Managing investments held in an offshore asset protection trustBlog added by Ike Devji on April 29, 2011
Ike Devji

Ike Devji

Phoenix, AZ

Joined: May 19, 2010

As much as you may be told otherwise, using the massive deterrence and level of protection available in offshore asset protection systems can very complicated. This complication requires a team of experienced and knowledgeable professionals working to make sure that you are doing things safely, legally and effectively.

The team typically includes an asset protection attorney, trustee, offshore bank, a great CPA and an investment adviser. As a team they watch over your family and assets. Financial adviser Richard Arnold is one such experienced professional. We asked him to share some important basics below:

Physicians, business owners, real estate developers and others are increasingly concerned with protecting their assets/net worth in these difficult economic, political and litigious times. Those who have prepared in advance for potential lawsuits or negative economic events have considered establishing asset protection trusts. These trusts can have their assets held by a foreign bank and managed by a financial adviser in the U.S. An investment policy statement is prepared that defines the return objectives, risk tolerance and time horizon of the trust.

Here are a few answers to FAQs related to managing your investments in an offshore asset protection trust:

  • The foreign bank is the custodian for the investments in the asset protection trust, therefore it is important to choose a bank that is financially solid as the investments will be in excess of insurance on deposits. Financial information on the banks can usually be obtained and evaluated.

  • Generally, foreign banks can buy any U.S. individual stock, ETF or mutual fund. They can also buy foreign stocks, bonds and mutual funds, but contrary to typical wealth management in the U.S., money managers are normally not used due to the volume of transactions. If the trust is using a U.S. adviser, purchase recommendations are sent by the adviser to the trustee, who then instructs the bank to make the purchase.

  • The custodian bank charges transaction fees to buy and sell securities, which are about 1.8 percent for both a purchase and a sale. If the bank is managing the assets, additional fees run about 1.1 percent to 1.3 percent depending on the size of the account. This fee can be avoided by using a U.S. adviser whose fees generally range from 70 to 90 basis points depending on the size of the trust. Be sure to choose an advisor who is experienced with offshore trusts.

  • IRS rules require the preparation of various forms and there have been recent changes to the reporting requirements. Consult a knowledgeable tax specialist to be sure you are complying. The tax requirements are not onerous, but of course must be complied with. We work with tax advisers who have experience in reporting offshore investments.

    - Richard L. Arnold, Advisor and Operations Manager
    CB&T Wealth Management and The Corundum Group
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