Offshore Trusts Used to Protect Income - By : Adam Heist

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Real Estate Agent with Keller Williams Florida Partners

It seems that overseas trusts, in order to shelter your money from taxes, are expensive to run. You are forced to travel to attractive places like the Cayman Islands, or not so attractive ones like the Isle of Man. It's not really worth it unless you're talking about at least 1 million dollars of income to protect. Some say, you really need $20 million to make it worthwhile. An overseas trust is a good but not foolproof way of protecting your assets. Even if the corporate veil is pierced, it will definitely slow down your creditors for a while. They cannot use lawsuits to go after you from the United States; they have to file suits in the offshore entities. They really don't want to do that because it's expensive and time-consuming.

Tax shelters are so effective; they upset a U.S. Senate committee. The Senate wants publicly traded U.S. corporations to disclose their ownership of assets in the famous tax havens of the Cayman Islands, the Bahamas, and the Isle of Man. In terms of marketing, trusts are advertised as a way of protecting assets from creditors and lawsuits. United States citizens have to pay taxes on all income that is generated worldwide. Of course, if you don't admit to making a certain income and no one can find the income, or if you misrepresent the source of the income when it shows up in your stateside income, probably no one can make you pay taxes on it.

The use of offshore trusts to conceal and present fraudulent accounting records was a key part of the Enron case. Other US Corporations divert large amounts of income to their offshore branches, and then feel free to declare US bankruptcy in order to "globalize" their assets. They then can transfer their production to China, Mexico, and other offshore sweatshops where they can use slave-labor and avoid paying most taxes.

Two Texas brothers who are billionaires, the Wylys, came under investigation for their use of a tax exempt trust in the Isle of Man, a quasi-independent republic in the Irish Sea, under the United Kingdom. Sam and Charles Wyly have the use of expensive jewelry, paintings and real estate that are nominally owned by the offshore trust and lent to them. These trusts may be nominally owned by a local person in the Isle of Man, but it is contended in the Senate investigation that there is proof that the trust is controlled by the Wylys and that they use it to evade taxes they should pay.
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