Quote of the Day - There is a certain inevitability to a couple of things. Death and taxes come to mind. However, death doesn't get worse every time the legislators come together. - Unknown
What Adds Up When You Combine Trusts, Corporations, Foundations & Offshore Entities?
That's tax evasion, according to the United States Senate Permanent Subcommittee on Investigations, especially if you whip in a couple of foreign banks from Switzerland and Liechtenstein. A report issued by the Subcommittee today blames the loss of billons of tax dollars on this combination.
As most people know, there are two things very hard to avoid: death and taxes.
Even so, the report blames banks and U.S. citizens trying to avoiding taxes by moving money to these offshore banks. Unfortunately for both, former employees of the banks gave up information to the IRS about the banks and the people moving money offshore.
The Subcommittee is investigating and you can be sure the IRS isn't far behind. Big deals aren't just for the rich, however.
Even so, there are some common misconceptions about trusts and offshore entities. It's a legitimate tactic to move money offshore. It's legitimate to shelter your assets from just about everyone but the IRS. You still have to pay taxes. You may be able to use an offshore transfer to avoid a judgment, as long as you do so well before someone sues you.
The government will allow you to do so to avoid judgments and the like, just not income taxes. On the other hand, moving money into a trust will help avoid probate taxes. Perhaps avoid isn't the right term. Delay is perhaps better.
See the third paragraph above about death and taxes.
By moving money into a trust, you can pass assets along to heirs without going through probate because the trust doesn't die when you do. A trust "stays" alive. For asset protection, though, it's almost worthless. Trusts work for delaying taxes, just not for judgments.
As with just about everything else I write, this post isn't legal advice, and whether trusts and offshore banks are appropriate depends significantly on a great number of things I haven't included here. So, if you're in need of asset protection and delaying taxes, talk to your lawyer.
Consider the advice of my accountant: be happy if you're paying a lot of taxes; it means you're making a lot more money.
But I still don't like paying taxes, and I'm guessing you don't either.