Foreign Trusts:

A foreign trust is an entity organized outside the United States that is set up to hold and administer funds or property on behalf of beneficiaries. Some domestic taxpayers use this arrangement for the purpose of reducing income from property for United States tax purposes.  Another use is for asset protection, or what is commonly known as a Foreign Asset Protection Trusts (FAPT).  A FAPT works by naming a trustee in a jurisdiction that does not recognize United States judgments.  There are also other uses and variations of this trust that are designed on a case-by-case basis.

Corporate law is not the same worldwide.  Concepts of entities otherwise known in the United States as a corporation can be quite different in other countries.  The uses of foreign corporations are different with every case.  Sometimes, the foreign corporation is used to conduct business in the foreign jurisdiction.   That use, however, has many complex legal issues associated with it, such as:

• Double Taxation
• Income, Gift, and Estate taxation in the foreign jurisdiction.
• Protection for personal liability for the liabilities of the foreign corporation.
• Treaties with the United States concerning operation of the business from a financing, accounting, tax, and legal perspective.
• Capital management in a foreign jurisdiction.
• Source of income rules.
• Controlled foreign corporations
• Subpart F income taxation.
• Obtaining a credit for foreign taxes paid.
• International corporate reorganizations.
• Foreign trade.

If you are considering a foreign corporation, or have issues with a foreign corporation, consult with a competent tax attorney or accountant in forming such an entity or addressing such issues. The legal and tax issues are vast and complex.
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Many United States citizens want to invest in the various investment markets around the world, but also want to make sure they do so in a safe and prudent way.  In addition, investors might be interested also in protecting these investment assets from taxation, especially estate taxes and income taxes.  What is the solution?  One answer for many clients is to invest through an offshore variable annuity or offshore variable life insurance policy.  In fact, while many American investors might be concerned about investing with a company that they do not know, many such plans offer mutual fund investments with the very same US Mutual Fund companies investors do know and trust, albeit offshore, asset protected, and tax free.

Anti-Money Laundering Compliance:

The United States is involved in an array of treaties with a majority of countries around the world to stop the illegal activity known as money laundering.  The Patriot Act, Bank Secrecy Laws, and a great deal of other legislation, domestic and international, greatly effect the every-day operation of banks, asset managers, and financial institutions.

Is your bank, company, or financial institution in compliance with these laws?  Are you aware of such entities as the Financial Action Task Force, or its 40 recommendations to battle money laundering? Are you using KYC (Know Your Customer) to protect your entity and its investors? Can you determine “beneficial ownership”?  Is your institution exposed to complex typologies of money laundering such as smurfing or offshore financial crimes? 

Compliance with these laws is costly to the legitimate American business.  Even more costly is non-compliance for entities and investors.  Additionally, concerns such as trade with countries that are compliant based on treaties and agreements, stopping terrorism, and avoiding criminal tax evasion or fraud for your legitimate client’s benefit is at the heart of these complex laws.  A sound institution for legitimate client investment will address these issues and will communicate the procedures and their reasoning to their investors/clients.