Beautifying Your Financial Picture

How Much Do You Really Know About Off-Shore Trusts?

by Darryl Nguyen

When you hear the term "off-shore trust," what comes to mind? If you've watched a lot of movies, your mind might jump to tax evasion and fraud. It's true that some unscrupulous individuals use off-shore trusts to evade the IRS and hide "dirty" money. However, off-shore trusts are not the scary, all-bad boogeyman you might think they are. Below, you will discover three myths about off-shore trusts -- and the real truth about these valuable money tools.

Myth: Off-shore trusts are only for the rich.

The wealthy do tend to use off-shore trusts more often, but that tends to be because they are more financially educated and aware -- not because these trusts are only available to the wealthy. Even if you only have a few thousand dollars to invest and protect, there are off-shore trusts that will allow you to do so in a tax-advantaged way. You should look at these trusts as a tool to help you become wealthy, rather than as a tool you will only be able to use once you are wealthy.

Myth: Off-shore trusts are illegal.

There are no laws that require you to invest your money or protect your money only in U.S.-based funds. You can absolutely put your money in an off-shore trust hosted in any nation of your choosing. Perhaps off-shore trusts got the reputation of being illegal because they are commonly used by criminals who don't want their money accessible by the U.S. government. But if the money you have has been earned legally, there's no reason you can't invest it off-shores.

Myth: Off-shore trusts offer no protection.

You might be used to seeing the reminder that your funds are FDIC protected when you visit a bank or financial institution in the U.S. Without this guarantee, you might assume that the foreign trust is unreliable or not properly protected. However, responsible countries have their own form of protections, similar to the FDIC in the U.S. As long as you choose a reputable financial institution for your trust, it's not any more risky than investing that money in the U.S. Just make sure you have a financial expert help guide you in choosing a safe and reliable trust.

Investing your money in an off-shore trust can be a good way to reduce your tax burden and build wealth. To learn more, reach out to your financial advisor or the manager of a foreign trust.