Offshore Tax Planning for Death Duties

It is beyond belief how Governments can tax people upon their deaths, on income they already paid tax on when they were alive…but they do!

Karl Marx and John Maynard Keynes, both favoured high inheritance tax as a tool to achieve social equality, but whatever your view is on this subject, there are methods to employ, to avoid or reduce the amount you pay in death duties.

Consider the use of offshore tax havens

One idea to could consider is that, you can in your lifetime, set up a trust, to transfer to a trustee, assets for beneficiaries to receive after your death. The trustees duty is to hold and administer your assets in a tax haven (Switzerland, The Cayman Island, British Virgin Islands, to name but three), to protect your assets against excessive death duties, family dispute or political risk.

Another example would be, if you are a resident in a country, but not born there (non – domiciled). In the UK for instance, a person can purchase property and assets through an offshore company, whose shares are owned by an offshore trust. This means their estate is not subject to inheritance tax upon their death.

As a substitute to making a will, you may have the potential to set up a private interest foundation in Panama, effectively and legally avoiding probate, and successfully allowing your assets to be passed onto beneficiaries via a trusted third party or protector of your foundation.

Protecting your Will if Living Abroad

If you are looking at becoming a resident in a new country, make sure your will is applied in the country that suits you best. In most of Europe, treaties exist to recognise wills drawn up in accordance with the testators nationality, residence or domicile, or the country where the will is signed. US citizens can enjoy similar benefits, whereby the wishes of the will are honoured.

In both Sweden, and Italy, inheritance tax was abolished, with Sweden replacing it with a more ´profitable´ wealth tax. Italy did not though, introduce another form of tax, and as a result enjoyed increased investment from foreigners investing in property for their children to inherit. However, recent dramatic downturns in the Italian economy have seen both property, and high inheritance tax reintroduced, with further changes likely.

I live in Spain, where the tax system appears to hit disproportionately all non – Spanish, or second home owning beneficiaries, so making sure my will is structured to apply UK law is imperative. As always, seeking the relevant expert advice on the regulations and laws from your current country, is an absolute must.

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