Most people think their IRA or other retirement account is protected…and most people are wrong. Yes, your IRA offers some level of security, but it’s not all that you think. You will find that the only guaranteed solution is to protect your IRA with an offshore IRA LLC.
For example, your IRA provides zero protection from the US government and the Internal Revenue Service. The IRS can levy your bank account for back taxes without notice and without court oversight. There is no need to give you warning or bother with a court order. The person assigned to your case can seize your IRA with just a few keystrokes on her computer.
Ok, so you are not afraid of the IRS. Well, your retirement account is not protected from your ex-spouse or delinquent child support payments. Your ex does need to go to court and get an order (called a “QDRO”), but that is a rather simple matter. Then he or she can empty your accounts up to the amount of the judgment.
Well, you say, I have been experiencing marital bliss for 30 years and my kids are grown and out of my hair. I say, congratulations, but you will be disappointed to learn that your retirement account is not as secure from civil creditors as you might think.
The first level of civil creditor protection is in Federal law. ERISA protects your 401(K), SEP, and compliant pension or profit sharing plan. The Feds give you up to $1 million of protection and, any amount over this, is exposed to civil creditors.
However, your IRA is not a qualified account, not covered under ERISA, and is governed by your State’s laws. The rules in this area are a maze and vary widely.
Good news first: Most states, including New York, New Jersey and Connecticut, exempt 100 percent of the assets while they are in your account. However, once you begin taking distributions, then a large portion of your income will be up for grabs.
Now for the bad news: Some states limit how much is exempt. For example, Nevada only allows you $500,000 in savings, while California and other states exempt only what is “reasonably necessary” to support yourself and your dependents. Such a rule is an invitation to lawsuits and you will spend big in legal fees on this issue alone if you live in California. If you do not want to pay the lawyers, protect your IRA with an offshore IRA LLC.
In deciding whether your IRA can be taken by creditors, courts look at your age, monthly income, and other assets. If you have $500,000 out of the reach of creditors in an offshore asset protection trust, a court might find that a $200,000 IRA was not necessary and not protected.
How to Protect Your IRA with an Offshore IRA LLC
If you are concerned about your IRA or other account being taken over by the government, or seized by creditors, the only solution is to protect your IRA with an offshore IRA LLC. You can take control of your account, move it in to an offshore LLC and international bank account, and thereby out of the reach of any and all creditors.
This is relatively easy to accomplish. First, we form an offshore IRA LLC in Belize or Nevis and open an offshore bank account under your company. Next, we move your IRA from your current custodian to a US custodian who allows for this type of structure. Finally, we wire the money from your new custodian in to your offshore bank account. Once there, you can make any approved investment you like and are in complete control over your money. Most importantly, you are the only signor on the bank account and no one can force you to move or return the money if you do not want to.
When you move your IRA in to an offshore IRA LLC, it maintains its preferred tax status. Going offshore is not a distribution and not a taxable transaction. Of course, this means that all of the same rules which applied to your IRA while it was in the US apply to your IRA while it is offshore.
For example, you can’t invest in collectables, take the money for personal use, buy life insurance contracts, or invest in a company that you own more than 50% of or are a highly paid employee of. For those of you investing in real estate, you can’t buy a property and live in it. You can purchase a home, fix it up, and rent it out until you reach retirement age. Then, once you qualify, you can distribute the property.
One word of caution: above I talked about IRS bank account levies. The IRS can empty out any account in your US bank, as well as any account in the UK, Canada and France. They can also issue a levy to the US branch of any bank in the world.
For example, if you move your IRA in to HSBC, Panama, the IRS can issue a levy to HSBC NY and get to your money in Panama. The only solution for this is to hold your funds in a bank that does not have a branch in the United States.
I hope you have found this article helpful. For additional information, see: http://premieroffshore.com/self-directed-ira-llc/. Feel free to phone me at (619) 564-4062 or email info@premieroffshore.com for a free and confidential consultation.
