International Real Estate for Asset Protection and Privacy

Posted on 10/13/2016 ~ Categorized as Invest
International Real Estate for Asset Protection and Privacy

One of the best forms of personal asset protection are investments in international real estate. Select a country where it’s near impossible to seize that property, and you have a safe and secure nest egg… and a landing spot should you decide to leave the United States.

International real estate is also one of the best ways to invest offshore in a private yet tax compliant manner. This is because you are not required in report foreign real estate held in your name to the IRS. International real estate does not need to be reported on the FBAR (Form 114) nor the Statement of Specified Foreign Financial Assets (Form 8938).

Please note that I said you don’t need to report real estate held in your name. If international real estate is in the name of a corporation, LLC or trust, that entity must be reported. Thus, real estate held in an entity is reported indirectly - on the balance sheet of the offshore structure.

But, if the property is titled in your name, you have zero reporting requirements.

Of course, if you rent out international real estate, you must report the net income. This is reported just as US rental property, on Schedule E of your personal return.

  • Tip: You may take all of the same deductions against rental income from international real estate as you can from US real estate. The only exception is that you must use straight line depreciation, not accelerated depreciation.
  • You may be able to deduct one trip per year to check-up on your foreign real estate. Be sure to speak to your tax advisor on this one before incurring any expenses. Many caveats apply.

You might be wondering if there are other non reportable investments. The major one is physical gold. If you buy and store gold offshore, you need not report that on any IRS form. Like real estate, so long as it’s held in your name and not in an offshore structure, it remains private.

Also like real estate, when you sell that gold, it’s reportable as a capital gain on your personal return. Basis information goes on Schedule D as a long term or short term gain. You need not indicate where the gold was when it was sold.

Let me get back to the asset protection component of international real estate.

International real estate in the following countries is NOT recommended for asset protection purposes:

  1. United Kingdom
  2. France
  3. Canada

These three countries have agreements in place with the United States Internal Revenue Service that allows the US government to seize real estate. If you owe the IRS, real estate in these countries is no more protected than it is in America.

And I expect these collection and seizure powers to be expanded. Bottom line is, if the US wants to take your property in these countries, they will get it.

With the exception of the above, it is difficult to enforce a judgement from the Unites in a foreign country. This is because the United States is not a party to any bilateral treaties or multilateral international conventions which permit the enforcement of court judgments.

The reason for this is the United States courts are seen as a joke around the world. We hand out excessive awards and our litigation system is out of control. Also, America all too often asserts jurisdiction over cases and companies unfairly… acting as a civil policeman in just about any dispute.

As a result, foreign courts generally do not recognize U.S. money judgments unless:

(1) the U.S. court had jurisdiction;

(2) the defendant was properly served;

(3) the proceedings were not vitiated by fraud; and

(4) the judgment is not contrary to the public policy of the foreign country.

Attempting to enforce a US judgement in a foreign country will often take many years. Considering most international lawyers won’t take a case on contingency, the plaintiffs legal bills will skyrocket and they often lose interest.

This means most will agree to settle the matter for pennies on the dollar because of the costs and challenges of collecting on international real estate.

Countries in the European Union are most likely to enforce a U.S. judgement. This means that the EU is the highest risk region if you are buying international real estate with an eye to asset protection. However, even Union, U.S. judgements are treated differently. You should seek local counsel if you have a pending U.S. case.

Countries where it’s nearly impossible for a creditor to reach real property are Panama, Colombia, Brazil, Mexico, Costa Rica, China and Thailand.

Each of these countries has a legal system which is difficult to navigate, cases take years to get traction, and there are many tools available to your defense attorney to delay or have the case thrown out on procedural grounds. Also, each is loath to enforce a US judgement against people or assets in their country.

Note that I am not saying it’s impossible to enforce a judgement in these countries. I’m saying it’s so costly, complex, and time consuming, that they are excellent asset protection jurisdictions. That even the most motivated creditor will give up and settle on your terms.

Combine this protection with the privacy only available in real estate (and gold) and you see why investing in international real estate is a solid asset protection move.

I’ll conclude by saying that investing in foreign real estate might have a major side benefit. Many of the best asset protection jurisdictions offer residency with an investment of a certain size. For example, Panama offers you residency with an investment of $550,000 which can lead to a second passport in 5 years.

I hope you’ve found this article on international real estate as an asset protection tool to be helpful. To be connected with a real estate expert experienced in asset protection, please contact us here. We will be happy to help you find the most efficient and secure jurisdiction.

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