A powerful asset protection and tax avoidance tip

by | Jun 5, 2002 | Archives

Dear International Friend,

Part of Inspired Investing is to have a system so that your wealth is not eroded by tax and lawsuits. Carlos Kepke, a tax attorney I have known and worked with for decades, specializes in using overseas trusts. Here is a tip he has shared with us.


A brilliant and successful estate planning attorney used to begin all of his speeches regarding estate planning with the statement that “an estate planning attorney is guilty of malpractice if he does not offer the option of testamentary foreign trusts to his clients”. Provocative as this may sound, and notwithstanding the current hullabaloo surrounding foreign trusts, this remains a true statement.

Testamentary foreign trusts, that is, trusts created in one's will and which become activated only upon the death of that person can give to the heirs significant U.S. tax advantages not found in the normal domestic trusts typically placed in persons' wills. Among those tax advantages are (i) elimination of U.S. capital gains tax on the sale of all assets placed in the trust (other than U.S. real estate), (ii) elimination of U.S. income tax on interest income received by the trust from U.S. bank deposits, certificates of deposit, etc., (iii) reduction of U.S. income tax rates on passive income (dividends, royalties, annuities, etc.) received by the trust from U.S. sources, and (iv)elimination of future U.S. estate taxes on all assets held by the trust upon the deaths of the heirs. Along with all of this there are significant asset protection benefits not available to domestic trusts.”

What Carlos has shared is of great value since foreign trusts, even if granted by an American, once perfected (when the grantor passes) are no longer subject to U.S. tax. In addition if the trust does not hold assets in the U.S., they are highly invulnerable to U.S. lawsuits.

You can get more data on this from Carlos at carloskepke@webtv.net

Until next message may all your investing be inspired!