MUMBO JUMBO IRS STUFF

There are some international "advisors" who advocate using a secret foreign trust as a way to avoid/evade U.S. taxes. Aside from the fact that these arrangements are patently illegal for U.S. persons, they will eventually backfire. Right now, the IRS is actively investigating many thousands of foreign trusts based on information they have gleaned from various promoters. Few people who have foreign trusts can resist the temptation to brag about it to friends, relatives, neighbors and everyone at the local country club. It's not unusual for one of these people to feel they are being cheated because the braggart is evading taxes -- so they inform the IRS. Even if the person who creates the trust is able to keep his mouth shut for many years, there are numerous paper trails to alert the authorities. And assuming that someone is able to keep the trust a secret until they die, their estate will become liable for huge amounts of back taxes, penalties and interest. After the dust is settled, their heirs will curse them in perpetuity. Foreign trusts are being used by those of moderate wealth to protect some of their assets from the litigation lottery in the U.S. A properly structured foreign trust will make it extremely difficult for a judgement creditor to gain access to the assets in the foreign trust. However, to do this, the person who puts money into the trust must give up effective control over the assets to the foreign trustee. Thus, it is not advisable for anyone to put more than a nest-egg into such a foreign trust as a worst case precaution against losing all of their other assets. But --- these asset protection trusts are tax neutral, which means they don't result in any tax savings. For tax purposes, the person who puts the assets into the trust must pay income taxes on any income earned by the trust. This is an over-simplified description of a conplicated form of asset protection and is not intended to be complete explanation of the subject.