your own intl trust

8/10/2019 Your Own Intl Trust

1/17

YOUR OWNINTERNATIONAL

TRUSTFor Maximum Financial Safety

By Terry Coxon


2/17INTERNATIONALMAN.COM2

YOUR OWN INTERNATIONAL TRUSTFor Maximum Financial Safety

Topic 1

MAXIMUM FINANCIAL SAFETYNothing will bring you and your family closer to complete financial safety than alawful international trust. Tis report explains how international trusts work and howyou can establish your own trust to protect your wealth and free it to grow faster.

A properly designed, properly managed international trust gives you:

Asset Protection.An international trust ends your exposure to potentialfuture lawsuits. Te trust makes it extremely difficult for a lawsuit winnerto reach the assets youve protectedwhich comforts you every day while itdiscourages lawsuit predators from ever making you a target. Asset protection

also means you cant be wiped out through a no-warning seizure by a runawaygovernment agency.

Income ax Savings Now.Being international, your trust has ready access tolegitimate tax-saving opportunities that most US investors miss out on. Aninternational trust opens those opportunities to you, to shrink your tax bill oninvestment profits.

Income ax Savings Later.After your lifetime, your trust disconnects from theUS tax system. It can invest tax free all around the worldeven in the USfor

faster compounding and unhindered growth in family wealth.

Estate Planning Advantages.An international trust easily accommodates allthe standard estate planning strategiesand then does much more. It eliminatesthe fear of giving away too much too soon (the number-one barrier to effectiveestate planning). And, because your trust eventually will disconnect from theUS tax system, it solves your familys estate planning problems once and for all.It wont be part of the taxable estate of any future generationever.

Financial Privacy.An international trust sets up a zone of privacy that gives

you greater control over who does and who does not have access to the details ofyour financial life.


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Topic 3

TWO KEY PROVISIONSTe relationship among the four participants is set out in a written, legally enforceablerust Instrument. Tat document defines the rights retained by the Grantor, therights of the Beneficiaries, the duties of the rustee, and the powers of the Protector.

o deliver maximum asset protection and tax savings, the rust Agreement needs twokey provisions. It should say that the trust is irrevocable and that it is discretionary.

Irrevocablemeans that you dont keep the right to order the rustee to wind upthe trust and immediately return all the assets to you. It is critical that you not havesuch a right. If you did, a court could order you to revoke your trust and retrieve the

assetsmaking them easy pickings for anyone who had won a lawsuit against you.Your trust cant protect you unless it is irrevocable.

(Because the trust is irrevocable, you generally should include yourself as one of theBeneficiaries. Tis allows the rustee to make distributions to you.)

Discretionarymeans that the rustee has a duty to decide which Beneficiariesreceive distributions or other benefits, how much they receive, and how and whenthey receive them. With such a discretionary provision, no Beneficiary owns a fixed,percentage share of the trust. No Beneficiary has, for example, a right to receive 50%

of the income or 25% of the principal. A discretionary trust protects the Beneficiaries,because it creates no rights that a Beneficiary (including yourself ) can be compelled tosign over to a creditor.

An international trust that is both irrevocable and discretionary is a thick wall againstpotential future lawsuits, and those same two provisions lead to valuable tax advantages.But they also are highly cautionary for the Grantor. How can the Grantor be confidentthat the rustee will use its discretion correctly? Putting that concern to rest is onereason for naming a Protector for your trust and giving him the right powers.




Topic 4

THE PROTECTORFor you to reach the confidence level youll insist on before establishing aninternational trust

e Protector should have the power to conferwith the rustee on any matterpertaining to the trust, including investment policy and distributions to Beneficiaries.

e Protector should have a broad power to fire the rusteeand replace it withanother independent trustee.

e Trustee should be authorized to relyreasonably on the information and

advice it receives from the Protector.

ogether these three features ensure that the rustee will give proper weight to the advice itreceives from the Protector and never lose sight of your (the Grantors) intentions.

A conscientious rustee welcomes the information it receives from the Protector about theneeds and circumstances of the Beneficiaries. Tat information makes the rustees jobeasier. And almost any rustee wants to continue to earn its trustee fees, so it doesnt wantto get fired by the Protectorwhich could easily happen if it disregards the Protectorsadvice. A rustee also wants to protect itself from complaints and legal claims, which it can

do by reasonably relying on the information and advice it receives from the Protector.

Selecting a Protector

Who should be your trusts Protector? Because the role is so important, most Grantorsdecide to keep it for themselves. Tey also keep the power to appoint their ownsuccessor as Protector, so that they can decide which one or more of their heirs shouldinherit the job of monitoring the rustee.

But it isnt necessary for you to be the Protector if you dont want to be. Tealternative is to make someone else the Protectorsuch as an international attorneyor a second non-US trust company.

Protecting the Protector

Because the Protectors role is so important, the rust Instrument should specify that theProtector may act only of his own free willespecially if you are going to be the Protectoryourself. Such an anti-duress provision protects against any attempt to use a US court toforce the Protector to replace the rustee with an institution located in the US.




Topic 5

SOURCE OF ASSET PROTECTIONIn principle, your trust frustrates lawsuit predators by putting your wealth under theprotection of a rustee outside the US. Having transferred assets to your trust, you nolonger are the legal owner, so you no longer have the ability to surrender the assets toa lawsuit winnerso no one can compel you to do so. Te rustee holds the assets,and it is obligatedto use them exclusively for you and the other Beneficiaries younamed when you established the trustnot for your creditors.

Te rustee is protectedfrom coercion by US government agencies, because it is notin the US. It is subject to the laws of its own countrynot to US laws. It is able and

obligated to say No to any US court order aimed at undermining your trust.As Grantor, you are protectedbecause your trust is irrevocable. You can (and should)obey any order you receive from a US court and still be confident that your trust is safe.

As a Beneficiary, you are protectedbecause your trust is discretionary. You can (andshould) obey any order you receive from a US court and still be confident that yourrights as a Beneficiary cant be touched.

As Protector, you are protectedby the rust Instruments anti-duress clause. You can(and should) obey any order you receive from a US court and still be confident that

only your voluntaryactions will influence the rustee.

Respect Existing Debts

o make this protection actually work, it is important not to go too far in transferringassets to your trust. You must not transfer more than some fraction of your networth.In other words, you should hold back at least enough assets to cover all your existingand reasonably foreseeable obligations. An international trust is not a device fordefeating existing creditors or for ducking obligations you already suspect may beheaded your way.

And unless there is a practical reason for doing otherwise, the rustee should holdtrust assets through a custodial account at a foreign banknot in the US in the nameof your trust. Tis guards against the arbitrary actions of any US government agencythat might be determined to seize trust assets despite established legal norms.




Topic 6

INCOME TAX SAVINGSYour international trust should be located in a country that levies no income tax.Nonetheless, being US citizens or residents, you and the (other) Beneficiaries stillwill be subject to US tax rules. One set of income tax rules about international trustsapply during your lifetime. Different rules will apply after your lifetime.

During Your Lifetime

If your international trust has any Beneficiaries who are US citizens or residents (theusual case), it initially will be classified as a grantor trust. Tis means you must

include all the trusts income, deductions, etc. on your own personal tax return. Italso means that your dealings with your trust are completely income tax free. Youcan transfer assetsto the trust (even if they are highly appreciated) tax free. Andyou can receive distributions back from the trust tax free. During your lifetime, itsalmost as though, for income tax purposes, your international trust were a simplebrokerage account.

Because of the grantor trust rule, the mere structure of the trust has no effect, good orbad, on your personal income tax bill. Instead, during your lifetime, the income taxadvantages come from the way the rustee plans and manages your trusts investments

(assuming you give the investment management job to the rustee).

For an investor, tax planning means deferring tax bills as long as possible and favoringuntaxed appreciation instead of income that is taxed as its earned. Most investors doat least a little tax planning. But a qualified rustee in certain non-US jurisdictionsis likely to be far more effective at it than the average investor, since an alert rusteehas advantages most individuals lack. Tats why it is important to pick the rightrusteeone with the following qualifications:

For the Trustee, tax planning is a full-time business. It can devote more

attention to the task and budget more resources for the best professional advice. e Trustee operates in a zero-tax environment. It is comparatively simple for

the rustee to structure tax-saving transactions between trusts it manages for USclients and other, non-US clients that are not subject to US tax rules.

e Trustee has ready access to tax-favored investment opportunitiesthat areeffectively blacked out in the US by securities laws, insurance regulations, andother artificial barriers.




For Your Heirs

After your lifetime, the income tax rules change. Your trust becomes completely

foreign. Neither it nor any of the Beneficiaries will be subject to tax on trust income.Wealth will grow faster, because the trusts earnings can accumulate and compoundtax free. Tis makes a dollar left in an international trust far more valuable to yourheirs than a dollar they inherit directly.

Distributions to Beneficiaries after your lifetime are partly taxable and partly tax free.Te tax-free portion represents the assets in your trust at the end of your lifetime. Tetaxable portion represents later trust earnings.

In some cases, your heirs can achieve even better tax results by dealing with the trust(buying, selling, borrowing, lending, etc.) than by receiving direct distributions. Andin nearly all cases, the rustee can improve the tax results for Beneficiaries who receivedistributions through the way it manages the trust.1

1 For certain technical reasons, tax planning is easier after the Grantors lifetime. But it remains

important, especially if the trust is used to accumulate investment profits.




Topic 7

ESTATE PLANNING ADVANTAGESSomeday, your estate could be taxed at a rate as high as 40%. Your heirs would losemuch of what youve built up.

If concern about estate tax leads you to visit an estate planner, you probably willhear about:

Lifetime credit amount ($5 million, as of 2013)

Annual gift tax exemptions ($14,000 per recipient per year)

Crummey trusts (another way to use annual exemptions)

Marital exemption (for gifts to your spouse)

Marital deduction (for bequests to your spouse)

QTIP trusts (to capture the marital deduction for money left in a trust)

Life insurance trusts (to avoid estate tax on life insurance proceeds)

Grantor Retained Annuity Trusts (GRATs, to eciently remove an unlimitedamount of wealth from your taxable estate)

Tese are the standard tools of estate planning, the techniques designed to reducethe eventual tax bill on your estate. You readily can apply any or all of them with an

international trust. But an international trust lets you do even more.

Your trust makes estate planning easier. With an international trust, you can removeassets from your taxable estate and still keep them available for your own support, incase you need them later. Tis frees you to do a thorough, energetic job of estateplanning without fear of planning yourself into the poorhouse by letting go of toomuch too soon.

A thorough estate plan may call for transactions between you and other familymembers. You can simplify those transactions by wrapping them in your international

trust. Because of the grantor trust rule, transactions between you and your trust haveno income tax effect. Tus the trust lets you pursue powerful transactions for estateplanning without entangling yourself in unwanted income tax complications.

And an international trust is the grand slam of estate planning: It eventuallyeliminates the need for estate planning. Because the trust is discretionary, it wont beincluded in the estate of anyone in a later generation. In other words, your trust leavesthe estate tax systemforever.




Topic 8

FINANCIAL PRIVACYo increase your financial privacy, simply locate your trust in a country where privacyis the norm.

In most of the zero-tax jurisdictions you might consider for an international trust,privacy is respected by law. A financial institution or professional that discloses yourprivate information to third parties would be violating its legal duty. And in mostjurisdictions that are appropriate for an international trust, financial privacy is amatter of business necessity. Local institutions couldnt attract business if they failedto safeguard the privacy of their clients.

During your lifetime, however, financial privacy wont be complete. Because you mustinclude the trusts income on your own personal tax return, there are IRS reportingrules. You are required to report transfers to your trust on IRS Form 3520 and toreport the trusts activities each year on Form 3520-A. You also must le form FBAR(which deals with foreign financial accounts). Tese forms are mandatory. It is byfiling them correctly and on time that you keep your international trust completelynon-controversialso that it truly is a source of protection and comfort and not asource of risk and worry.

After your lifetime, the trust becomes completely foreign. No one in the US willhave a reporting obligation for it. Beneficiaries will have to report distributions theyreceive, as indicated earlier. But the trust itself can remain silent for as long as theBeneficiaries find it advantageous.




Topic 9

WHAT YOU CAN PROTECTYour international trust can protect almost any kind of assetcash, stocks, bonds,precious metals, foreign currencies, even real estate and business assets.

Transferring cash and securitiesto your trust is easy. For cash, simply write acheck. For stocks or bonds, mail the certificates to the rustee or instruct yourbroker to make the delivery.

If you own stock in a private corporation, you can protect your shares bytransferring them to your trust.2

To protect real estate, youll probably need to use a limited liability company.First, transfer the real estate to a limited liability company formed under the lawsof your own state. Youll be the LLCs manager and keep direct managementresponsibility for the property. But your trust will be the LLCs owner.

You can transfer the value of an unincorporated businessto your trust in thesame way, by using a limited liability company.

2 You should not transfer shares in a sub-chapter S corporation to an international trust. Doing so

would disqualify the corporation from the favorable tax treatment available under sub-chapter

S. However, there are special strategies for using an international trust to protect the value of a

sub-chapter S corporation.




Topic 10

INVESTMENT MANAGEMENTA properly structured international trust gives you wide freedom in arranging forinvestment management.

If you want to make investment decisions yourself, advise the trustee to opena brokerage account for your trust and appoint you as the trading advisor. Youwill deal directly with the broker and give the buy orders and the sell orders.

If you want to maintain even closer supervisionover trust assets, transferyour investments to a limited liability company that you manage. Ten transferownership of the LLC to the trust.

If you want to put an outside advisorin charge, advise the rustee to open amanaged account for your trust with the advisor you select.

If you want to reduce your income tax bill, pick a rustee that is alert to theimportance of tax planning and let it manage the investments.

With an international trust, you can have any type of investment management programyou want. You also gain access to investment opportunities not available in the US.




Topic 11

THE NEXT STEP TOWARD REAL SAFETYBy Nick Giambruno

I hope you learned as much about real financial protection as I did by reading YourOwn International rust. (If you havent had a chance to read its companion piece,Why You Dont Have An International rust, you can access it by clicking here.)

Te core message is emphatic. If youre looking for the strongest protection for yourassetsprotection that cant be undone by any runaway government agency nor evenby the cleverest lawsuit attackeran International rust is the solution that fits you.Nothing else comes close. If youre looking for permanent protection from high taxes

on your capital, an International rust is the solution that fits you. Nothing else comesclose. If you want to get ahead of the next round of new rules from Washington, anInternational rust is the solution that fits you. Nothing else comes close.

Te list of the benefits an International rust delivers is long and rich, and it includes:

Protect your assets from potential future lawsuits.Your rust can shut out allfuture lawsuit predators.

Protect your assets from seizure by arbitrary government agencies.Your

rust follows the laws of the jurisdiction you chooseits not subject to the lawswhere you live.

Protect family wealth from gift and estate taxes.With an International rust,you get estate-planning advantages that are impossible with any stay-at-homeestate plan. Equip your family with an International rust, and even a billion-dollar fortune can pass from one generation to the next without loss to estate tax.

Protect assets from possible future exchange controls, capital controls, or otherdesperate government measures,such as forced sales of privately owned gold. Telicensed institution that serves as your trustee is beyond the reach of any asset grab.

Protect future generations from estate tax and from the full burden ofincome tax.Your rust eventually disconnects from the US tax system, so youcould be the last person in your family who needs a plan for estate tax. Andfor future generations, your rust will be an ideal vehicle for compoundinginvestment returns free of current income tax. Better yet, for future generationsit can lawfully be silent and lawfully invisible.
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Protect your peace of mindby knowing that the politicians next big idea cantdamage the wealth youve protected with your rust.

It all sounds so wonderful. But how do you make it happen?Ive found a resource that will show you exactly how to use an International rustto achieve all those advantages for yourself and your family even while you staycompletely within the rules. Its what Id been hoping for. As soon as I saw theworking draft, I knew I wanted to publish it with the International Manimprimatur.

Its Terry Coxons International rust Guidebook, and it has everything Ive beenlooking for to take readers from concept to action.

Te Guidebookis complete. It answers all my questions and answers them in such

depth and detail that Im prepared to act on what I learn. Its not just ideas; its 115pages of readiness for getting the job done.

Te Guidebookis clear and understandable. Although it speaks precisely, it speaks withthe simplicity, directness, and clarity that are the authors trademark. Its not a jargon-filled manual meant only for your professional advisors. Its written for them andfor you.

Te Guidebookis authoritative. It is thoroughly footnoted with tax law and courtcase references and with knowledgeable commentary, all by Robert B. Martin Jr., aprominent international tax attorney with decades of experience in international trust

matters. Tats the kind of careful detail your lawyer or accountant will insist upon ina serious publication.

Teres so much in the International rust Guidebook.

Drawing on your rust.Te purpose of putting money into the rust is to getmoney out of the rust later. Page 23.

Your rusts limited liability company.Use a foreign LLC that you managetohold rust assets a simple way to maintain hands-on control of investmentdecisions. Page 28.

Open bank and brokerage accounts for your rust (or its LLC). Your rustis a welcome customer where you as an American might not be. Understandingthe procedures of non-US banks and brokers opens up more choices and makesit quicker and easier to start an account. Page 35.

ransfer assets to your rust (or to its LLC).Tere are several routes forplacing assets under your rusts umbrella learn how to document yourtransfers to close the door on any possible attack from a future creditor and to
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get the tax results you want. Page 37.

Protect real estate and subchapter S stock.Tese assets are different, but there

is a right way to use your International rust to protect their value, includingthe value of your home. Page 41.

Reporting.Filing the reports required under US tax rules is essential. Reviewthis chapter to understand how to keep your rust completely noncontroversial.Page 80.

Mistakes not to make.When you read this chapter, youll wonder Who woulddo anything like that? In fact, people have made those mistakes but youwont be one of them. Page 86.

Getting as much help as you need.Experienced professionals are availableto assist you with planning for your rust and using it to gain permanentprotection for family wealth. Page 90.

And there is so much more youll gain from the International rust Guidebook.Reviewing the model Trust Deed (page 95its written in clear, standard Englishfor easy understandability) is like looking under the hood of an Internationalrust. Teres no better way to learn how all the pieces fit tightly together to delivermaximum financial safety for you and your family. And the Guidebookanswers all thewhat about questions youll probably think of, including:

What about financial controls?Set up your rust so that money never moveswithout your say-so. Youll always know where every penny is.

What about the trustee? How can I be sure the trustee never loses sight of mygoals?Retain sucient inuence over how the Trust is administered so that therustee thinks of you as a customer who can always take his business elsewhere.

What about the IRS? How do I avoid creating problems?Te recipe isridiculously simple. Te tax rules tell you what taxes to pay and what reports tofile. Follow the rules (the Guidebookexplains them clearly and in detail) and live

without problems. Its disregarding the rules that invites trouble.

What about me? How can the an International rust adapt for my familyand my situation?Te Guidebookexplains how to put the rusts inherentflexibility to workto eventually split into separate rusts, to pass on yourguiding role to a spouse or to one or more children, and to allow for the specialneeds or circumstances of any beneficiary.

What about cost? How do I get all the safety of an International rust without
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getting a fat legal bill?Te knowledge you gain from the Guidebookwill makeyou a decidedly shrewd shopper for legal and trust services; its knowledge that cansave you many thousands of dollars in consulting fees with lawyers. What others

have paid $40,000, $50,000 or more to achieve, youll do at a cost that will looklike peanuts.

An International rust is a serious matter. o gain all the financial safety and tax-planning power that is possible only with an International rust, you need to knowhow it works and how to make it work for you. Terry Coxons International rustGuidebookexplains it all. Its an action bible. Its Te Big Book of Answers.

Sincerely,

Nick Giumbruno

Senior Editor, International Man

Act now to get the Guidebook.
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DISCLAIMER: Casey Research, LLC does not provide investment, tax or legal advice, and nothing

in this e-mail or any document found at InternationalMan.com should be construed as such. Before

undertaking any action, be sure to discuss your options with a qualied advisor.

The information contained within this article is based on the best research we could nd as of the

date of publication. However, the world changes fast and information can become out of date

relatively quickly. So, two points... First, before undertaking any action described in this material,

please conduct your own due diligence and verify all facts. Second, if you happen to spot an out of

date fact or gure (or even suspect something is out of date or false), simply get in touch with us andwell look into it. International Man is a network made up of some very smart people - tax specialists,

accountants, lawyers, analysts and many other talented individuals. As a group, we can create and

maintain a very accurate and highly actionable resource for internationalization.

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