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10 Mistakes to Avoid When Working with Offshore Trust 10 Mistakes to Avoid When Working with Offshore Trust 2020 Edition LawPracticeCLE Unlimited All Courses. All Formats. All Year. ABOUT US LawPracticeCLE is a national continuing legal education company designed to provide education on current, trending issues in the legal world to judges, attorneys, paralegals, and other interested business professionals. New to the playing eld, LawPracticeCLE is a major contender with its oerings of Live Webinars, On-Demand Videos, and In-per- son Seminars. LawPracticeCLE believes in quality education, exceptional customer service, long-lasting relationships, and networking beyond the classroom. We cater to the needs of three divisions within the legal realm: pre-law and law students, paralegals and other support sta, and attorneys. WHY WORK WITH US? 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CHECK US OUT ON SOCIAL MEDIA Facebook: www.facebook.com/LawPracticeCLE lnstagram: www.instagram.com/lawpracticecle Linkedln: www.linkedin.com/company/lawpracticecle Twitter: www.twitter.com/LawPracticeCLE THE MUR LAW FIRM, P.A. “Serving The World One Client at a Time” MISTAKES TO AVOID WHEN USING OFFSHORE TRUSTS FROM A U.S. TAX PLANNING POINT OF VIEW PRESENTED BY: Lazaro J. Mur, Esq. AV Preeminent Rating - Founder, The Mur Law Firm, P.A. www.murlaw.com ABOUT PRESENTER LAZARO J. MUR, ESQ. AV Preeminent Rating Founder, The Mur Law Firm, P.A. www.murlaw.com Lazaro J. Mur, Esq. Founder of The Mur Law Firm, P.A. Mr. Mur has been serving the international business community since 1985, has an AV Preeminent Rating from Martindale-Hubble, has been quoted by the Wall Street Journal, is Former Chair of the Florida State Hispanic Chamber of Commerce, lectures on the topics of Global Asset Protection and International Tax Planning on behalf of the National Business Institute, LawPractice CLE; LawPro CLE and myLawCLE; and is a contributing Author for Mundo Offshore, EB-5 Investor Magazine and other World Class Journals. 2 COURSE SUMMARY Offshore Trusts have become more prevalent to practitioners over the years. Many have come across Offshore Asset Protection Trusts and/or Offshore Pre- Immigration Tax Planning Trusts. Both of these types of Offshore Trusts are very sophisticated and require special attention to detail in order to avoid serious mistakes when drafting and implementing the same. 3 Mistakes To Avoid When Using Offshore Trusts 1.Not Knowing All the Facts 2.Not Understanding What “Irrevocable” Means 3.Not Understanding the Specific Provisions of the Trust 4.Not Properly Funding the Trust 5.Not Doing Corporate Due Diligence 6.Not Knowing Your Offshore Trustee 7.Not Choosing the Proper Jurisdiction 8.Not Understanding the U.S. Reporting Requirements 9.Not Taking into Account Family Needs 10.Not Considering a Change of Mind 4 INTRODUCTION If you are thinking about moving to the United States, you should be thinking about pre-immigration tax planning. Otherwise, you may face significant U.S. income and estate tax consequences as a result. Proper and timely pre-immigration tax planning may involve establishing an offshore trust. In this presentation we present the top 10 most common mistakes to avoid when using offshore trusts from a U.S. point of view. 5 1. Not Knowing All the Facts Many readers thinking about moving to the United States do not understand the nature of the U.S. tax regime because they may be coming from a jurisdiction that has a totally different tax system. 6 Once you move to the United States with your green card, you become a U.S. resident for income tax purposes, you will be taxed on your world-wide income and if you are deemed domiciled in the United States as a result of moving to the United States, then your entire world-wide holdings will be subject to estate taxes. Needless to say, this is a harsh reality for some to understand, much less accept. This is why pre-immigration tax planning is of critical importance if you are thinking of moving to the United States. 7 2. Not Understanding What Irrevocable Means For the offshore trust to protect you from the exposure of U.S. estate taxes, it must be irrevocable. Irrevocability is an issue that many have a difficult time with. After all, it implies a complete loss of control over the assets being transferred to the trust. However, if the offshore trust is revocable, then all of the trust estate will be included in your estate for U.S. tax purposes. This is why the offshore trust must be irrevocable. Even then, if the irrevocable trust contains provisions that are indicative of retained interests and control, you will have an estate tax issue. 8 3. Not Understanding the Specific Provisions of the Trust The offshore trust will probably have language you are not familiar with and simply may not understand. This type of trust will usually contain language specifically used for U.S. statutory planning and compliance purposes and may not appear to make any sense at first glance. So if you come across language in a provision contained in the trust that you are simply not sure about, stop and ask: 9 • What does this mean? • Why is it relevant? • What are the real life implications to me? • How will this impact my family’s needs in the future if I am not around? 10 It is important that you read and understand each and every provision contained in the offshore pre-immigration trust because the trust will be irrevocable. Remember, you will have to respect and abide by each and every provision in the offshore irrevocable trust, as failure to do so may bring about significant adverse tax consequences. 11 4. Not Properly Funding the Trust You may have a perfectly drafted offshore pre-immigration trust, one that you can live with because you understand each and every single provision contained in it. Yet, unless you actually and properly fund the offshore trust, it will be of no benefit to you. Assets not properly transferred to the offshore pre-immigration trust will be included as part of your taxable estate for U.S. estate tax purposes and subject to U.S. estate taxation at a rate of 40 percent. As such, the failure to fund the offshore trust means that your objective of minimizing exposure to U.S.
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