Global Diversification for the Whole Family: Building Security for the Next Generation

Global Diversification for the Whole Family: Building Security for the Next Generation
Smart global moves today can safeguard your family’s future.|©iStock/Jacob Wackerhausen

In an earlier article I explained how important it is to have a solid estate plan for assets outside your home country. Countries’ laws differ, and unless you anticipate the needs of your estate and your heirs, you can run into trouble. Fortunately, there are easy solutions, as I’ve explained.

Assuming you’ve taken our advice and created a structure that protects your estate from excess taxes or foreign laws that undermine your intentions, what can you put into your foreign estate—and how can you employ the rules to benefit your children, grandchildren, and beyond?

Let’s start with money. The immediate benefit of having assets in foreign countries is that they are typically valued in currencies other than the U.S. dollar. If the dollar falls in value and therefore purchasing power, your foreign properties will retain their value. And so will any income you get from them.

Let’s say you buy a property in Europe for €250,000. At today’s exchange rate, that’s a little over $293,000. But let’s say the dollar depreciates 20% against the euro. Your European house is now worth a little less than $235,000. But it’s still worth €250,000, and if you sell it, you can use that money to make other purchases or investments in euros. The same applies to any rental income you might get from that property.

This is one of the greatest ways to provide for your heirs in a context where the U.S. dollar is facing a long-term decline in value. Keeping all your assets denominated in dollars means that your estate is going to decline in value compared to foreign currencies. If you don’t move some of it into other currencies, your heirs will be poorer than they would be otherwise.

The same logic applies to financial investments. Let’s say you’ve got $10,000 invested in a U.S. brokerage account. If the dollar declines by 20% against the euro, you’ve lost that much of your purchasing power in Europe. But if you have a foreign brokerage account denominated in euros, you won’t lose any purchasing power at all. Your heirs will be richer because you have diversified some of your assets outside the United States and outside the dollar.

A similar logic applies to growth rates around the world. Again, property is an excellent example. According to my research, the average increase in U.S. residential property values is around 4.5% per year. In many parts of Europe and Latin America, you can see returns of as much as 10% to even 15% per year if you invest in the right places. And with market insights offered by Real Estate Trend Alert, you can be the first to know about such opportunities.

One of the least-known and most profitable things to do with your estate is to take advantage of the differences in the laws governing trusts around the world.

In the U.S., trusts are limited by the rule against perpetuities (RAP). This common law legal doctrine requires that a trust be wound up, and all its assets distributed, 21 years after the birth of the youngest beneficiary—say, a grandchild. The purpose is to prevent trust from existing indefinitely and accumulating wealth without being subject to taxes.

Some foreign trusts aren’t limited this way. You can create a trust to hold your foreign assets, and have income paid into that trust—say rental income from foreign properties. If the trust is set up correctly, that money can remain in the foreign trust indefinitely. It can be reinvested and generate more and more profits over time, all free from tax. In this way, you can grow your estate and the assets that will go to your heirs much further and faster than you could if you left them in the United States. And the trust can remain valid for unlimited future generations.

Of course, if you're like many Americans, the bulk of your wealth may be in your retirement accounts. It might seem that taking advantage of foreign investment opportunities is off the table.

That's definitely not the case... and many International Living subscribers have learned that investing their retirement funds offshore can be done quickly, easily, and profitably, taking advantage of everything I have explained above.

The solution is something called a Self-directed IRA. An SDIRA is simply a retirement account with a U.S.-based custodian who is willing to allow you to invest in foreign assets. Most people don’t know this is possible, because U.S. retirement fund administrators only offer access to the U.S. stock and bond markets. But there is no legal obstacle to investing your retirement funds offshore.

For example, let’s say you’ve got an IRA, 401K, or a mixture of retirement accounts worth $3 million. You want to invest that money in Europe or other regions because you’re worried about the long-term decline of the dollar and the U.S. economy.

With my connections, I can introduce you to Swiss money managers who will gladly help you create a U.S.-based SDIRA and rollover enough funds into it to qualify to open brokerage facilities in Swiss banks. Again, this is all perfectly legal, and hundreds of people do this every year. But only those who know about it!

An SDIRA can also be used to purchase foreign property. For example, some people use SDIRA funds to buy a residential property in a country like, say, Greece. That property investment could qualify you for a golden visa, which can be renewed indefinitely as long as you like, doesn’t require that you become a Greek tax resident, and lets you come and go as you please. And on top of that, your foreign property is invested in euros, in a fast-growing property market that will earn more return for your retirement savings than if you’d left it in the States. (Of course, as a retirement asset, you can’t use any foreign properties owned by your SDIRA yourself, but you can eventually transfer them into your own name.)

As I said before, these are things that wealthy people do all the time. But there’s absolutely no reason why you can’t do the same thing. You just need to know the right people.

As part of the International Living family, you will!

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