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One of the primary benefits of your membership in The Sovereign Society is access to investments that are not offered by U.S.-based investment advisors, such as Gresham House Investment Trust, the world’s top-performing mutual fund—up an amazing 1,812% since 1996. But chances are, your U.S. broker will never tell you about Gresham House, not to mention more than 50,000 other offshore mutual funds, plus hundreds of thousands of foreign securities, that aren’t traded on U.S. exchanges.  Why not? - Basically, it boils down to laziness: most U.S. brokers don’t want to deal with the extra work needed to invest offshore for their clients. There are also legal issues to consider: U.S. brokers aren’t permitted to promote securities that aren’t either registered with the U.S. Securities & Exchange Commission, or that qualify for an SEC exemption. But, it’s perfectly legal—and potentially very profitable—for you to buy these “forbidden” investments. And one of the very best ways to do so is through your retirement plan.  With a handful of exceptions, U.S. law doesn’t address what investments you can place into a retirement plan. Instead, it lists various “prohibited transactions.” Whatever is not prohibited is, in fact, permissible. And there are no specific rules prohibiting any offshore investment.  In other words, you can achieve all the advantages of offshore investments—higher returns, currency diversification, privacy, asset protection and investment continuity in the event of a temporary shutdown of U.S. markets—and not pay a penny in U.S. tax until you actually receive the profits! Indeed, if you make the investments through a Roth IRA, you’ll NEVER pay tax on the profits (other than estate tax, and even that tax can be avoided with proper planning) —and it’s all perfectly legal. All the World’s Investments in Your Retirement Plan Let me give you a few examples of offshore investments you can put in your retirement plan right now. The world’s safest and most profitable offshore funds. Looking for an investment that gives you consistent double-digit returns with minimal risk? Look no further than the Momentum Assetmaster Fund, a London-based hedge fund launched in 1991 that has never experienced an annual loss and has averaged an incredible 12.54% per year since inception. Or how about a “rocket ship” like Cuttyhunk Fund Ltd., launched in 1997? It’s never had a down year and returned an incredible 21% annualized.

The Sovereign Society, headquartered in Waterford, Ireland, was founded in 1998 to provide proven legal strategies for individuals to protect their wealth and privacy, lower their taxes and to help improve their personal freedom and liberty. The Society's highly qualified contacts recommend only carefully chosen banks and investment advisors as well as financial and legal professionals located in select tax and asset haven jurisdictions around the world. The Society provides advice concerning the establishement and operation of offshore bank accounts, asset protection trusts, international business corporations (IBCs), private foundations, second citizenships and foreign residency, as well as practical safeguards for financial, Internet and personal privacy. The Sovereign Society stands alone in fulfilling this singular, international offshore service role for its members. To learn more about our organization and how you too can become a member, please click here.

In most cases, because of the complexity and high compliance burden of the IRS regulations, there’s no easy way to avoid not deferring the tax due. The outrageous result is that it’s possible to owe more tax and interest to the IRS than you made in profits from the offshore fund! But, if you buy the funds through your retirement plan, you don’t have to worry about this tax time bomb. Skeptical? All of the funds I mentioned are based in London, where the concept of mutual fund investing was invented more than a century ago. 

International real estate. From apartments in Vienna to homes in Veracruz—your retirement plan can also invest in raw land, office buildings, mortgages, even tax lien certificates, both inside—and outside—the USA. An international business. Your retirement plan can own interests in one or more international businesses, as long as this interest doesn’t exceed 50% of the total value of all classes of the businesses’ corporate stock. 
Any international business is permitted, so long as it’s not carrying on activities contrary to U.S. law. For instance, your retirement plan could own up to a 50% interest in a company with an offshore website that sells books, tapes, medicinal herbs, or just about anything else. It could also own up to a 50% interest in a company that owns a yacht registered in Croatia that is rented out to affluent tourists seeking an Aegean getaway. 
It doesn’t matter for U.S. tax purposes how the business is organized—as a partnership, international business company or other entity. All profits attributed to your retirement plan accumulate tax-free, safe and secure, until you actually receive the profits in the form of a distribution from your retirement plan. 

What’s more, with a Roth IRA, you can actually gift your retirement plan’s interest in the offshore business to your children or other beneficiaries, free of any U.S. tax obligation, other than estate tax. Ironclad asset protection with Swiss annuities. The “Swiss annuity” is synonymous with “asset protection.” Under Swiss law, creditors can’t attach interests in an insurance policy. And, if you name your spouse as beneficiary, or name another beneficiary irrevocably, if there is a claim against you as the policy owner, under Swiss law, the beneficiaries become the new legal owners of the annuity. Furthermore, it’s perfectly legal for your retirement plan to purchase a Swiss annuity. 

That’s just one example of the opportunities available in offshore annuities. For instance, unlike most U.S. insurance companies, an offshore annuity issuer is more likely to let you choose your own investment advisor (although you generally can’t manage the portfolio yourself). All This…and Asset Protection, Too! There are considerable asset protection advantages in moving the assets into a retirement plan offshore. That’s because when your retirement plan purchases offshore investments, while your U.S. custodian remains responsible for complying with IRS reporting requirements, the assets are now held by a non-U.S. entity that is under no obligation to comply with the orders of a U.S. court. In many countries, it is against the law for the holder of an asset to comply with a foreign court order! 

There Must be a Catch… Actually, there are a few eminently reasonable ones:

You must have a self-directed IRA, 401(k) or pension plan, or be able to convert your current retirement plan into a self-directed plan. If you don’t have one, it may be possible to “cash out” of your current plan and reinvest it in a self-directed plan. There is no U.S. tax liability if the funds are reinvested in a tax-compliant retirement plan within 60 days. 

No self-dealing is permitted. For instance, you can’t lend yourself money from an IRA and then use it to invest in your own business. However, there are numerous exceptions to the self-dealing rule. 

You can’t benefit from the investments in your plan until you actually retire. For instance, if you buy an apartment in Vienna, you can’t live in it until you receive it as a distribution from the plan. But, your family and friends can live in it legally—and are free to welcome you as a “guest.” And, according to certified retirement plan expert and Sovereign Society Council of Experts member Larry Grossman, there’s an important exception to this limitation: You can make a “temporary” distribution of the apartment for up to 60 days, during which time you can live in it without any U.S. tax consequence. You can only do this once a year, but so long as you convey the apartment back to the retirement plan within 60 days of the distribution, it’s treated as a non-taxable event.

You won’t be able to credit foreign taxes you pay against your U.S. tax liability, since this income is tax-exempt in the U.S. The countries you invest in will all have their own tax laws, and your retirement plan income is only tax-deferred in the U.S. However, with foresight, you can often mitigate or even eliminate these taxes. 
Distributions from a U.S. retirement plan don’t benefit from the 15% tax rate for dividends and capital gains. Instead, when you cash out, you’ll pay tax on the income at your marginal tax rate—which may be substantially higher than 15%. However, it’s often possible to plan distributions so that they take place in years when income from other sources is minimal. And of course, if you’re taking distributions from a Roth IRA, there’s no income tax to worry about at all. 

What Does it Cost? - The fees associated with moving your retirement plan offshore vary depending on your investments. For instance, if you buy securities through a foreign bank, you’ll pay approximately 1% annually of the value of the account, plus loads (front-end or back-end), commissions and service fees. If you purchase a foreign annuity, fees are around 1%–1.25% annually, plus loads, commissions and service fees. If you purchase an interest in a foreign business, you’ll generally do so through an international business company. The fee to establish an IBC typically is US$2,500–US$5,000, with annual fees and compliance costs of US$1,500–US$2,000. 

Finally, there will be ongoing fees to ensure compliance with IRS rules and regulations, but for most plans, these fees will be minimal.
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For More Information… If you’re interested in learning more about using your retirement plan assets to make international investments, I recommend that you contact Larry Grossman. Larry was one of the first financial advisors to develop a tax-compliant method to help his clients take their retirement assets offshore. He has established relationships with dozens of offshore banks, insurance companies and trust administrators. He’s also the author of The Ultimate Retirement Protection Plan: A Step-by-Step Method for Taking Your IRA, 401-K or Pension Plan Offshore.  Contact: Larry Grossman, Sovereign International Asset Management, Inc., 1312 Alt 19, Palm Harbor, FL 34683; Toll-free: (888) 609-7425; Fax: (727) 784-6181; E-mail: lgrossman@worldwideplanning.com  Website:  www.worldwideplanning.com. Finally, while Larry’s now making some important updates to The Ultimate Retirement Protection Plan, it should be back in stock by September 2005. To reserve your copy, contact info@thesovereignsociety.com.  Mark Nestmann is a Research Editor for The Sovereign Society and president of The Nestmann Group, Ltd., a consultancy assisting high net-worth individuals to achieve wealth preservation solutions. You can contact him at assetpro@nestmann.com or visit his website at http://www.nestmann.com.

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