" For the offshore trust to protect you from the exposure of U. S. estate taxes, it must be irrevocable."
NOT UNDERSTANDING WHAT IRREVOCABLE MEANS
For the offshore trust to protect you from the exposure of U. S. estate taxes, it must be irrevocable.
Irrevocability is an issue that many have a difficult time with. After all, it implies a complete loss of control over the assets being transferred to the trust. However, if the offshore trust is revocable, then all of the trust estate will be included in your estate for U. S. tax purposes.
Even if the irrevocable trust contains provisions that are indicative of retained interests and control, you will have an estate tax issue.
NOT UNDERSTANDING THE SPECIFIC PROVISIONS OF THE TRUST
The offshore trust will probably have language you are not familiar with and simply may not understand. This type of trust will usually contain language specifically used for U. S. statutory planning and compliance purposes. If you come across language in a provision contained in the trust that you are simply not sure about, stop and ask: What does this mean? Why is it relevant? What are the real-life implications to me? How will this impact my family’ s needs in the future if I am not around?
It is important that you read and understand each provision contained in the offshore pre-immigration trust because the trust will be irrevocable. Remember, you will have to respect and abide by each provision in the offshore irrevocable trust, as failure to do so may bring about significant adverse tax consequences.
NOT PROPERLY FUNDING THE TRUST
You may have a perfectly drafted offshore pre-immigration trust, one that you can live with because you understand each provision contained in it. Yet, unless you properly fund the offshore trust, it will be of no benefit to you.
Assets not properly transferred to the offshore pre-immigration trust will be included as part of your taxable estate for U. S. estate tax purposes and be subject to U. S. estate taxation at a rate of 40 percent. As such, the failure to fund the offshore trust means that your objective of minimizing exposure to U. S. estate taxation will not be achieved.
NOT DOING CORPORATE DUE DILIGENCE
You need to know exactly what you own and where. Too often clients forget about an offshore company or foundation they established years ago. Failure to take this into account will have an adverse effect in achieving your planning objectives. You may forget that you have a company with other shareholders and that your ownership interest in said company is not freely transferrable under an existing shareholder agreement. This may
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