No matter what your objectives for placing assets in an offshore account, having real estate in a retirement account will most likely serve you better.  In addition, it will not invite the scrutiny of the Internal Revenue Service and other government agencies.  Real estate held in a retirement account such as a 401(k), individual retirement account (IRA), or other vehicle is a unique tool for financial planning that is far better than an offshore account.

Real Estate Retirement Account or Off Shore Account

Off shore accounts are generally opened to reduce the tax burden and provide a layer of asset protection.  There is nothing inherently complex about off shore accounts.  Placing assets in an off shore account can be made that way, however, by developing various layers to conceal the owners through having more than one account, interlocking directorships, the creation of multiple shell companies, and other such tactics.

When that takes place, there is no better way to draw a bull’s eye on yourself and your assets for the Internal Revenue Service and a host of other government agencies.  The United States Government and others can freeze and confiscate the assets you are holding offshore.  It will neither be cheap nor easy to recover those assets.  Good luck affording an attorney if all of your off shore assets are frozen by an order of the United States Government.

The protection you are afford can also be easily compromised, by either a foreign government or individual operating outside the United States.  Again, good luck in recovering your money.  The fact that the asset is controlled “off shore” by others  removes it from your control.  That is never a good idea.  There are many wealthy Russians right now who regret they set up off shore bank accounts for assets in Cyprus.

Off shore accounts can be very expensive, too.  There is the travel and logistical costs.  The legal fees can be very high, depending on the complexity of the account.  Directors, trustees, and others must also be paid.

Buying real estate to be held in a retirement account will provide you with both asset protection and a greatly reduced tax bill.  When you fund a retirement account such as an IRA, every dollar you place in it is deducted from your taxes.  From that, your taxable income is significantly reduced.

Depending on your employment status, your tax bill can be sliced very sharply.  As detailed in “Save Big,” a recent article on retirement planning in Forbes by Ashlea Ebeling, “…A 52-year-old entrepreneur netting $300,000 could use a one-person defined-benefit pension plan combined with a 401(k) to shelter a total of $169,800 from current income taxes…”

It is difficult to imagine a legal offshore account reducing your taxable income by almost 50%!

A retirement account cannot be seized by creditors, so there is asset protection for the real estate immediately.  Structuring the real estate as separate limited liability corporations or as another entity provides further protection.  This protection is given to real estate assets, whether it is the property itself or a mortgage held from lending to the buyer.

For the real estate assets in the retirement account, it can be in the form of owning the property itself or the mortgage from financing the purchase.  Known as private mortgages, these notes secured by real estate are ideal for retirement accounts.  According to Jerry Cohen, President of EquityBuild, a premier private mortgage investment firm, “There are two methods for getting started in private mortgages: Mortgage Pools and Direct Lending.  Mortgage pools are like the mutual funds of private mortgages. Each investor's money is pooled with the other investors participating in the pool and the money is used for private lending.

Cohen, who was just awarded the prestigious “Moving America Forward” honor for the success of EquityBuild and EquityBuild Finance, its financial arm, furthered that, “Direct lending is typically reserved for seasoned real estate professionals due to the level of expertise that is needed to identify undervalued properties...”

Either way, through directly owning the real estate itself or holding the mortgage, using a retirement vehicles such as an IRA or 401(k) performs just as well as an off shore account for legitimate needs.   For anything like these accounts for financial planning, it is best to consult with your tax advisor or lawyer.  Before you move your money away from the country to an off shore entity, look to buying real estate assets for your retirement account to achieve the objectives at much lower costs, in every meaning of the word.