steps to protect yourself from a major devaluation… or just a loss of value through realignment.  I don’t know how this will all play out, but I do know that there is significant risk out there and that we need to protect against it.

For thousands of years, currencies have failed while gold has stood strong.  Today is no different.  I suggest that some of your holdings should be in physical gold.  We can arrange this for you in Panama or Switzerland and physical gold may be owned by your retirement account or in a Panama Foundation.

We can help you move your retirement account or other savings offshore and invest in gold… or just hold a currency other than dollars.  Feel free to phone or email me at info@premieroffshore.com for additional information.  I have many posts on this topic at www.premieroffshore.com.

Panama Foundation Scam
Christian Reeves

The Panama Foundation Scam

/in , /by

Just about every week someone calls asking about using a Panama Foundation as a charity.  This is known in tax circles as the Panama Foundation scam and the internet is filled with it.  Avoid the Panama Foundation scam at all costs.  It will lead you down a very bad path with the IRS.

Here’s how the call goes:  “Hey there, I’ve been reading on the internet and came across your site.  What I’d like to do is…”

By this time I already know what’s coming, but let them proceed anyway.  Just about any call which is prefaced by, “I was reading on the internet” is leading nowhere good.  There are very few sites that provide both asset protection or formation services and U.S. tax compliance.  If a company is based offshore, they can tell you whatever they want to make a sale.  If they are in the U.S. and have U.S. licensed professionals, then they follow the law first and look to make the sale second.

Ok, enough pontificating.  Back to the Panama Foundation scam.

“I want to form a Panama Foundation and operate it like a charity.  I want to make donations to this charity and deduct them on my U.S. taxes…” or something like that.

Here’s the bottom line on the Panama Foundation scam:  The Panama Foundation is not a charitable entity and can’t be turned in to a charity.  All of the websites and marketing brochures talking about this are scammers… or, worse, they believe the cr*p they are selling and are tax protestors.

The U.S. tax code is very clear.  Only donations to a U.S. licensed charity may be deducted on your personal income tax return.  That is to say, only donations to a charitable organization licensed under 501 (c) (3) of the U.S. Tax Code are deductible.  Your Panama Foundation won’t get a 501 (c) (3) license, so you can’t deduct transfers to it.  If you were to spend the time, money and effort to get a license, there would be no reason to use a Panama structure… you would incorporate in the U.S.

Even if you wanted to donate to a church or legitimate charity in Panama or elsewhere, such a donation is only deductible if that entity is licensed in the U.S.  Of course, you are free to give to anyone or any organization you like.  You just don’t get to deduct that payment on tax returns.

For example, the Red Cross is incorporated in Switzerland, as are most of the major charities.  These organizations then form corporations in the United States and apply for charitable status before taking donations.

Sometimes the Panama Foundation scam relies on the private interest foundation tax rules rather than the charity code section.  A private foundation in the U.S. allows you to donate property (usually appreciated assets) to your personal foundation.  You get to deduct the fair market value of the donation in the year given (which is why appreciated property is recommended) and then transfer a small percentage of that property to a licensed charity over a number of years.  This allows you to maintain control over the property, manage it for the benefit of a charity, and give up only a portion over time.

So, the Panama Foundation scam often takes verbiage and rules from the private interest foundation sections and applies them to the Panama Foundation.  Unfortunately, there is nothing legitimate to this analysis.  The Panama Foundation is not a private interest foundation as defined in the U.S. code and this is just a scam to sell Panamanian entities to those looking for a tax loophole.

Just last week I came across someone who took the Panama Foundation scam to a new level.  He would form the Foundation and file the charitable tax return in the United States for that entity.  This was done with the intent of confusing the U.S. IRS computers into thinking it was a legitimate charity.

He would then sell this “licensed” foundation for many thousands of dollars to someone who fell for the scam and thought they were getting a charity or private interest foundation.  Of course, the sham will be discovered some day and all the donations will be reversed.  This will mean big time tax, interest and penalties will be assessed against the buyer… and criminal charges brought against the scammer… if he can be found on the day of reckoning.

Don’t fall for the Panama Foundation scam.  The Panama Foundation is not a charitable organization as defined by any section of the U.S. tax code.  This is one of the many reasons you should only form offshore structures with a firm that provides U.S. tax compliance.

Physical Gold
Christian Reeves

Physical Gold is the Ultimate Investment

/in , /by

Physical gold has served as the universal currency for 5,000 years and will continue to do so long after We the People, and this nation of ours, have ceased to exist.

Physical gold is also the only reliable hedge against political instability, government debt, and inflation.  It is a borderless currency whose value comes from supply and demand, not how ever much the government decides to print.  It’s not based on a government promise or regulation, but is a physical precious metal.

Need proof?  Physical gold has the highest liquidity value in the world.  You can exchange it for cash in any major city in the world, and at just about any time of day.  If you hold your gold outside of the reach of Uncle Sam, you can access it at any time, and exchange it for local currency, or goods and services, with minimal effort and at a guaranteed rate.

And gold thrives during inflationary times.  Not if, but when, the United States and the U.S. dollar go through a revaluation, it will be physical gold that soars and where everyone is rushing to.  Don’t be the sheep.  Invest outside of the U.S. in physical gold now, while prices are low and access is assured.

* Note that I write about physical gold because I believe in its value and the need to diversify abroad.  Premier doesn’t sell gold and we are not investment advisors.  We can introduce you to firms in Panama and Switzerland that can assist you, but we earn no commissions or other income from these transactions.  My advice here is independent and without financial motive.

More importantly, the price of physical gold is not dependent on investors or the markets.  In fact, investors accounted for only 16% of the gold supply in 2013 (World Gold Council).  The largest mover was consumer demand at 51%, then reserve banks at 17% and industry use at 12%.

If you’re like me, you start your day by watching the financial channels (I go with CNBC).  The news is often hostile to gold and gold ownership as an investment class.  They are too busy pushing viewers towards the U.S. stock market… it is at all time highs don’t you know!  That means it’s time to buy!!

Well, regardless of this BS, and the industry news you get from the brokerage firms, the investment in physical gold (not paper gold), remains strong.  I suggest that physical gold is one of the most important elements in your onshore or offshore portfolio.

The demand for physical gold has never been higher.  TV viewers would be shocked to learn that investment in 2013 was up 28% from 2012… some people must know something the talking heads on TV don’t.

This represents about 44% of the total gold market of $170 billion and compares favorably to the paper gold market for exchange traded funds, which saw a loss of $40 billion.  That’s to say, $40 billion moved out of paper gold and in to physical gold in 2013.  There is now more money in physical gold than in ETFs by a factor of 8 to 1 (the last two paragraphs are according to the World Gold Council).

What you will find in the industry is that paper gold and hypothecation of gold is manipulating the price… pushing it down.  If these are eliminated from the market, such as during a realignment of the dollar or demand in gold because of hyper inflation, the price of physical gold will skyrocket.

* This is because gold doesn’t correlate to any investment class.  It went up in value during the 2008 recession.

You will also see that those who invest in physical gold take the long view.  They recognize it as the ultimate hedge.  Buyers see it as a superior asset allocation… not just seeking to buy low and sell high, as is attempted in the EFT market.  Investors in physical gold buy to provide support for their other investments.  The price they buy in at should be of little consequence.  Yes, it’s low today, but if it were to double in the next few months, my advice would be the same:  buy physical gold and hold it outside of the United States.

That’s right, you can buy physical gold offshore.  It can be held in a vault or you can take possession.  We work with a number of offshore providers and will be happy to make introductions.

You can even purchase physical gold in your IRA.  You first form an offshore LLC in a country like Belize, or a Panama Foundation, and move your retirement account in to that structure.  From there, you can write the checks and make any permitted investment you like… which means you can buy physical gold in Panama and hold it in a vault.

* You can buy gold in an onshore or offshore IRA LLC structure, though we only offer international formations.

Once you have physical gold in your IRA, you can take required distributions in gold, rather than cash… keeping the investment in gold without the need to convert to cash.  If any tax is due (traditional IRA rather than a ROTH), you will need to make those payments with good ole American greenbacks.

In fact, about 50% to 60% of our clients now take distributions in physical gold rather than USD.  This is becoming one of the most interesting uses of offshore IRA LLCs, and one of the highest demands, in the industry.

Physical gold will also allow you to maximize privacy and asset protection.  Gold held in a vault outside of the U.S., and outside the reach of the U.S. courts, has little risk of being seized by an aggressive creditor.  More importantly, you are not required to report physical gold held in your name.

While you have probably heard much of the new IRS laws that require just about anything you have offshore to be reported to the U.S. government, physical gold is exempt.  You may hold gold in an offshore vault and are not required to report it to any agency.

From here, you can pass physical gold down to future generations, keep it outside of your U.S. estate, minimize estate taxes, and do as you like without interference from the IRS or creditors.

I hope you have found this post on why physical gold is the ultimate investment interesting.  For more information on taking your retirement account offshore, or buying gold in Panama, please give us a call or send an email to info@premieroffshore.com.  We will be happy to work with you to structure your affairs in a tax efficient and compliant manner.

I think you will find physical gold to be a unique and valuable addition to your international portfolio.  I also believe the price is set to jump.  Quantitative easing, and other factors, have been holding down the price of gold since 2011, but this is going to change.  QE will be stopped this month and a number of forces are coming to bare on the U.S. dollar (take a read through my posts on the USD vs. Russia and France).

When the flooding of markets with cash, the artificial support received by the U.S. stock market, and other fakery ends, we’ll come back to physical gold.  It will increase in price and we will all benefit from our offshore portfolios.  Remember that physical gold is where the stability lies.  It is the one and only hedge against a significant market correction or currency realignment.

design

Cauți online filme sexy pentru adulți?

/in /by

 

Dacă îți plac filmele pentru adulți, sunt șanse să te fi lăsat la un moment dat să vizionezi niște videoclipuri cu sex. Poate le-ați închiriat de la magazinul video sau le-ați achiziționat de pe internet. Dacă da, atunci cel mai probabil aveți o copie a filmului preferat stocată pe computer și/sau pe playerul DVD de acasă. Lucrul grozav este că puteți viziona o copie oricând doriți. Cu toate acestea, este important să vă dați seama că există unele riscuri asociate cu filmele sexuale.

Când vedeți pentru prima dată  https://filmexxx18.com , câteva cuvinte de avertizare ar trebui probabil să clipească pe ecranul dvs.: conținutul creează extrem de dependență. Pentru cei dintre voi care nu l-ați văzut, probabil că nu veți rezista nici o oră înainte de a începe să vă gândiți cum îl puteți adăuga la colecția voastră. De aceea este esențial să găsești un brand care să ofere conținut original. Deși puteți găsi cele mai multe dintre cele mai populare filme pe site-urile web ale mărcii, nu vă veți bucura să vizionați ceva de genul Sex Video XXX.

Nu vă fie teamă să faceți niște cercetări de fundal asupra companiei de la care urmează să cumpărați. Ar trebui să cumpărați doar de la o marcă de încredere și respectabilă. Mulți oameni fac greșeala de a cumpăra de la o marcă necunoscută și adesea devin descurajați de achiziția lor pe linie. Amintiți-vă, cumpărarea de videoclipuri sexuale legitime nu înseamnă cheltuirea unei sume exorbitante de bani. Puteți cheltui cu ușurință câțiva dolari pe un film DVD de marcă și să rămâneți în continuare în bugetul dvs.

Deși există o serie de companii legitime care produc și vând filme pentru adulți, este posibil să doriți să stați departe de site-urile conduse de brokeri sau agenți de vânzări. Vrei să găsești un brand care să ofere conținut original și să nu încarce un braț și un picior. Din păcate, deseori întâlniți această problemă când faceți cumpărături pentru un site bun. Unele companii încearcă să vă vândă filme fără a vă oferi vreodată opțiunea de a le descărca pe computer.

Odată ce găsiți o companie de renume care oferă conținut original, verificați selecția acestora. Vrei să alegi un site care oferă toate tipurile diferite de filme pentru adulți. Deși nu este nimic în neregulă cu filmele clasice, este posibil să doriți să optați și pentru alte selecții. Dacă un site oferă doar filme mainstream, poate doriți să căutați în altă parte.

O modalitate bună de a afla ce cred alți clienți despre site este să accesați site-urile de revizuire și să vedeți ce au de spus. Deși nu ar trebui să considerați tot ce spune un site ca fiind Evanghelie, îl puteți folosi pentru a vă ajuta să determinați dacă compania are o reputație pozitivă. Dacă descoperiți că un procent mare dintre oamenii care au cumpărat de pe site nu sunt mulțumiți de achiziția lor, probabil că cel mai bine este să continuați să căutați.

Există multe motive pentru care oamenii pot alege să cumpere videoclipuri porno online. Fie că doar cauți ceva de urmărit acasă, la birou sau alături de partenerul tău, este important să alegi un site care să ofere conținut original. Deși selecția va fi mai mică decât dacă ați merge la un magazin video, veți obține ceea ce plătiți. Unele site-uri oferă închirieri gratuite de DVD-uri, dar acestea sunt de obicei filme de masă pe care majoritatea consumatorilor nu le-au văzut niciodată.

Pentru a vă asigura că obțineți exact ceea ce căutați și a evita să fiți înșelat, asigurați-vă că cumpărați de pe site-uri web legitime care oferă filme pentru adulți de calitate. Când vrei să vizionezi ceva provocator, de ce să nu alegi dintr-o selecție largă de filme erotice de calitate? Cu aceste informații, ar trebui să puteți găsi exact ceea ce căutați în intimitatea propriei case. Dacă doriți să aflați mai multe despre siguranța filmelor pentru adulți online, nu uitați să citiți blogul meu astăzi!

When to Hold
Christian Reeves

When to Hold and When to Fold

/in , /by

With the U.S. market at historic highs, how do you know when to hold and when to fold?  Here’s the best investment advice I’ve seen:

“Buy at the point of maximum pessimism; sell at the point of maximum optimism.”  Sir John Templeton (1912 to 2008), known as the great contrarian.

I have always taken this to mean that, if you buy the same securities and at the same time as everyone else, you will get the same results as everyone else… which is to say, you will be average.

With the U.S. markets at historic highs, and logic (and simple math) telling us that returns over the next decade will be lower than the prior, we should be looking to move money in more dynamic markets.  Of course, most ignore what’s right in front of their face and are now dumping cash in the U.S. stock market after being on the sidelines for the last few years.  This makes no sense, but most buy on emotion and momentum rather then with their brains.

The investing masses expect the most from the market when the prospects are the worst and the least when things are at their best (prices at or near the bottom).  You can do better.  Don’t be a sucker who’s enthusiastic when stocks are expensive.  Be that guy or gal who knows value, diversifies out of a bad market, and move your assets and investments to safety.

Want proof of what I am going on about?  When the market was at its height in 2000, inflows were $288 billion.  When stocks were cheap in 2002, inflows were a mere $13 billion.  Don’t follow the herd, make your own way.

I’ll leave you with a bit of history on John Templeton.

At the outbreak of WWII, he bought nearly every NYSE listed company trading at $1 or less… and made money on just about every single one.  It was a simple plan:  identify weakness in the market and take advantage.

If the market is at a high, do the inverse, get the heck out.

Mr. Templeton was one of the first U.S. investors to see the benefits of diversifying out of America.  As a result, $10,000 in to his flagship international fund in 1954 was worth $2 million by the time he retired in 1992.

The Templeton growth fund continues this strategy and has averaged an 18.3% return over the last 5 years.

If you’re considering investing offshore, we can help.  We can set up an offshore foundation or offshore company, move your IRA to an offshore LLC and introduce you to quality banks and investors around the world.

If you want to get some of your assets out of the U.S., start by planting that first flag offshore in the form of an offshore company, foundation, and/or bank account.

We will be happy to work with you and we are the only experts providing both international formations AND U.S. tax compliance.  We will ensure you are structured as efficiently as possible and keep you in compliance with the U.S. tax code.  Feel free to phone or send an email to info@premieroffshore.com with any questions and for a free confidential consultation.

Panama Foundation
Christian Reeves

The Panama Foundation for Asset Protection

/in , /by

The Panama Foundation provides the best asset protection and estate planning available… hands down, no questions asked.  Here’s why the Panama Foundation is the ticket for those wanting to move assets out of the United States and eliminate the U.S. estate tax.

First, let me take a moment to summarize the Panama Foundation as an asset protection tool.  The Foundation, as defined in the Panama law in 1995, and as updated and improved over the years, is now a separate and distinct entity from its owners.  As a result, the Panama Foundation is now recognized, not only by Panama, but by the United States and other countries as one of the most efficient tools out there.

For example, the Panama Foundation is one of the very few foreign structures approved in the Cayman Islands, and is a recommended vehicle for holding investments there.  The very conservative country of Cayman (regardless of what you see in the movies, Cayman is extremely conservative) has approved the Panama Foundation to open accounts in its banks and funds without any extra due diligence required.  Try to open an account under a Belize corporation and you will be shown the door or told to form a local company.

* Being recognized around the world gives you better access to foreign banks, currencies and investments.  It also means you can move quickly out of Panama if sued there.

I also note that the Panama Foundation does not require members or shareholders.  All that is needed is the Founder (settlor), the Foundation council, and a beneficiary.  You may act as both the Founder and the beneficiary, and may appoint any three people or any one company as the counsel.  It is usually this counsel that manages the assets should you become unable or unwilling to do so (such as if you are in litigation or your assets are otherwise under attack).

This is the basic structure.  I usually recommend that larger Panama Foundations 1) don’t list the settlor as the beneficiary and 2) appoint an asset manager as the protector or foundation counsel.  While it is not required, if the primary purpose of the Foundation is asset protection, taking these steps early can save you in the long urn.  Of course, you can add the protector or investment manager later if an attack on your assets is not imminent.

Benefits of a Panama Foundation

There are many benefits of a Panama Foundation for asset protection and I will take many of them in turn here.  The first is that the Foundation won’t be taxed in Panama… and no local accounting or audit will be required.  I never recommend a jurisdiction for asset protection that requires audited financials, the filing of tax forms, or any other compliance.  For example, Hong Kong has a number of these rules so I avoid that jurisdiction.

*So long as the income is from outside of Panama, it will be tax free.  Of course, if you open a business (such as a bar) in Panama, you will pay Panama tax on the profits.

Next, the Panama Foundation is a hybrid entity in between a trust and a corporation.  Therefore, it may act as an offshore trust, but it is far more cost effective to form and operate than many international trust arrangements.

For example, the Panama Foundation is about 1/3 the cost of a Cook Island Trust and you need not pay for a Protector or asset manager unless you elect to have one.  Most trusts require one of these two persons and charge a few percentage points on the assets of the trust (assets under management) to provide them.  I’ve seen a CI trust that cost $6,000+ to maintain per year move to Panama and cut these costs down to about $950.

Of course, if you desire advanced fund management services, they are available to you in Panama, Cayman Islands, or elsewhere.  All of the major financial service providers are in Panama and we can make introductions to banks and brokerages at all account sizes.

Next, the Panama Foundation is a separate entity and, as such, may enter in to contracts and agreements on behalf of its Founder (you) and as the manager of its underlying assets.  The ability to contract and operate as a company separate and distinct from its owner, is why we call the Panama Foundation a hybrid structure.  While a trust is one with its settlor, a Panama Foundation is a legal entity like a corporation or LLC (which is why I refer to it as a company).

The only limitation is that a Panama Foundation may not own an active business.  If you want to hold a business in a Panama structure, your Foundation may incorporate a Panama corporation, but may not own the business directly.

I note that real estate is usually not an active business… unless you own many units or buy land, divide it, and sell parcels.  Your Panama Foundation may own a rental, or you may decide to purchase the condo in a corporation for maximum local asset protection… if something happens to the condo, liability in Panama won’t reach the assets of the Foundation.

A Panama Foundation may be established for the benefit of any third party, or the Founder/settlor may be the beneficiary.  As stated above, I don’t recommend the Founder be the beneficiary, but it is possible.  You may also list anyone or any company as the beneficiary.  If you want to leave your estate to the Red Cross, no problem.

*Beneficiaries may be any person or company.  They are not public information.

In fact, your estate plan may be as simple or complex as you like.  You might decide to work with the U.S. gift tax exclusion, or the Foreign Earned Income Exclusion for a business in Panama, create a charitable remainder structure, a generation skipping Foundation, or any variation thereof.

The bottom line is that you may control the disposition of assets by lodging a simple or complex list of instructions with the Foundation council.  This “letter of wishes” will tell the banks, brokerages, and property managers what to do with your assets upon your passing and may be changed or updated as often as you like… usually at no cost.

Also, the Panama Foundation requires no annual meeting or formalities.  With a U.S. structure, if you fail to keep up appearances, creditors may pierce the corporate veil and get to your assets.  In Panama, no such laws apply and your assets are secure.  As stated above, no audit, accounting, or tax filing will be required.

Structure of the Panama Foundation

A Panama Foundation may use any name available.  You’re not required to use your last name, as is the custom with a trust.  Though, you do need to include the name “Foundation” in the name.  So, The Reeves Private Interest Foundation, Reeves Foundation, or Great Panama Foundation would all be acceptable names.

A Panama Foundation must have a local address and local agent for service of process.  Just as when you form an out of state company or LLC, you need to have a local representative to receive legal correspondence.  We provide this for you at no cost.

The Founder of a Panama Foundation may be any person or entity (a foreign or domestic corporation, trust, LLC, etc.).  In fact, it can be your U.S. retirement account.

* We are currently working on a U.S. compliant IRA Panama Foundation structure, to be released in the next few months.

The most common uses of a Panama Foundation are:

–  To hold shares, patents, collect royalties, manage trademarks and other passive activities;

–   Offshore asset protection for those who want to diversify out of the U.S.;

–   Offshore estate planning for those with more than $5 million in assets (assuming the estate tax amount doesn’t go down, as it has in decades past… then, anyone at risk of qualifying for the U.S. estate tax);

–   Investment management and private asset management by firms or outside of the United States, especially where the provider is unwilling to do business with a U.S. person directly.

Panama Foundation Council

As I’ve said, your Panama Foundation may be as simple (cost effective) or complex as necessary.  One of the reasons for this flexibility is the Foundation Council, which is unique to Panama.  It is this council that allows you to maximize asset protection and, should you come under duress, allows you to separate yourself from the structure and the assets.

* You may manage the Panama Foundation directly until or unless you have an issue (come under attack by a creditor).

You may elect to retain a professional trust company or lawyer to act as your trustee/protector.  This person would be appointed by your foundation council and act at your direction.

We provide your foundation council at no additional charge.  You may then add an investment manager or lawyer as you see fit.  Alternatively, you can manage your Panama Foundation and then seek additional council if you come under duress or litigation becomes likely.

Your Panama Foundation Council may consist of three or more persons or one legal entity (a corporation or LLC).  These people or company may be from any country… they need not be Panamanians.  Though, I would not use U.S. persons or a U.S. company, as this would eliminate the asset protection benefits of the Panama Foundation.  U.S. persons would be subject to the control of or whims of a U.S. court.

So, if you want to create an advanced structure, we can provide a Panama attorney, or an offshore LLC to act as the Foundation Council… maybe a limited liability company from Belize, for example, so as to maximize privacy.

Taxation of a Panama Foundation

As I said above, foreign source and passive income are not taxable to a Panama Foundation owned by a U.S. person.  So long as the foundation is not operating a business in Panama, you will pay no local tax.

Of course, if you do operate a business, or sell local real estate, you will pay tax to Panama.  The Foundation does not affect local transactions.

If you are living in the United States you (the Founder) are the beneficial owner of those assets for U.S. tax purposes.  In other words, the Founder is the owner of the assets which are held by the Foundation and any income generated there from will be taxable in the U.S.

As you know, the U.S. taxes its citizens on their world wide income.  The fact that you are using a Panama Foundation for asset protection purposes does not change the tax rule.  The U.S. will want its cut of passive income so long as you hold a blue passport and its share of business income so long as you are living in the U.S.

There are a number of tax planning options with a Panama Foundation that are outside of the scope of this article.  For example, you might hold an active business in a Panama corporation owned by the Foundation, qualify for the Foreign Earned Income Exclusion, and draw a salary from that corporation of up to $99,200 each (husband and wife) free of U.S. income tax.  Then, you may retain earnings over this amount and defer U.S. tax for as long as you like.

You might also decide to create sub-Foundations and transfer portions of the assets in your primary Panama Foundation to your heirs over time using the gift tax exclusions.  This may reduce your U.S. tax and have other estate planning benefits.

You may decide to purchase precious metal or physical gold within your Panama Foundation.  This can be done in Panama by leasing a local vault and we can introduce you to reputable sources for bouillon if you like.

Finally, you might invest in an offshore life insurance policy through your Panama Foundation.  These investments usually of $2 million or more and assuming they are U.S. compliant, may allow you to avoid U.S. tax on passive income and then obtain a step-up in basis upon transfer to the beneficiaries of the Panama Foundation.

For more information on offshore life insurance, the Foreign Earned Income Exclusion, or how to acquire gold in a Panama Foundation, please see my various articles.  These are complex topics and I have just touched on them here.

If you would like to form a Panama Foundation, please give us a call or send an email to info@premieroffshore.com.  We will be happy to work with you to structure your affairs in a tax efficient and compliant manner.

Foreign Assets
Christian Reeves

Offshore IRA LLC Tax Analysis

/in , /by

Moving your retirement account in to an offshore self directed IRA LLC is the best (and really, the only) way to diversify out of the U.S., protect your assets from future creditors, and boost returns by investing in more dynamic markets.

I write quite a bit on why and how to move your account into an offshore self directed IRA LLC.  This article is for those who want to get in to the nitty gritty of how it works from the IRS’s perspective.  This post on the self directed IRA will include all relevant U.S. Internal Revenue Tax Code (IRC) and ERISA sections.

The first step in taking your IRA offshore and moving it in to a self directed IRA LLC is to open an account with a self directed custodian that allows for this type of structure.  Note that you are required to use a U.S. custodian, but this custodian has no control over your assets or investments once they reach the IRA LLC.

We work with a number of self directed custodians/administrators, and will be happy to setup the account for you.  If you prefer to do your own research, please Google Midland IRA and Entrust… these are the most efficient and specialize in offshore transactions.  There are others found on domestic structures (IRA Services, for example).

Once your account is established, your administrator will give you an account number that will look something like: Midland IRA FBO Christian Reeves #55555-00.  This is your self directed IRA account name and the “owner” of the offshore IRA LLC that we will form for you.

More specifically, this account will acquire a 100% of the “beneficial interest” of the offshore IRA LLC and hold 100% of the “membership interest” in your offshore company.  According to IRC § 4875(e)(2)(G) and the ERISA Regs at 2510.3-101(b)(1), the beneficial interest in an LLC is the equity interest in the assets of the entity, as well as the beneficial owner of the entity.

So, all of that is to say that your IRA account is the equity holder and legal owner of the assets and the offshore IRA LLC we form for you.  The custodian’s job is to manage IRS reporting and make the investment of your retirement account in to your offshore IRA LLC… that’s it.  From there, the owner of the offshore IRA LLC is your self directed IRA.

Your control over the offshore self directed IRA LLC is defined in the operating agreement of the LLC which we provide.  This document has been reviewed and approved by various banks and the custodians with which we work.  It ensures all parties the proper levels of protection and your rights to control the investments and open bank and brokerage accounts in the name of the offshore LLC.

The operating agreement and its importance to the structure is defined in what we call the “plan asset rule” under ERISA Reg. 2510-3-101(a)(2).  This regulation allows you (the beneficial owner of the IRA account) to act as the manager and exercise control over the offshore IRA LLC and its investments.  As such, it requires you to manage the assets for the benefit of the retirement account, just as a professional fiduciary would.  This means you must do your due diligence in all investment decisions and not use the assets for your personal benefit.  You are to manage the offshore self directed IRA LLC as if it where someone else’s money.

This operating agreement also sets out the rights and duties of the owner of the LLC (your account).  These terms are always very broad, giving it the authority to open accounts, modify the documents or the LLC, and appoint the manager (you).  Most importantly, the document allows the account to transfer these authorities to the manager… so, you can take control over the LLC.

Note that the operating agreement is signed by your custodian on behalf of the IRA, you as the beneficial owner of the IRA, and then you again as the manager of the LLC.

The operating agreement also transfers all authority and control over the offshore self directed IRA LLC to you, and away from the administrator/custodian.  You are thus the only one authorized to make investments, open accounts, and operate the offshore LLC.  The custodian is relegated to filing annual reports with the IRS.

That is to say, the custodian makes only one investment:  your IRA account in to the LLC.  From there, you are authorized to:

  • Make all investment decisions,
  • use funds for the upkeep and improvement of your investments (such as for improvements in real estate), and
  • control the sale/disposition of assets.* A corporation can be used as a UBIT blocker, but not as the primary (parent) entity.  We are working on a new structure for investments in Panama, which doesn’t have an LLC statute, but their Foundation laws can be used to create a trust/LLC hybrid.So, because the offshore IRA LLC we have designed is a disregarded entity (has only one member and is a limited liability company), it is an eligible entity under Treasury Regulation 301.7701-3(a) and (b).  As such, it is not required to file either federal or state income tax returns.  Also, no State Franchise Tax or other reporting will be required.There is an exception to the default rule that your offshore IRA LLC will have no filing obligations… and that the U.S. administrator/custodian will handle any reporting obligations other than those described here.  If you generate Unrelated Business Income in your IRA, or use a UBIT blocker corporation, you’ll need to file IRS Form 3520 and may have other reporting obligations.When your IRA invests in an active business, or uses borrowed funds (such as a mortgage or leverage in a brokerage account), then you will generate UBI and will be required to pay Unrelated Business Income Tax.  Because your structure is offshore, you may use a UBIT blocker corporation to eliminate this 35% tax.  This allows all profits to flow tax free (ROTH) or tax deferred (traditional) in to your IRA LLC, and thus in to your IRA.  This is one of the major benefits of moving your IRA in to an offshore self directed IRA LLC.  UBIT blocker structures are not available in the United States.
  • So, if you employ a UBIT blocker, or generate active income in your IRA LLC, then you will need to file additional forms.
  • There are a number of UBI and UBIT blocker corporation articles on this site, so I will just describe it briefly here.
  • Also, none of the international forms are required for a typical offshore IRA LLC structure.  The big one is the Foreign Bank Account Report, which is required for bank or brokerage accounts outside of the United States that hold more than $10,000.  This form is specifically excluded for offshore self directed IRA LLCs (search FBAR at IRS.gov for additional information).
  • Your objective in an offshore self directed IRA LLC structure is to eliminate all U.S. tax filing and paying obligations.  Therefore, your offshore company must be a “disregarded entity” under the IRS “check the box” rules.  This is achieved by 1) using an LLC rather than a corporation and 2) that LLC having only one member.  A single member LLC is a disregarded entity, while a multi-member LLC is considered a partnership.  (For more information, see:  Treas. Reg. § 301.7701-2(b), (c)(1) and (c)(2).)
  • The tax classification of an offshore IRA LLC is quite different than an offshore corporation, and an LLC is generally the required entity – not a corporation.  Because very few offshore jurisdictions (those that won’t tax your returns) offer compatible limited liability companies, we usually form IRA structures in Belize and Nevis.

I hope this article on the taxation of an offshore self directed IRA LLC has been helpful.  If you have any questions, please give us a call or send an email to info@premieroffshore.com.  We will be happy to work with you to move your retirement account outside of the U.S. and ensure it remains in compliance with all applicable U.S. tax laws.

UBIT
Christian Reeves

UBIT: IRA As a Dealer in Real Estate

/in /by

If you’re going to invest in one or two rentals with your IRA, then you won’t have a tax problem. You can operate these properties through a U.S. LLC (if domestic) or an offshore LLC (if abroad) and net profits will flow back in to your retirement account tax free.

If you buy in to a hotel, acquire land that you divide up and build homes on, or buy a multi-unit apartment building, which you improve and convert to condos, then you are probably a dealer in real estate and expected to pay 35% in Unrelated Business Income Tax (UBIT) to the IRS. That is to say, if your IRA operates as a dealer in real estate, you must pay 35% tax on your profits. Then and only then does the net flow in to your retirement account, to be taxed again on distribution (if a traditional IRA, or tax free in a ROTH).

Let’s take a step back for a moment. UBIT is a tax levied on IRAs that operate as a dealer, any kind of active business, purchase real estate with a mortgage, or use any kind of leverage in a brokerage account owned by the IRA.

In the case of an IRA buying with a mortgage or using leverage, UBIT applies to the portion of income driven from that leverage. If you purchase a rental with $100,000 down and $100,000 from a non-recourse mortgage, then 50% of your net profits will be taxed at 35% and 50% will flow in to your retirement account tax free.

In the case of an IRA doing business, including the business of a real estate dealer, 100% of your net income is taxable. You’ll need to file a corporate return, or a UBIT return, pay the tax, and report the after tax net as gains in your retirement account.

Now, here’s the problem. The IRS hasn’t bothered to define what makes an IRA a dealer in real estate. All we know is that it is someone in the “business” of real estate, rather than someone who is a simple “investor.” The bottom line is that being defined as a dealer, and thus getting to pay UBIT, is based on your intent.

If your intent is to buy, refurbish and sell multiple units, you are probably a dealer. If you buy a single family home and turn it into a rental, you are not a dealer. If you build up your rental portfolio to 20 units, or adopt a “flip this house” model, you have probably flipped your way in to UBIT.

If your intent is to invest, then no special planning is required. You simply form an offshore limited Liability Company and invest your retirement account in to that entity. From there, you control the transactions and can write checks on your account for the improvements, collect the rents, etc.

If your intent is to engage in a business, or if there is any risk of the IRS classifying you as a deal now or in the future, you need a UBIT Blocker Corporation added to your international structure. An offshore UBIT blocker corporation is one of the few remaining loopholes available to Americans and will eliminate UBIT.

A UBIT Blocker corporation eliminates the 35% UBIT tax by moving the transaction it in an offshore corporation in a tax free jurisdiction. It effectively converts the ordinary income earned in to dividends or other payments from the corporation to the retirement account. The UBIT Blocker moves income from “ordinary” and “unrelated” categories in to traditional investment returns. As such, business income, including profits from an IRA classified as a dealer in real estate, can avoid UBIT.

Please note that this requires the business be entirely offshore. The IRA, the LLC, the UBIT blocker, AND the real estate must all be outside of the U.S.

I hope you’ve found this post on UBIT helpful. For more information, please give us a call or send an email to info@premieroffshore.com.

IRS Fees
admin

IRS Fees

/in /by

If you have a tax debt, there are a number of IRS fees for setting up a payment plan or installment agreement. These IRS fees can add up quickly if you default and need to reapply.

The IRS fee for setting up a payment plan on direct debit from your bank account is $52. This is the least expensive because you are authorizing the government to debt your bank account and the risk of default is lower.

The next IRS fee is $120 for an installment agreement if you will send in a check each month or have the money taken out of your paycheck (payroll deduction). With a payroll deduction, your employer must send the government a check on your behalf. As you can imagine, these are not very popular with taxpayers because of the embarrassment involved.

I will note that the IRS sometimes requires a payroll deduction rather than allowing you to send a check. If you have defaulted more than once, or without good cause, the government will want some assurances that it won’t happen again … which they believe they get with a payroll deduction.

If you have very limited resources, you might qualify for a $43 installment agreement, rather than $52 or $120. There are a number of low income categories, so, suffice it to say, you will need to be about at the poverty line to qualify for a low income installment agreement. To be honest, very view people who must make payments, and are not listed as uncollectible, qualify for the discounted rate. If your income is low enough for the discount, you probably don’t need to pay anything.

These IRS fees apply equally to payment plans setup online, through a professional, or by mail. If you owe less than $50,000, you can set up a streamlined payment plan online. If you owe $25,000 in payroll taxes, you may set up an online payment plan and these IRS fees apply.

I hope this post on IRS fees has been helpful. Please take a read through my more detailed articles on resolving your IRS tax debt.

Give Up U.S. Citizenship
Christian Reeves

Give Up U.S. Citizenship

/in /by

As America becomes ever more intrusive in the daily lives of expats and residents alike, and the tax burden of the “haves” increases each year, the number of people giving up U.S. citizenship is also increasing. In some studies, the number whom give up U.S. citizenship has grown by a factor of 10 in five years.

First, let’s talk about what you get when you give up U.S. citizenship. You get a life free of the U.S. IRS. You’ll never need to pay in to the U.S. tax system again. While the U.S. does tax its citizens no matter where they live, once you dump that blue passport, you’re free of Uncle Sam.

It is fear of the IRS, and unreasonable taxation of Americans abroad, that are the most common reasons cited by those who give up U.S. citizenship. I think it is safe to say that, if the U.S. stopped taxing its citizens living abroad, the number of expatriations would drop significantly.

Note that the U.S. taxes its citizens on passive/investment income no matter where they live. If you also earn a salary from a foreign corporation, and qualify for the Foreign Earned Income Exclusion, you can earn up to $99,200 before Uncle comes calling. If you are living abroad, and your primary source of income is a salary or an active business, you may be able to operate tax free without expatriating.

If you are convinced you want out of the U.S. system, there are three steps you must take BEFORE you disengage.

–  Step 1: Move your assets out of the U.S. and to a tax free offshore jurisdiction

– Step 2: Decide where you would like to live abroad … where you would like to make your home base.

–  Step 3: Obtain a Second Passport

Step 1: Move your Assets Out of the U.S.

Even while your most important asset is in America (you), begin moving liquid assets and retirement accounts out of the U.S. Before you give up U.S. citizenship, you must plant that first flag offshore in the form of a corporation, business and/or investment accounts under the foreign structure, and more your retirement accounts abroad.

We can provide introductions to a number of offshore banks and brokerage firms, as well as international real estate investments and physical gold facilities. We are experienced in helping citizens diversify out of the U.S. in anticipation of giving up U.S. citizenship. We will ensure you do it effectively, efficiently, and, most importantly, legally.

Even if you are going to invest in to the U.S. markets, you should be doing so through a foreign company and brokerage. Yes, you will have access to all areas of the United States markets, as well as a range of international investment opportunities. If you are looking to diversify out of the U.S. dollar, you can hold your accounts in just about any currency you choose.

Step 2: Identify Countries Where You Would Like to Live

Once you give up U.S. citizenship, you won’t usually be able to live in the United States … though, I did know one person who did exactly this because his spouse changed her mind after the expatriation process was complete. For the rest of us, we shouldn’t plan to spend more than three or four months in America. If you’re here six months, then you are a tax resident, even though you have no U.S. passport, and get to pay U.S. tax on your worldwide income.

So, you need to figure out where you would like to live. Those of you who follow my postings know I’ve been a fan of Panama for a decade, was recently reintroduced to Chile, and have always had a soft spot for Medellin, Colombia, as having the highest quality of life in South or Central America.

Most of my recommendations center around Latin America because I like to be within the same time zone as the United States in nations with first world telecommunications. This is because I am running a business. If I were retired, I think my suggestions would be more diverse.

If you’re undecided on where to live once you give up U.S. citizenship, I suggest you take a look at www.liveandinvestoverseas.com. They are the best site on the web at providing the information and tools future expats need to make decisions.

I will note that where you live does not need to be the same country where you bank or invest, but it should be where you obtain a residency permit. I believe you should hold your assets in a country other than where you reside and plant multiple flags to ensure maximum diversification. Keeping in mind that most countries don’t tax worldwide income, this is usually an effective tax mitigation technique.

Though, you should live in a country that will grant you a residency. This will allow you to maximize the Foreign Earned Income Exclusion during your first year or two and while you are in the process of giving up U.S. citizenship. If you’re a resident of the country where you live, then you can spend more time in the U.S. If you don’t gain residency, then you must be out of the U.S. for 330 of 365 days and other issues may arise that will cost you when it comes tax time.

All of the countries I list above have efficient residency programs. I suggest that the least expensive, that doesn’t require you to make a significant investment and thus commit resources to a particular country, is Panama. Here, you can buy a small teak parcel for about $15,000 and gain residency through their Favored Nations Visa. No matter where you decide to live, you should have a solid understanding and plan for obtaining residency.

Step 3: Obtain a Second Passport

You might be surprised to find that the majority of calls I get from those who want to give up U.S. citizenship forget the most important component to the plan – you must have a second passport to go to before dumping your U.S. document. If you become a person without a country, you won’t be able to travel, open bank accounts, do business, or find a country that will grant you residency. You must have a new passport and citizenship in hand before you can terminate your U.S. tax paying obligations.

For detailed information on how to obtain a second passport, please see my page (top right menu). The basics are these:

You may qualify for a second passport by ancestry, marriage, religion, or extended residence in another country. For example, if your parents were born in certain EU countries, you can qualify for a passport and citizenship. If this is available to you, I strongly recommend you move on it immediately. Many countries have closed these programs, and others are sure to do the same.

Countries like Panama have residency programs that lead to citizenship. They require you to live and invest there for several years before applying, take 5 or 7 years, and are subject to change as national policies and the president change. In other words, the president in office and national policies will change during your residency period, and you are hoping not to be left out in the cold … or required to make a large campaign donation to the current president’s party.

If you don’t want to wait for years, and don’t have parents who can get you citizenship in their home country, then you will need to buy a second passport before you give up U.S. citizenship. The best program is from St. Kitts. I say it’s the best because the passport offers the largest number of visa free travel options. The least expensive with many visa free options Dominica. The lowest cost second passport with limited visa free options is the Dominican Republic.

If you want to buy a second passport, you should be aware that both Dominica and St. Kitts will do a very thorough background check on you and your family. Neither country will grant citizenship to anyone convicted of a felony … and you must provide a U.S. FBI report if you are going to give up U.S. citizenship.

* If you have a non-violent conviction in your distant past, you might have some options. Feel free to send us an email at info@premieroffshore.com with questions.

Thank you for taking the time to read through this post on how to give up U.S. citizenship. For more information, please see my second passport page. Feel free to phone or email us with questions.

Retire Abroad
Christian Reeves

Retire abroad with Maximum Privacy

/in /by

If you are thinking about retiring abroad, here is how to maximize your privacy. We start with the premise that the U.S. government wants you to disclose all assets, holdings, transactions, and investments. We then look for exceptions to those rules to find the legal loopholes that will allow you to retire with maximum privacy.

As you know, U.S. persons must pay tax on their worldwide income no matter where they live. Even if you retire outside of America, the IRS wants theirs. To enforce these laws, the U.S. requires you to disclose your assets each and every year on the Foreign Bank Account Report form and the Foreign Asset Report. Both of these force you to tell the U.S. what you have and where they can find it.

Well, there are a few … and I mean a very few … exceptions to these reporting requirements. In this article, I will describe each to give you an idea on how to retire abroad with maximum privacy.

My favorite tool to maximize privacy offshore is physical gold held in your name. You are not required to report physical gold on the FBAR or the Foreign Asset statement. Physical gold is gold bars or bullion, and not gold stocks. Paper gold must be reported while physical gold is exempt.

So, you may hold gold in Panama or Switzerland, in a vault in your name, and you are not required to report it to the U.S. I suggest gold is an excellent hedge if you have any concerns about the U.S. economic system or the USD.

Two quick sidebars:

  1. When I say something is held in your name, I mean that you are the owner. If gold is held in a corporation, trust, or foundation, you need to report the entity on the appropriate form and the asset on that entity’s balance sheet. If no structure is used to hold the exempted asset, then no reporting is required.
  2. I am talking about living abroad with maximum privacy, not reducing or eliminating U.S. tax. I will leave that topic for another day. Suffice it to say, if you buy physical gold, you are not required to report its existence. However, when you sell that gold, it is a capital gain, taxable on your U.S. return unless it is inside a U.S. compliant retirement account.

The next best way to retire overseas with maximum privacy is to invest in foreign real estate and hold that property in your name … again, not an offshore company. So long as you live in it, or it is vacant, you have no reporting obligations on foreign real estate.

If you decide to rent it out, then it is reported on your IRS Form 1040, Schedule E, just as a U.S. property. Though, there is nothing that necessarily denotes it as an offshore property. If it is your primary or vacation home, there is no reporting until you sell it. Then it goes on Form 1040, Schedule D as a capital gain. Because you will probably pay significant tax on the sale in the country where the property is located, you usually don’t have any tax due to the U.S. You will find several detailed articles on this site discussing offshore real estate transactions.

The best way around the FBAR form is to open your offshore bank accounts in the name of an offshore IRA LLC. The LLC is owned by your U.S. compliant retirement account and thus exempt from the various reporting requirements. While all savings accounts must be reported if you have more than $10,000 offshore, a bank account owned by your retirement account is excluded.

And if you think about it, that makes sense (a rare convergence of law and logic). When you take your IRA offshore, it is the IRA that owns the offshore LLC, and you act as the manager or fiduciary of that structure. Because the account is owned by an IRA, and not a person, it would be confusing at best to require an FBAR.

If you have questions on this, or would like proof of my claim, search FBAR at IRS.gov. You will see that accounts held by an IRA are exempt.

The same goes for an IRA account inside of a Panama Foundation. This structure allows for maximum asset protection, as well as offshore estate planning, and remains exempt from the FBAR form. Please see my recent posts on the Panama Foundation IRA structure for more information.

Another option for avoiding the FBAR is to invest in an offshore life insurance. If it’s a U.S. compliant policy, a single pay policy will usually allow your income to grow tax free and won’t be reported.

Though, there are many variations of offshore life insurance. I suggest you talk with your insurance provider and confirm that the structure you are considering does not require you to report the account on the FBAR and is exempt from all other U.S. filing obligations.

The last option I will offer on how to retire abroad and maximize privacy is to hold any business interests or projects in joint venture structures where your partner is not a U.S. person. If the other owner of the offshore company is neither a U.S. citizen nor a U.S. resident, you will have a lot more freedom.

For example, if you own and/or control 50% or less of an offshore company, then you need only report the formation of the structure on IRS Form 5471. You are not required to report the company each year … just when you incorporate it and when you sell it.

Likewise, if you are not a signatory on the offshore company’s bank account, you will not need to file the FBAR. In that situation, you could be a partner in an investment company for decades and have no U.S. reporting obligations until the company is sold.

I hope you have found this article on how to retire abroad with maximum privacy helpful. Please call or send an email to info@premieroffshore.com for additional information. We will be happy to work with you to structure your retirement abroad to keep you compliant with the IRS.

Attack on Your Retirement
Christian Reeves

Attack on Your Retirement

/in /by

The U.S. Government has launched an all-out attack on its retirees, crushing their investment returns with low interest rates. Be it intentional, or ignorance, the government is artificially pushing down returns, which does the most harm to our nation’s seniors.

As the United States attempts to stimulate its economy with cheap money, it’s the seniors, who need safe U.S. investments, that will suffer. Just when you should be invested in boring, stable, and guaranteed, the returns on U.S. treasuries are miserable. Adding to this mess, the U.S. economy is the epitome of risk, but returns are lower. When treasury returns should be higher to compensate for this risk, you are lucky to net .5% after an adjustment of 2% for inflation.

* That is to say the yield to maturity on a 20 year treasury is 3% and inflation is 2%. At least you’re not retiring in Europe, where returns are 1% … and my see .5% this year (before inflation).

This all means that America’s seniors are left with two choices: 1) stick with treasuries and reduce your lifestyle, or 2) diversify out of the United States. I suggest there are equal or lower risk investments available offshore that are paying for better returns.

But, first, let me talk about my premise that America’s seniors are under attack from their own government. The Federal Reserve has been pushing law rates for the last six years. This has resulted in miserable returns for those who stuck with treasuries. Obviously, it’s Seniors and Retirees who most often look to protect their nest egg with conservative investments and are thus hardest hit by this policy.

As you’ve read in my previous posts, returns on treasuries are about half of what one would expect from the market. These low rates are the result of Obamanomics. Lower returns mean you have less to live on or that you must take on more risk … a Hobson’s choice for a retiree living on a fixed income.

Next, let’s talk about my claim of 2% inflation over the next decade. I extract this from the yield to maturity of 20 year U.S. treasuries at 3% (going to 2.5%). U.S. the yield to maturity of inflation protected treasuries, which is about .6%. The spread between these is the break-even inflation rate of 2.4%.

Some of this 2.4% represents a bonus for taking a risk on the inflation adjusted treasury (called a TIPS). When you buy a treasury, you get a “guaranteed” return. When you buy a TIPS, you get a return fixed to inflation. If it goes higher than expected, you make more. If it goes lower, you earn less … thus, TIPS include a bonus for taking that risk.

Most financial analysts agree that this risk is worth .4%. Therefore, the expected inflation is 2%. Of course, expectations are often wrong, but that’s the rationale behind TIPS and how we get to a 2% inflation number.

And this can bring you, my valued reader, to why holding U.S. dollars in your retirement account results in a net return of -2% per year. If you hold your account in cash, its value is going down by the rate of inflation.

All of this is based on the assumption that the United States dollar, and treasury, are the world’s safest investments. I believe this is a deeply flawed assumption. Now, I’m not a doomsayer, but I do think that America and the dollar face significant risks and that these risk are not priced in the market.

For example:

  • the Federal Reserve is printing money as if it’s going out of style,
  • quantitative easing is artificially propping up the stock market and the dollars,
  • France has begun to move away from the dollar as its transactional currency,
  • Russia wants to denominate all oil and gas contracts in Rubles or Euros, eliminating the petrodollar, and
  • The world’s emerging markets (the BRICS, Brazil, Russia, India, China and South Africa) have united against the IMF and Worldbank in preparation of a concerted effort to push the dollar from dominance.
  • The Fed’s balance sheet is 25% larger than it was just one year ago ($4 trillion – see Grant’s Interest rate observer).

You will find detailed articles on each of these risks on this site. My point here is that these risks exist. It’s up to you to figure out how much they must be protected against.

So, where might you turn for higher secured returns? Most analysts agree that the United States is in for a decade of flat, slow growth. From the Economist to Forbes, everyone is predicting tough times ahead. You can also find an article here explaining why the U.S. stock market, which is at record highs, is likely to be quite average over the next several years.

I believe it’s time for the American retiree, or anyone looking to boast the returns in their retirement account, to invest abroad. I also believe you should be defensively minded as you decide how to diversify your portfolio. Now is not the time to gamble or to play a risky gambit. Focus on safety, security and diversification out of the dollar.

The most basic form of defense, and one I certainly don’t recommend, is to the buy the 10 year U.S. treasury and hope for better by the time it matures. This means your inflation adjusted return over that decade will be around .3% rather than the lofty .6% found in the 20 year.

You can do much better than that offshore. Here is what I recommend.

First, get your retirement account out of the U.S. and out of harm’s way. Form an offshore IRA LLC and move your IRA into that structure. This will give you control over the account and allow you to invest in just about anything you like offshore. For more information, see my page Self Directed IRA at the top right of this site.

Next, consider investing in foreign real estate with your savings or your IRA. This is an asset which has a high ROI compared to the treasury, and you can invest in a country (such as Panama) with a strong history and appreciation curve. I also note that inflation, if it exceeds the 2% anticipated above, is likely to help your returns in Panama rather than hurt them.

I also suggest it is time to acquire a foreign residency in case you want to remove yourself from the United States. While times are good, these residencies are easy to get in countries like Belize, Panama, Colombia, etc. If things don’t go well in the next few years, some of these programs are likely to be eliminated.

My preferred residency program is offered by Panama. If you combine an investment in teak (around $15,000) with the favored nations visa, you can get residency in no time. Considering the minimal commitment, compared to other programs that require real estate purchases in the hundreds of thousands of dollars, this is a very efficient solutions.

Finally, I suggest you buy physical gold and store it outside of the United States. Gold is the best hedge against a system wide collapse and the only guaranteed investment that will increase in value if the dollar declines. If you’re like me, you think a realignment of the dollar and America’s way of life is more likely than a total failure. Even so, you should move some of your portfolio to physical gold as a hedge against this 10% to 35% realignment.

I never recommend paper gold. Stocks, funds, and gold certificates, are of little value in a major crisis. I also avoid the gold documents offered in Australia and the Perth Mint. Those are gold allocations, not physical gold you take possession of.

Note that physical gold (like real estate) need not be reported to the U.S. government. Gold certificates and stocks are subject to the FBAR or Foreign Assets reporting requirements, and thus are not private if you wish to comply with U.S. law … as we all must. Physical gold held in your name is exempt from these forms.

I hope this post has been helpful. If you would like more information on any of these topics, please give us a call or write to info@premieroffshore.com.

* Premier is not a gold dealer and we don’t make a commission on any sales. These suggestions are meant as a guide. We are happy to introduce you to qualified professionals.

Seize Your IRA
Christian Reeves

The IRS Can Seize Your IRA

/in /by

I want to use today’s post to clear up a common misconception. Yes, the IRS can seize your IRA or other retirement account. Yes, the great collector is exempt from state laws protecting your retirement account and can take what it wants at any time … unless you take steps to protect yourself.

Specifically, the IRS may seize your Keogh, 401(k), IRA or SEP by sending a letter to your administrator demanding all the cash, up to the amount of taxes, interest and penalties they claim you owe. You have very little recourse to protect your retirement account once the IRS has issued this letter … known as an IRS levy of your IRA. Your administrator will be required to sell all assets under his control to pay the government.

If you wish to get some of the money back, you must prove that the taking of your IRA is going to create a significant and undue economic hardship on you and your family. As someone in the business for many years, I can tell you that this claim usually falls on deaf ears … unless you are going to be homeless and have near zero to pay for food and rent. If you are a person of means, the IRS may take your retirement account at will.

The same goes for ERISA plans, but the IRS may take only the amount that is vested. If you have a right to the money, then the IRS can get to it.

Now, here’s the kicker. When the IRS sizes your IRA, you must pay tax on that money as if it were distributed to you. If the IRS takes $75,000 from you on June of 2015, you must pay tax on that amount as an IRA distribution when you file your 2015 tax return. Obviously, this creates a new tax debt in 2015, but at least the IRS has theirs.

* You don’t need to pay an early withdrawal penalty on the amount the government takes.

You do have options. If you are concerned with the IRS and what might happen in the years to come, you can take control of your retirement account away from your administration. You can prevent the IRS from seizing your IRA by moving it to an offshore LLC and investing it out of the United States.

While it’s illegal to move assets offshore for the purpose of keeping them away from the IRS, you do have a right to seek higher returns and more diversification offshore. You may for an offshore IRA LLC, open bank and brokerage accounts, and invest in more secure assets – primarily foreign real estate and physical gold.

Though, I suggest it is best to take these steps before you owe the IRS. If they are actively coming after your assets, it may be a problem to take your IRA offshore … unless you have a good reason, such as you are going to move to that country. If you are going to retire to Panama, it makes sense to move your IRA to Panama.

Note that the IRS can also seize your account if your foreign bank has a branch in the United States. Putting your IRA in HSBC or Citibank makes little sense if you have a tax issue or are concerned with government interference. If you are going offshore, you should separate yourself from country risk by holding assets in local banks and consider diversifying out of the dollar.

I hope this is helpful. For more information on moving your retirement account offshore, please see my Self Directed IRA page. Feel free to phone or email to info@premieroffshore.com with any questions or suggestions. As always, consultations are confidential.

Retire Overseas Tax Free
Christian Reeves

Retire Overseas Tax Free

/in , /by

First, let me tell you about my inspiration for this post. France has been in the news and on this site quite a bit recently. They are pushing hard against America’s recent extortion of $9 billion from one of their banks, and I think this could have a major impact on the dominance of the dollar.

You might be wondering what this has to do with how to retire overseas tax free. Well, let me tell you. Like the United States, France taxes the heck out of its citizens … with the maximum rate reaching 75% on incomes over $1 million. These new tax measures have brought in about € 70 billion Euros ($94 billion) over the last three years, but are now driving French citizens out of the country in waves.

Even with this extreme tax rate, I’d swap my U.S. passport for a French one in a heartbeat. You see, France, like most countries, only taxes citizens who live in the country. Anyone can leave France and retire overseas tax free without making any special arrangements … just be out of the country for 163 days a year and you can live, work, and/or retire overseas tax free.

As a result, French citizens are moving to Portugal. This country doesn’t tax foreign pensions and, again, France doesn’t tax its citizens living abroad, so a French citizen may retire to Portugal and live tax free.

In our part of the world, there are many countries that won’t tax your U.S. pension (or your business income, for that matter), such as Panama, Belize, and Chile. Other nations, like Colombia, will only think about taxing you if you are there for more than a few years. In other words, you get to try them out before becoming subject to their tax laws.

Now, here’s the problem. While a French citizen can retire overseas tax free rather easily, Uncle Sam wants his cut no matter where you live. The U.S. taxes its citizens on their worldwide income, including pensions, retirement income, passive and active income, and all forms of compensation. No matter where you live and no matter where the income is generated, the default rule is that you must pay taxes. The rest of this post is about the exception to this rule.

For example, if a U.S. person retires to Panama, and earns $30,000 in capital gain, Panama won’t tax you, but the U.S. will. You are looking at standard U.S. long term (20% ObamaCare tax if applicable) or short term (ordinary) income rates on your income earned in Panama.

Here are four options to retire overseas tax free.

  1. Retire to Puerto Rico

The U.S. territory of Puerto Rico is a special case and is exempt from U.S. Federal Tax laws. As a territory, their rules take precedent over the IRS.

If you retire to Puerto Rico, live there for 163 days of the year, and become a (tax) resident of the island, you can retire overseas tax free. Puerto Rico will not tax your pension or other income, and their long term capital gains rate is 0% on assets (stocks, bonds, real estate, etc.) you acquire after moving. You will pay tax on things you owned before the move, but all stock bought and then sold after becoming a resident is tax free.

Let me clarify. If you retire overseas to Panama City, Panama won’t tax your passive income, but the U.S. IRS will. You will pay 20%+ on all long term capital gains.

This is the case because the default U.S. Federal tax laws control U.S. citizens in foreign countries. If you move to Puerto Rico, and become a tax resident of that U.S. territory, their laws govern and supersede those of the U.S. IRS … because Puerto Rico is a territory and not a foreign country.

Puerto Rico also offers business tax breaks and the above is just a summary of their tax deal for Americans who want to retire “overseas” tax free. Please see my two detailed articles on Puerto Rico for additional information.

  1. Give Up Your U.S. Citizenship

As I have said a few times, the U.S. taxes its citizens on their worldwide income. If you give up your U.S. citizenship, your duties to Uncle Sam are terminated and you may retire overseas tax free … you can’t retire in the U.S. tax free, but you can do so anywhere else you like.

The two most common issues or questions I get on this topic are:

If I give up my U.S. citizenship, can I visit America from time to time? Absolutely. If you have a quality second passport, you can enter as a tourist at any time. If your passport doesn’t allow for visa free travel to the U.S., then you can apply for a visa just like everyone else.

I have had a number of clients do this without issues. They dumped their U.S. passports and returned as a tourist to visit friends and family several times a year. Not one ever had a problem going through immigration.

I even had a client who gave up his U.S. citizenship and then was forced to return to the U.S. as a tax resident by his wife. She decided she couldn’t live so far from her family, so they both became U.S. resident/green card holders using their foreign (second) passports. Now, he is free to burn his green card at any time and go back to his tax free existence … so long as his wife allows it. Giving up your citizenship is a big deal, leaving and no longer being a resident for tax purposes is simple.

This first question begs the second: Do I need a second passport? Yes, you must be a citizen and have a second passport from a country before giving up your U.S. citizenship. If you don’t have a second passport, you would be a person without a country and unable to travel. It’s impossible to give up your U.S. citizenship until you have a second passport in hand.

You can obtain a second passport in three ways: 1) If you have family ties to certain countries, you can come a citizen through lineage … usually because your parents, or maybe grandparents, were born there. 2) You can become a resident of a country like Panama and may qualify for a passport within 5 or 6 years. 3) You can buy a passport from countries like St. Kitts and others.

For additional information on how to obtain a second passport, please see my page (top right menu of this site). We will be happy to help you buy a passport through one of these programs or to become a resident of Panama or Belize.

  1. Eliminate Most Capital Gains or Passive Income Sources

Assuming you don’t want to get rid of that blue passport just yet, you can minimize your taxable income by investing in tax free vehicles offshore.

*Of course, this assumes you don’t need capital gains to live on … that you can rely on your savings.

One option is offshore life insurance. So long as it’s U.S. compliant, the cash in your offshore policy will accrue tax free and may get a stepped up basis when you pass (transfer to your heirs tax free).

Another option to retire overseas tax free is to take only required distributions from your IRA or retirement accounts. These accounts can travel with you overseas, if you move them into an offshore IRA LLC or a Panama Foundation. Then, you can open offshore bank accounts and transfer your IRA or other retirement accounts to your country of residence. The same rules will apply offshore as they would onshore, so you can maintain the tax benefits of your retirement accounts overseas.

Finally, you might create an offshore Trust or Foundation and move your assets into that structure. While you will pay tax on any sales, you can accrue capital gains in the trust and use certain estate planning techniques (such as gift tax exclusions) to minimize or eliminate U.S. tax.

I also note that your IRA or trust can hole gold and real estate. You are not limited to stocks, bonds or treasuries. Certain rules apply to offshore retirement accounts, so please see my other articles for more information.

  1. Convert Passive Income in to Active Income

One of the best ways to retire overseas tax free … is to start a business! While this might sound strange, please allow me to explain.

If you are living and working outside of the United States, and qualify for the Foreign Earned Income Exclusion, you can earn up to $99,200 tax free from your foreign corporation in 2014. If a husband and wife both work in the offshore company, they can both draw a salary and get about $200,000 tax free.

The most common way to qualify for the Foreign Earned Income Exclusion is to move overseas and become a resident of a foreign country. So long as your business doesn’t involve selling to locals, nations like Panama won’t tax you and you can “retire” overseas tax free.

So, if you are an active investor, and spend most of your time trading stocks, maybe you are a professional trader and should incorporate offshore. If you are managing a number of rental properties, or buying land to develop into a multi-unit complex, maybe you are a professional real estate developer and should run that through an offshore company. Maybe your retirement includes selling goods or books over the internet and that should escalate from a hobby to a business. Any of these can become active income and qualify for the Foreign Earned Income Exclusion.

The key to operating a tax free business overseas rather than generating taxable capital gains is how much effort you put in to it. If you are spending 40 hours a week researching, reading, training, and trading, then you are clearly a professional trader. If you are spending 25 hours per week, then you might qualify. If you are regularly and continually searching for and managing real estate projects, you are probably a professional.

So, to retire overseas tax free, you need to spend as much time as possible on your income generating efforts, qualify as a professional in your trade or business, operate through an offshore corporation, qualify for the FEIE, and draw out your profits as tax free salary up to the FEIE and retain any excess in the offshore company.

I hope this article on how to retire overseas tax free has been helpful. If you have any questions, please give us a call or send an email to info@premieroffshore.com. We will be happy to discuss these options with you and plan your new life overseas.

Christian Reeves

Jim Rickards – Threats to Our Dollar

/0 Comments/in /by

A conversation with Jim Rickards by Christian Reeves on February 6, 2015.

Our currency and our financial system are under attack from all sides. Here’s what you can do to protect your wealth and your family.

Jim Rickards is the best selling author of Currency Wars and Death of the dollar. He has been cited on to on the floor as the senate by Rand Paul and is an adviser to both the Pentagon and the CIA on financial warfare.

Please click here to listen to the recording.

Diversify Your IRA
Christian Reeves

Proof You Should Diversify Your IRA Offshore Now

/in , /by

A record high stock market in the U.S. exposes the suckers! Don’t be one of them.  Diversify your IRA offshore as soon as possible.  This article offers statistical proof that you should diversify your IRA abroad.  U.S. returns over the next 10 years will wipe out your retirement account.

While everyone is running to dump money in to the stock market, the smart investors are taking their profits and moving to investments with more upside.  When a market is at an all time high, it means run… not invest more!  If you wanted to get in to stocks, you should have been buying in 2009 after the market bottomed out.  Now, you are just going to buy high and sell low.  Even the most optimistic outlook is for slow U.S. growth.  You will do far better to diversify your IRA in to foreign real estate or markets with significant growth potential.

What Alan Greenspan once called “irrational exuberance,” is back.  I hear smart people… doctors and lawyers and such who’ve sat on the sidelines for the last four years and are all excited about investing in the United States stock market.

Remember, if you follow the herd, you’ll be left holding the bank, when the smart money gets out… and they will get out.  Now is the time to diversify your IRA.

Please don’t get me wrong.  I am not arguing against stocks or the U.S. market in general.  If you have a 10 or 20-year plan, stick with it.  Remember that the 2008 crash didn’t wipe out investor’s retirement accounts, it just delayed their plans.  If you had stayed in the market, you would have made back your losses and then some.

What I’m saying is that now is the time to ignore the financial news and diversify in to international markets.  Studies show that investors who received no news performed better than those who received a constant flow of good and bad news.  Don’t get caught up in the reactionary cycle.

Statistical Proof That You Should Diversify Your IRA Offshore

Yes, the U.S. markets are at record highs.  From here, “basic math suggests that U.S. asset prices have less room to rise.  This means that the long-run outlook is for lower returns ahead.”  This, according to Wade Pfau, Professor of Retirement Studies at American College for Financial Services, a Ph.D. economist, means you should diversify or reduce your IRA distributions.

Conventional wisdom says that you can withdraw 4% to 5% from your retirement account each year and have cash left over at the end of 30 years.  If you are retired more than 30 years, you need to take out less.  It also assumes you are 50% in stocks and 50% in bonds.  This assumes you are earning 3.5% to 4% on your IRA.  If this goes down, your withdrawal rate must also decrease.

Based on Pfau’s recent study of stock and bond returns since 1926, the amount you will be able to take out of your U.S. based retirement account is a function of your return on investment.  Because this return is expected to be lower than the previous decade (because the market is at record highs), you’ll need to adjust your withdrawals or increase your returns.  I suggest you focus on the second option and diversify your IRA out of the U.S.

Specifically, the amount you can safely take out of your retirement account has gone down from 4% or 5% to just 3%.  To support his analysis, Prof. Pfau cites the U.S. Treasury markets.  The historic yield has been 3.5% and is now only 2.6%.  Current 10-year yields generally correlate to the total return you can expect over the next decade.

This, combined with earning ratios on the S&P 500, get you to an average return in the U.S. of 2.2% after inflation over the next decade… less than ½ of the historic average.

Assuming your IRA is $1 million, a 3% drawdown means you have only $30,000 a year to live on.  With Social Security and other income, you’ll be lucky to end up with $40,000 before taxes.  To me, this means I should consider living abroad… as well as investing offshore… where the cost of living can be a fraction of the U.S.

Prof. Pfau’s computer model indicates that pulling an inflation-adjusted amount of $40,000 (4%) per year from a $1 million dollar IRA ran the account dry in 57% of the simulations.  Taking $30,000 in distributions crashed the account only 24% of the time and a 5% withdrawal emptied it 82% of the time within 30 years.

Where to Invest Your IRA

The solution is to use diversification to stretch your cash and extend your retirement.  This is especially urgent when you consider the length of the average retirement.  We are living longer, and our retirement years are more than 30, thus we are outliving our savings.

“Tell your dollars where to go rather than asking them where they went.”  Roger W. Badson, 1875 to 1967

In order to diversify your IRA, the first step is to take control over your account by moving it in to an offshore IRA LLC.  Once that is complete, you can invest in just about anything you like outside of the United States.

So, where might you put your investment dollars?  If you consider only historic highs, most EU countries are well off their averages and a good buy.  The concern is that many perceive currency and other risks because of the nature of the Union.

*To be honest, I’m not an expert on the EU.  I’m focused on south of the U.S. of A.

My favorite countries for diversification are Mexico, Panama and Colombia.  Most of the drug wars have come to an end in Mexico and they’ve rewritten the laws that limited investments in coastal real estate… or required you to use a banker’s trust or other convoluted structure.  So long as you spend the time and get to know the city of Mexico you’ll invest in, I believe it is one of the best options available.

Those of you who read my columns regularly know that I’m a big fan of Panama and that my business and investments are centered there.  I prefer Panama City to other areas, and now believe that the secondary districts of the city hold the most promise.

For example, if I were to diversify my IRA in to Panama today, I would avoid Punta Pacifica and Pitea.  I’d look to San Francisco, around Park Omar, and parts of 50th Street.  Most of the gringo dollars going in to Panama are flowing in to Pitea, around Trump Tower, so I’d focus elsewhere.

The same holds true for Colombia.  My preferred city is Medellin and I’d stay away from the ever popular “golden mile.”  I’d look for condos around parks and within walking distance to cafes and entertainment.  For me, the prices within the mile are just too high.

Whenever you invest offshore, you must understand the region of the city you are buying in to.  Each area will perform differently and will have differing long term prospects.  Doing your homework is 10 times more important offshore than on… especially when there’s no MLS.

If you would like additional information on where to invest, I suggest www.liveandinvestoverseas.com.  For more costs and rules related to taking your IRA offshore, please send me an email to info@premieroffshore.com.  I’ll be happy to answer any questions you may have.

IRA Gold
Christian Reeves

Buy Physical Gold in Your IRA

/in /by

If you see some risk in the U.S. economy and want to protect your retirement savings, I suggest you buy physical gold in your IRA.

This can be done easily enough.  You first move your retirement account to a U.S. custodian that allows for this type of investment.  We then form an offshore LLC and open bank and storage accounts under that entity.  The LLC is the owner of your account and assets… with you as the only signatory on those accounts.  You can now buy physical gold to hold in a vault in Panama or Switzerland, or coins that you take possession of.  You can also open bank accounts in just about any currency and completely diversify out of the U.S.

And now is a great time to buy physical gold.  The growing distrust of America has not translated in to higher gold prices.  In fact, gold is well off its high of $1,895.  Add to this the fact that production is set to decline significantly in 2015 (because the production cost per ounce is skyrocketing) and gold looks like a solid long term investment.

For the first time ever, the majority of Americans are afraid of their own government.  According to a Pew Research poll 53% of us think that the U.S. government threatens our personal rights and freedoms.

Though, in my opinion, the price of gold has little to do with the decision to buy.  While it’s nice to sell at a profit, the focus is to diversify and create a partial hedge out of a U.S. economic melt down.  Gold is the perfect investment to protect your assets.  Because it can be bought and sold just about anywhere in the world, and because you can buy it in your retirement account if you set up an IRA LLC, to buy physical gold at any price is a wise move.

For now, gold’s value is determined by a very complex financial trading system.  Gold is loaned, leased, hypothecated and re-hypothecated over and over.  This inflates the supply – at least on paper – and has a significant downward impact on the market price.  For example, 9,000 metric tons are traded daily while only 2,800 metric tons are mined annually.

This artificial system has created havoc in the market.  When Germany demanded the return of its 700 tons of gold back in 2011 the U.S. couldn’t deliver.  So far, only a small portion has been sent and the U.S. now says it will be some time after 2020 before the full amount can be sent.  Of course, Germany can visit its gold in New York, but they can’t take it until all of the hypothecation contracts are up.

The bottom line is that gold contracts and paper gold often leverage physical gold by 40 to 1.  All of these shenanigans in the paper gold market (EFTs, LBMA, and Comex) push down the price.  If there was no leverage or hypothecated trading, especially as a hedge in FX, prices would be many times higher than they are now.

Again, this is all to say that the price of gold has a lot of potential and is a uniquely interesting investment.  Though, I still believe that, to buy physical gold for your retirement account is not about investment return.  It’s to protect your retirement from the United States and the weakened financial position we find our nation in.

It is also to say that, holding paper gold for the purpose of protecting yourself from a major devaluation or catastrophic collapse is folly.  Fear of the government means you must also fear the economic system in general and that you must hold physical gold.

For these reasons, I suggest you buy physical gold in your retirement account.  The price should not be your primary motivating factor, but know that any event that cuts off leverage and hypothecation will send the value of physical gold rocketing upward.  In a panic, paper gold has no value.  You need the real thing.

I hope you have found this post interesting.  For more information on how and where to buy physical gold in your IRA, please send me an email to info@premieroffshore.com.  I look forward to working with you.

Attack on the Dollar
Christian Reeves

France’s Attack on the Dollar

/in /by

There is an attack on the dollar from all sides that will have a major impact on your retirement and savings.  This is the first of a two part series on the attack on the dollar by friends and old foes alike.  This time, it’s France coming after our currency.

Here’s the setup:  The United States now claims authority to regulate ANY transaction denominated in dollars.  Basically, any time the dollar is involved in a deal, the U.S. feels it has the duty to control the terms… might makes right seems to be the prevailing sentiment.

To many of you, this might sound ridiculous.  The U.S. wants to regulate a transaction having nothing to do with a U.S. business interest or one not tied to America in any way, simply because the contract lists the terms in dollars?

That’s exactly what happened in the case of the French bank BNP Paribas.  This company entered in to transactions with countries that the U.S. government didn’t like, including Sudan.  They made the mistake of setting the terms of these transactions in dollars, which let mighty Uncle Sam step in and fine the bank nearly $9 billion dollars (yes, that is billion, with a B, and yes, the fine was denominated in dollars).

These transactions between BNP Paribas and Sudan had nothing to do with the United States.  Neither party had any business interest in America, no European Union or French regulations were violated, and the only connection between the transactions and the U.S. is that they were completed in dollars.

Of course, France has come out very strongly against this attack on their financial sovereignty.  The best articles I’ve found on the topic are in the Financial Times, including July 7, 2014 – Paris rails against the dollar’s dominance.

And this is why we get to a place where France is mounting an attack on the dollar.  If the U.S. wants to control all transactions involving its currency, the solution is simple:  dump the dollar as the transactional currency.

Now, I’ve been on this beat for a number of years and consider myself experienced in international banking.  I never thought that the U.S. would go so far as to regulate a transaction simply because it was in dollars.  It seems preposterous… but I guess there is no limit to the audacity of my country.

Even after rules like FACTA et al came along, where foreign banks must report transactions involving U.S. persons, I still failed to see the level of control the U.S. was hoping to force on the rest of the world.  I justified these regs as being for the collection of tax from Americans living or investing abroad.  Now it is clear all of these attacks on liberty and financial freedom are for control.

While we’ve talked in theory about what would happen if the U.S. dollar was no longer the dominant currency, it now seems reasonably likely it will fall from its perch.  For example, the French Finance Minister, Michel Sapin, said,

“We need a rebalancing of the currencies for global payments.  The BNP Paribas case should make us realize the necessity of using a variety of currencies.”

“We Europeans are selling ourselves in dollars when we buy planes for example.  Is that necessary?  I don’t think so.”

“A rebalancing is possible and necessary, not just regarding the euro, but also for the big currencies of the emerging countries, which account for more and more of global trade.”

While the U.S. dollar has enjoyed a long run as the world’s currency, its hold over the world is becoming a matter of tradition, but no longer a requirement.  There is no need to buy oil in dollars.  Even if the price is quoted in our currency, the refinery can certainly transact in euros, or any currency it chooses, by using a standard exchange rate.  As with any other transaction, if the buyer or seller wants to hedge against fluctuation, they are welcome to do so.

And, after BNP, the major industries in France are behind the attack on the dollar.  For example, Total, the largest company in France by market capitalization, and the CAC Industrial Group, both came out in favor of dumping the dollar.  CAC said, “Companies like ours are in a bind because we sell a lot in dollars but we don’t want to always deal with the U.S. rules and regulations.”

And why should a company in France, doing business with a company in Africa, have any involvement with U.S. regulations?  It seems America may have bitten off more than it can chew in this case and their imperialistic attitude just might come back to bite them.  You can only push others so far before they fight back.

And, this attack on the dollar is a BIG deal.  It has significant implications for you and your savings.  If the dollar loses its place as the transaction currency, the demand for dollars, which has been artificially propping up its value for decades and allowing the U.S. to borrow and repay through inflation, will be over.

How much damage might this cause?  More than half of all international transactions are done in dollars.  The FX market is $5 trillion a day and the dollar is on one side or the other of 87% of all trades.  Add to this the fact that 60% of government reserves are in dollars, and you can see the size and scope of a move away from the dollar and how it will affect demand.

The risks associated with this attack on the dollar are enormous.  Please stay tuned for my next post, Russia’s Attack on the Dollar, and why the BRICs are looking to dump the petrodollar.

I will leave you with the suggestion that you diversify a portion of your portfolio out of the United States and out of the U.S. dollar.  You might consider purchasing physical gold and/or taking your IRA or other retirement account offshore.

We at Premier don’t sell gold, so my suggestions are just that… and I like to think they are unbiased since we don’t have a financial incentive to suggest one product over another.  If you would like a few recommendations on how to purchase physical gold outside of the U.S., please send me an email to info@premieroffshore.com.

We do offer offshore IRA LLCs and will help you move your retirement account(s) offshore.  For a confidential consultation on taking your savings offshore, please drop me an email or give us a call.

Attack on the Dollar
Christian Reeves

Russia’s Attack on the Dollar

/in , /by

Russia is mounting an attack on the dollar and will threaten your retirement account in 2015.  An attack on the dollar that results in a significant devaluation will have a major impact on your assets denominated in dollars.

As I said in my last post, France Attacks the Dollar, our mighty greenback is in trouble.  I now say that Russia will be happy to push it over the cliff.  Harkening back to the days of the cold war, Mr. Putin is leading the effort to replace the United States dollar as the world’s reserve currency.

First, remember the election battle between Romney and Obama.  Romeny claimed Russia was the number one international threat America would face in the coming years.  Obama claimed that his opponent was living in the 1980s to great applause… I guess no one is cheering now.

Here are the facts.  America fined the French bank BNP Paribas nearly $9 billion for a transaction having nothing to do with the United States.  Uncle Sam didn’t like the bank doing business with Sudan – who was on our naughty list, and put sanctions on this tiny nation.  France and the European Union had no such laws or regulations and no formal position against Sudan.

Well, the U.S. claimed the authority to regulate BNP because the contracts that it entered in to with Sudan were in United States dollars.  That’s right, the only connection to the U.S. was the currency in which the trades were in.

As you might imagine, this caused a great uproar in France and has led to a major attack on the dollar as the transactional and reserve currency of Europe.

Add to this the fact that the United States claims the right to regulate all foreign banks, including those who don’t have branches or offices in the States, that accept U.S. persons as clients, and you will see that the international community is being pushed hard by our government.  At some point, enough will be enough and the dam supporting the dollar will burst.

It is important to note that the U.S.’s economic power is based on its being the reserve and transactional currency of the world.  And, this status is based primarily on the petrodollar and our being the primary trading currency.

  • Petrodollar refers to the requirement that the U.S. dollar be used for all oil transactions.  When a Chinese buyer wants to purchase Saudi oil, they must use the USD, even if the U.S. has nothing to do with the transaction.

It’s this status as the world’s transactional currency that allows the United States to amass enormous debt while other countries pay for it through inflation.  As I’ve said, this will end some day… when these nations have had enough… and it will be time to pay the debt.

In to this landscape steps a new and empowered Russia… and the attack on the dollar gets a major ally (Russia and its group of countries, the BRICS).

Like oil contracts, Russia’s natural gas sales with Europe are priced in USD.  Mr. Putin is pushing hard to change to a petroruble or petroeuro… any currency but the dollar.  If successful, Russia will be able to decouple all of its trade from the dollar and Europe may follow.

As you read in my last post, France is hoping to do the same… dump the dollar.  And this will have a devastating affect on the demand for greenbacks.  For example, removing the dollar as the transactional currency from the Russia/EU hydrocarbon market will take about $1 trillion dollars out of the market.

Regardless of what France or the European Union decide, if Russia and its group of nations effectively abandon the petrodollar, tens of trillions of dollars will be wiped from the market.  Today, the USD might be riding high against the euro, but such a loss in demand, followed by a move away from the USD as the reserve currency in these countries, will cripple the dollar.  It could result in a cascade of nations and large industries moving away from the dollar and the regulation (and fines) that doing business in dollars now entails.

As this point, you might be thinking I’m just crying wolf… that the USD is here to stay and there is no way to escape it.  Well, I could point you to a number of examples in history where currencies and nations have fallen following a similar line of attack.  But, I’ll leave that to the historians.  I need only to direct your attention to the events of the last few years.

As I said above, the United States has begun to regulate ALL foreign banks that allow U.S. citizens or residents to hold accounts.  These banks may not have branches or offices in America, but we claim authority over them because they do business with someone holding a blue passport.

And this regulation is based on the threat of taking away that bank’s ability to do business with corresponding partners that hold dollar facilities.  Without the leverage/threat of prohibiting these foreign banks from doing business in USD, America would have no way to punish non-compliant institutions.

Many banks have responded by kicking American clients to the curb.  I estimate that 90% of the foreign banks without offices in the U.S., and 75% of them who do business in the States, are now closed to Americans seeking offshore accounts.

It doesn’t take a great deal of imagination to see that these same banks could decide to give up the dollar.  All they need is some support from the likes of France, Russia, and the E.U., and an alternative transactional and reserve currency.

In my opinion, we Americans should take action to protect our retirement accounts and assets against the coming times.  I believe the attack on the dollar will be (partially) successful and that a significant realignment of value is on the horizon.  It may not result in the annihilation of the dollar (at least, I hope it doesn’t), but it certainly will have a major impact on the value of the U.S. dollar denominated assets.

My suggestions are simple enough to implement.  First, get some or all of your retirement account out of harms way by diversifying offshore.  This is done by forming an LLC outside of the U.S. and investing your savings there.  You will find a number of articles on this site on how to move your IRA offshore.

Next, I suggest you invest in physical gold.  For thousands of years, currencies have failed while gold has stood strong.  Today is no different.  Please see my recent posts for more information.

I’ve written on why I believe the price of gold is artificially low and is due for an upward correction… especially against the dollar.  However, today’s low price is barely a factor in my recommendation to hold physical gold.  Gold will act as a hedge against any catastrophic event and can be turned in to currency or goods just about anywhere in the world.

Also, it’s legal for you to hold physical gold offshore and not report it to the IRS.  That’s right, you don’t need to report gold held in a vault offshore to the U.S. government.

Those are my thoughts.  I hope this article on the attack on the dollar has been helpful.  Feel free to call or email us at info@premieroffshore.com for additional information.  Alls consultations are confidential.