Use Your IRA to Invest in Costa Rica Real Estate
With the new policies and direction the US is enacting, the normally stable Tax Code’s laws and rates are in a very unpredictable juncture.
While it is a given that the wealthy will get tax breaks, the uncertainty comes at trying to guess to what threshold will these breaks trickle down. Surely the rich will get their tax breaks, but someone has to pay for it. Where will the line be drawn as to who gets the breaks and who gets the bill, and what side of the line will you be standing?
Many are taking steps to provide some shelter for their assets from the volatile economic and political climate that is the current reality in the U.S. As the need to insulate the wealth they worked hard to accumulate increases, many of them are now taking their assets offshore.
It is not as hard or as complicated as it sounds or as it once was. And it is no longer only an option for the few super wealthy corporations and individuals.
For the majority of mature professionals’ or aspiring retirees’, their largest asset is their retirement account. Ironically, in many cases it is one of the lowest performing investments in their portfolio. Often these holdings simply sit neglected for years as their custodians tend to allow them to drift in the financial currents.
A great deal of us are unaware of how much control and flexibility we have with these tax-deferred or tax incentivized accounts. For many many years now the very wealthy have used these types of accounts to not only accumulate wealth but also to shelter their wealth offshore… completely legally.
As most things, thanks to a couple of unscrupulous “bad apples”, the term “offshore accounts”, tax havens, etc. have come to have a tinge of illicit undertones. Strangely enough, “offshore investments” doesn’t seem to suffer from the same negative light. Why is that strange? Because offshore accounts are generally created or maintained through offshore investments.
Here is where it gets interesting; not only are these absolutely legal methods U.S. companies and individuals can use to lower their tax liabilities, you can make these investments and therefore get to these offshore accounts, with your IRA and 401(k). Yes, that is right; you can make investments through tax exempt self-directed IRAs.
“Investing through a trust or company organized in a tax haven is a perfectly legal thing to do,” said Stewart Patton, a U.S. tax attorney who specializes in taxes for Americans living and investing abroad.
Until recently two of the main obstacles to most people truly considering this were costs and unfamiliarity, even among most in the industry. Fortunately, over the past several years it has become more commonplace, so much so that the process and the costs have been streamlined. There is now a number of reputable U.S. Certified IRA Services Professional (CISP) and Offshore Investment Lawyers that are fiscally sound, time-tested and, most importantly, operating in a completely legal fashion adhering firmly with the US’s IRS tax laws.
This has opened the floodgates of options available these account holders as well as started a new trend of asset protection by investing offshore. Offshore investing is simply a wide variety of investment approaches that capitalize on advantages presented outside of an investor’s home country.
Perhaps the number 1 reason many people are taking their money offshore is for tax reduction. Many countries offer tax incentives to foreign investors. They do this to promote a healthy investment environment in order to attract international wealth. For a tiny country with very few resources and a small population, attracting investors can dramatically increase economic activity. There are several ways that this strategy helps you legally minimize your tax exposure. For instance; if the trustor is a U.S. resident, their trustor status allows them to make contributions to their offshore trust free of income tax. However, the trustor of an offshore asset-protection fund will still be taxed on the income that the trusts generates. Also, because you are not doing business as an individual, and are now operating as a corporation, and the corporation does not engage in local operations, little or no tax is imposed on the offshore corporation.
Another driving force behind moving your money offshore is asset protection. Investing company, whether through your IRA or otherwise, allow you to “reassign” ownership of some of your assets. Basically you simply create and register a legal company in another country, and then transfer the wealth or to that corporation. This provide shelter not only from taxes, but from litigation. By making these on-paper ownership transfers, individuals are no longer susceptible to seizure or other domestic troubles.
Some countries restrict the international investment options to private citizens. Many investors feel this hinders the ability to truly diversified their investment portfolio. Offshore accounts give investors easier access to international markets and to all major stock markets. On top of that, there are many opportunities in developing nations, especially in those that are beginning to privatize sectors that were formerly under government control.
For instance, as of 2010, Costa Rica ratified the Central America Free Trade Agreement (CAFTA). This deleted that some of the government monopolies should be privatized. As Costa Rica is already a developing nation with a booming economy, maneuvering yourself to be in a position to take part of that emerging market provides you with incredible opportunities.
Costa Rica has long been a favorite offshore investment destination. Why Invest In Costa Rica?
Traditionally structuring your investments and assets to take advantage of all of these benefits has been cost prohibitive for normal citizens and investors. Over the years the streamlined process has made its much faster, safer and cheaper. To use the same example, in Costa Rica it would cost roughly from $500-$800 to register a corporation, known as a “Sociedad Anonima” (S.A) , or an LLC, known as a “Sociedad de Responsabilidad Limitada” (S.R.L). After that it would be a matter of being able to fund this newly formed corporation.
Here is where having an experienced CISP, who either specializes or is thoroughly familiar with self-directed IRAs is vital. Their fees will range anywhere from $500-$5000 (or more if you’re lucky enough to have that large of an asset) depending on the size and complexity of the account.
Is Investing In Costa Rica Actually Safe?
More than half of the world’s assets and investments are held in offshore jurisdictions and many well-recognized companies have investment opportunities in offshore locales. Still, like every investment you make, use common sense, choose a reputable investment firm, and you must ensure that due diligence is thorough.
Before considering such an investment, it is wise to do some research and make sure you are up to the task. However, if you are thorough, there are some excellent opportunities for investment.
We recommend that you first speak with a CISP about your specific accounts. They will be able to explain how you can use your 401(K) in coordination with your IRAs to make such and investment, along with the benefits and liabilities. Done correctly you will be able to avoid any fees or penalties imposed by the IRS. Then you should speak with a lawyer or law firm that is familiar with the process of creating an offshore corporation. we have several attorneys that have done this type of transaction for years. We would be happy to refer you to one of these attorney in Costa Rica’s top law firms.
Talk to someone about Offshore Asset Protection in Costa Rica.
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