5 Legitimate Reasons People Have Offshore Assets

Since the Panama Papers were leaked, the term “offshore” has been all over the news and cast in a negative light. It has been associated with illicit activities by criminal organizations and corrupt politicians. Many leading politicians have been implicated, and other high-profile individuals are next.

Many people, however, use offshore entities for legitimate reasons. They are not illegal to set up nor to use. The activities of the entities or the shareholders are what can break the law.

It is vital to remember that offshore entities can, in fact, benefit regular people. Don’t be scared to use an offshore entity for a legitimate purpose. Here are five:

  1. Holding property in another country

It is common to use a local entity to hold real estate in another country, and in some cases, it can be required if you hold a property title as a foreigner.

In Mexico, for example, a foreigner cannot hold title to a property within 50 kilometers from the ocean. As required by law, they must use a Mexican trust, by definition an offshore entity. Many other countries have similar requirements on foreign ownership.

  1. Minimizing probate when you pass away

By owning foreign property in your name, your heirs must deal with probate in that country. In some cases, that involves navigating inheritance laws which could require distribution based on local statutes, which might not align with your wishes.

An offshore entity that is not located where your property is located can eliminate the need for probate in the country the real estate is based. Using an entity from a jurisdiction that allows for direct inheritance of that entity or of its shares allows avoidance of probate altogether.

For a person who owns multiple properties in multiple countries, utilization of an offshore holding company is merely a practical administrative strategy.

  1. Providing asset protection

While a corporation or LLC can provide some asset protection, an offshore trust is the most effective entity for asset protection. Frivolous lawsuits are all too common in the United States, and the best way to protect assets and prevent their vulnerability to a vengeful plaintiff’s attacks is to transfer their ownership structure offshore.

For example, holding your stock portfolio in an offshore LLC does not change any tax obligations to the United States, but it does create a barrier between a frivolous lawsuit and your hard-earned assets.

  1. Providing investment diversification

Even if you aren’t concerned with asset protection, international diversity of your investment portfolio is paramount, which can be facilitated by setting up an offshore entity.

Due to concerns over associated SEC regulations, most offshore stock brokers and mutual funds refuse to accept U.S. persons as investors. They will, however, accept offshore entities as clients even if they are owned by Americans.

This structure affords the brokerage company compliance with financial regulations while allowing the American owner access to a broader scope of international investments.

  1. Operating an active business

Offshore entities can also be actual companies. They can be used to run a business in a foreign country or to separate a primary American-based business from an offshore subsidiary. Businesses are incorporated overseas for the same reasons they are incorporated in the United States: to limit shareholder liability of the company, again providing asset protection.

Benefits of Offshore Assets

Some media outlets are pointing out that owning an offshore entity does not equate to engagement in any illicit activity. Others are using the Panama Papers to paint all offshore entities with a broad negative brush. In truth, offshore entities can provide significant benefits for ordinary people who want to protect their assets and provide for their future retirements. These benefits are far from illegal, but instead practical and administrative.

Cohen & Burnett offers estate planning and fiduciary management, delivered by trusted legal professionals with the experience and specialization you require. To learn more about our services, please visit our homepage today.

sort

SUBSCRIBE /

Receive the latest trends, news and resources on estate planning and asset management directly to your inbox.