Buying Offshore Real Estate with a Self-Directed IRA

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Do you want to make a real estate investment but don’t want the taxation that comes along with it? Utilizing the retirement fund you already have, you can take advantage of tax benefits, as well as some hefty asset protection.

An IRA is a tax-favored investment account that helps individuals save for retirement. In the world of taxes, contributing to an IRA can be deductible. Investments in an IRA grow tax-deferred. Since the contributions are not taken from a paycheck, the contributions are made in after-tax money. This means that taxes are not taken out when withdrawals begin at the time of retirement. The reason this is preferred and considered a tax-favored investment is that the income will be taxed less in retirement.

To get even more benefits, move your IRA offshore. By doing so, you can gain tremendous tax benefits as well as more control of your retirement fund.

Setting Up an Offshore IRA

There are several benefits to moving an IRA offshore, one being the asset protection that comes with holding your investments through a non-U.S. entity. By holding your IRA offshore, you can protect yourself from losing that nest egg that you planned well for, as well as earning tax-deferred income for your retirement. This is true for many countries, not just the U.S.

When you have a self-directed IRA, the manager of the account will charge you for each transaction, trade, or investment made. That’s why if you have more than one investment in mind, or don’t want to be limited, the second option would work best for you, where you can gain even more financial freedom.

The other way to do this is by forming an offshore IRA LLC to take control over your account. This puts you in complete control over the retirement account while the custodian only makes one transfer – when they transfer your IRA into your offshore IRA LLC. You’ll want to form an IRA LLC if you are hoping to hold property and make various investments.

Buying Property with an IRA

As stated earlier, and the reason you are here, is for the benefits of using your offshore IRA to buy real estate. With an offshore IRA, you can buy homes, commercial property, raw land, and more with your retirement account held outside of the United States. In fact, real estate is one of the most popular purchases made by offshore account holders.

A self-directed IRA is good for those who want to make one investment abroad, like real estate. In terms of asset protection, LLCs and bank accounts held outside of the U.S. are out of reach of U.S. creditors. Also, there is no custodian to make you return the money to the U.S., as an added bit of protection.

Why Invest in International Real Estate?

Now that you know how to use your offshore IRA or LLC to buy property, we can dive into why you would even want to do so. Why is real estate such a popular purchase for offshore IRA account holders?

One of the biggest draws to buying international real estate is diversification. According to Modern Portfolio Theory, diversification is one of the cornerstones of a successful portfolio. In fact, diverse portfolios outperform a concentrated one. By owning a large number of investments in more than one sector or asset class, investors can protect themselves from unsystematic risk, the risk that one encounters when investing in one particular company.

Another factor that attracts investors to foreign real estate is the opportunity to expand international options. Many real estate investments can lead to residency and, in some cases, a quicker road to citizenship. In rare cases, immediate citizenship is offered after a high enough investment in real estate. This is especially attractive for those looking to expatriate or those who want to earn a second passport in order to extend the amount of visa-free travel that is possible. This can play a key role in offshore retirement or years of stress-free travel.

There are also a lot of tax benefits that come with investing in real estate offshore. In fact, it is one of the few ways that an American can legally keep some of their money offshore privately. When real estate is held directly in an investor’s name, as opposed to in a trust or LLC, the investment is not reportable.

Alpen Partners

If you are looking into tax optimization assistance, Alpen Partners is fully equipped to help. Like almost all steps of financial planning, we offer a helping hand. Our experts and certified advisors can answer any questions you may have and help with any planning you have yet to do. By working with legal, tax, and accounting advisors, setting up structures, trusts, funds, or life insurance wrappers that benefit from specific tax treaties or other legal tax planning techniques can lead our clients to make significant savings in their tax bill.

Building on many years of experience in private banking in Switzerland, Alpen Partners Wealth Management International AG provides investment advisory services to U.S. clients. Swiss banking is highly regarded around the world, well known for being sophisticated and discreet. In 2017, it was reported that $7.5 trillion in assets are held in Swiss banks and almost 51% of that is generated from clients outside of the country. Choosing Switzerland as a banking destination is choosing years and years of financial stability and growth.

Alpen Partners is also equipped to assist you in your expatriation journey. Each step requires assistance, including getting the passport, making sure everything is completed correctly regarding taxes, acquiring work permits, making investments, and more. No matter what expatriation route is chosen, it can be a powerful tactic to allow clients to gain better control of their financial and personal lives.

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