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Any US citizen who has more than $10K offshore, must disclose their funds to the IRS. There are specific requirements for doing this under the Foreign Bank Account Reporting Act and the Foreign Account Tax Compliance Act. Both require the taxpayer to make full and annual disclosure of offshore interests, and failure to comply has egregious penalties.
That is why I tell every client seeking offshore protection that “you can do it”, but there are 3 major elements to understand:
1. First, you cannot hide your assets. You must report your assets and not doing so is tax evasion. If you are found out, you may be subject to criminal as well as civil penalties. Even though you may have to report only to the feds, a diligent pursuing creditor can, post judgment, ask for your tax filings or demand disclosure of offshore assets, and your failure to cooperate can result in contempt or criminal perjury implications. So, I tell my clients, if you are here to “hide” your assets, you are in the wrong place.
2. Second, you can put your assets safely out of reach, but you must be prepared to confront a contempt ruling by a court that does not believe that you cannot repatriate. This could result in short term incarceration.
3. Third, good asset protection planning requires the execution of an Affidavit of Insolvency. This is a sworn statement that you are not making the transfer for creditor avoidance but rather for estate planning purposes; and the disposition of the transferred assets does not render you insolvent and leaves adequate assets in place to handle any known or anticipated losses.
If you already have an offshore plan, I can review it to make sure the proper ‘bells and whistles’ are in place to avoid contempt implications from being exasperated and to understand its operational mechanisms. If you are looking for offshore protection, let’s talk about the options.