American foreign trust tax savings and asset protection, The

Attorney-CPA, The, 1998 by Eber, Alan, Double, Peter

16 Before placing assets offshore, be sure that the Settlor's cash flow needs are analyzed. Consultation fees are fully taxable, private annuity payments are partially taxable, and loans and mortgages are not taxable. If cash flow is not properly forecasted, the Settlor can adjust it by "consulting" with the offshore corporation - however, this is, from a tax point of view, inefficient.

17 This area can become extremely complicated and may involve such technical entities as Controlled and Noncontrolled Foreign Corporations, Foreign Sales Corporations, Passive Foreign Investment Companies, and a host of others. Each business and investment must be reviewed on a case-by-case basis. However, the advantages in asset protection and the reduction or elimination of U.S. taxation can be considerable.

18 Offshore planning should be so secure that the Settlor can give creditors and the IRS a copy of every document and details of every entity and transaction used. It is also recommended that the accounts of the offshore corporation and of the NOT be kept in accordance with U.S. Generally Accepted Accounting Principles and Practices. This will enable tax positions taken to be easily justified, and if accounts need to be produced, easily understood. The IRS always likes to receive accounts they can understand and accept, and such preparation only serves to establish the genuineness of the NCr Structure.

19 If the transfer is done through normal banking operations this form is not required to be filed.

About the Authors

Alan R. Eber, J.D., LL.M, Encino, California. 1. 800-9191. Post doctoral work in taxation at the University of Brussels and at New York University where he earned his LL.M. in Taxation. Mr. Eber is a member of the California and New York Bars and a practicing attorney for almost 25 years. His practice is confined to, and he lectures extensively on: asset protection, offshore tax and asset protection planning, and advanced estate planning.

Peter Double. Redondo Beach, California. Worked in London. Practiced for twelve years in Hong Kong. In 1986 admitted to California Bar. His practice is concentrated on international law, including foreign trusts.