International Tax And Asset Protection Planning
“I have been researching the idea of living overseas for years. I am 64, my husband is 61, and we want to retire to Ecuador, we think.
“Meanwhile, we both have demanding, full-time jobs that we can’t afford to lose unless we leave this expensive place.
“I am convinced we need to get some dollars into foreign currency and that we need an offshore account. It also seems that we need proper financial guidance with regard to trusts, etc., so we don’t have to reveal everything we own.
“We own a large home, which we need to sell if we leave, and we have three pets, which means we can’t just sell and leave.
“I need someone to point me in the right direction and to tell me where to start. I’m feeling a good bit of urgency over the financial conditions in the United States right now. If you can help me, thank you.”
— June H., United States
I wonder if things are as complicated as they seem. It can help to try to simplify the issues and then to address them one by one.
You’ve done your research, and you’re thinking Ecuador is for you. Great! If you’re ready to make the move, put your house up for sale and decide what you want to do with your pets. You could bring them with you to Ecuador.
If you use proceeds from the sale of your home in the States to buy a new one in Ecuador (and therefore have no rent or mortgage), you could live comfortably in this country on as little as US$700 a month. If you choose not to reinvest the money from the sale of your U.S. property into a new piece of real estate in Ecuador but, rather, to invest it somehow, then add US$400 to US$500 a month to your budget for rent. Then build out your budget from there. You could spend more, of course, but, as our editors have reported often, Ecuador is one of the world’s most affordable places to live right now and even a modest retirement budget can buy you a comfortable lifestyle.
Now…the currency diversification and the international tax and asset planning. These things are separate from your overseas retirement dreams and should be considered that way. You could pack up and move to Ecuador next week and never move your U.S. dollars into another currency or form a trust. I don’t know your situation, so I can’t say if either of these things would have benefit for you. If they would, though, again, that’s a separate issue from your retirement plan.
Yes, you’ll need a bank account wherever you end up relocating–in Ecuador, if that’s where you choose–out of which to pay local expenses. This shouldn’t be a big deal to organize in Ecuador.
Do you need an “offshore” account beyond a local checking account in the country where you eventually retire? Again, I couldn’t say without knowing more about your situation, but I wouldn’t let that question interfere at all with your relocation plans.
Our resident tax- and asset-planning expert explains further:
“International planning is complex and costly and not for everyone. A medical doctor or an investment banker, someone with high visibility and big liability for litigation, might do well to move some money out of the United States and find that the benefits outweigh the costs. On the other hand, a retired senior citizen living on a pension probably has no need for international asset protection.
“That said, I’ll try to estimate the costs and benefits, so you can decide if this kind of financial planning is worthwhile in your case.
“The most efficient option is a simple offshore corporation and bank account. This allows you to move your cash outside the reach of U.S. creditors quickly and without great expense. The cost is usually around US$3,500 to US$4,500.
“The problem with an offshore company and account is that they do not address estate planning. What happens when you die? How can your heirs get to the money? Rather than leaving this to chance, you might set up an offshore trust. This combines asset protection and estate planning in one package. The costs range from US$10,000 to US$15,000, with the average being US$12,500. I generally recommend this only when the client will be protecting at least US$100,000. Really, an offshore trust only makes sense when you have significantly more than that to protect.
“One important comment on asset protection: While it may provide some privacy, secrecy is not the ultimate goal. Even if a creditor is able to find your assets, your structure should protect those assets from attack.”