The IRS is cracking down on perceived offshore abuses. It has been obtaining credit card information, for example, to find foreign bank accounts. Some offshore trusts and corporations have been promoted as offering tax advantages but the IRS has made it clear that Americans have to pay taxes on their income.
The only legitimate tax-advantaged vehicles available to investors placing money offshore are foreign annuities and foreign life insurance, some advisors contend. They offer the same tax benefits of annuities or life insurance in the U.S.
Offshore, though, the investor can appoint an investment adviser to manage the money. If the investor wishes, he or she can change advisers. The adviser, in turn, can invest in just about anything, as long as certain diversification standards are met.
As a result, these offshore contracts may provide more flexibility than variable annuities or variable life policies sold in the U.S. Offshore annuities may have modest minimum investments but offshore life insurance policies might require an upfront commitment of $500,000 or more. If you’re interested, work with a well-known insurance company and look for a legal opinion from a respected firm, supporting the tax advantages.
