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ğRISERLAW.COM
BRIEFING CENTER
The MOST - The
Modular Offshore Structure: A Basic Tax-Neutral Offshore Asset Protection and Investment
Structure
For persons who desire a basic tax-neutral offshore asset protection
and investment vehicle, we have developed a very flexible,
modular offshore asset protection structure. We have nicknamed it the MOST - the
Modular Offshore Structure. This structure is
particularly well-suited to hold and protect cash,
marketable securities, closely held business interests, receivables, and other
personal property interests. With additional planning, it is also possible
to protect real property within this structure.
The MOST:
- Provides a high degree of asset protection, along with other significant
advantages, including
- the opportunity for truly diversified investing
in global markets otherwise closed to U.S. investors;
- facilitation of the
transfer of wealth to other family members while avoiding the hazards and
restrictions of other forms of co-ownership;
- consolidation of management of family assets;
- ease of liquidation;
- restrictions on the access of non-family members (ex-spouses, etc.) to family assets;
- investment flexibility without the restrictions placed on trustee-directed
investments, such as prudent investor rules;
- Is income tax neutral, i.e., you will pay no more or no less tax than you
would without the structure, and is intended to be fully disclosed to Internal Revenue Service,
although it is designed to legally minimize required foreign entity information
reporting;
- Can be designed to provide estate tax advantages in the same manner as a
U.S. family limited partnership or family limited liability company (LLC)
- Contains significant disincentives for future creditors designed to
discourage a creditor attack;
- Provides privacy, but does not rely on secrecy for its effectiveness;
- Is very flexible and is designed so that it is easy to add assets or
additional asset protection modules (such as additional domestic or offshore
LLCs, IBCs or trusts) to the structure;
- Is designed so that partial or total liquidation is
quick and easy;
- Is easy to operate; and
- Can be formed and capitalized very quickly.
The lynchpin in the MOST is an offshore limited liability company (OLLC),
most often formed in Nevis. An foreign corporation, such as a British
Virgin Islands International Business Company (IBC), is formed to serve as the manager of the OLLC.
Ownership of the management company is structured according to the
client's individual needs. Ideally, the management company shares will be held by a trust, either onshore or offshore,
established by the client for other members of his family, or established, for
example, by the client's parent for the benefit of the client and the client's
family. The proper use of a trust in this capacity (i.e., a true trust
relationship between the trustee(s) and the beneficiaries, for the benefit of third-party beneficiaries,
and not for the benefit of the settlor, with a trustee who has traditional trustee powers and
duties) does not present the sorts of problems often raised by the use of
offshore self-settled spendthrift asset protection trusts.
The legal costs associated with the MOST
(LLC and IBC) generally
range from $7,500 to $11,000, with filing fees, first-year registered agent
fees, and other miscellaneous disbursements (i.e., third-party fees) generally totaling about
$1,500. Costs vary
depending on the assets involved and the amount of time and expense necessary to
transfer assets to the structure.
Having the IBC shares held by an
onshore trust will increase costs slightly if new trust documents are
required. Having the IBC shares held by an offshore trust will increase
initial costs by several thousand dollars, depending on the choice of
jurisdiction, the structure of the trust and the choice of offshore trustee, and
annual costs will be increased by a few thousand dollars, again depending on the
factors listed above.
The MOST structure is very flexible.
Additional features may be added with relative ease to segregate and protect
various classes of assets. Additional LLC and management company business identity
services (mail, phone, fax, and e-mail) can be provided for a small annual fee.
The MOST is entirely legal, and is designed to
be fully disclosed to the IRS. The MOST will generally be treated no
differently than U.S. structures for tax purposes, although there may be
foreign entity and/or foreign trust information reporting requirements (which
for most clients are less onerous than often described). While the MOST may
open up tax-advantaged offshore investment opportunities for its owners, such as
offshore variable life insurance and offshore variable annuities, there are no
income tax advantages particular to it. It is designed to provide simple pass-through
taxation.
For more information on the MOST, send an e-mail message to
Chris
Riser at
criser@riserlaw.com
with your name, telephone number and e-mail address, and you will be
contacted within 72 hours. If you request information on a weekday, you
likely will be contacted later that same day or evening. If you request information
on a weekend or holiday, you likely will be contacted the next business day.
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