How to Put an IRA in an Offshore Trust

An offshore IRA allows retirement account holders to move their retirement savings into an international legal structure. This strategy provides enhanced asset protection and broader investment options compared to a domestic IRA.

Many people mistakenly believe they can simply transfer their IRA into their personal offshore asset protection trust. However, doing so would likely trigger a taxable distribution.

Instead, the correct method involves a specific structure where a self-directed IRA invests in an offshore limited liability company. The offshore LLC is then owned by a Cook Islands trust.

What Is an Offshore IRA?

An offshore IRA is a self-directed individual retirement account that holds an interest in an offshore entity, typically a Nevis or Cook Islands LLC.

In this structure, the IRA custodian does not hold the investments directly. Instead, the custodian holds 100% ownership of an offshore company. You, as the IRA owner, serve as the manager of that offshore company. This gives you “checkbook control” over the retirement funds, allowing you to direct assets into international investments and shield them from U.S. judgments.

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How Does an Offshore IRA Work?

To use an offshore IRA, you must first move your funds from a standard custodian (like Fidelity or Schwab) to a custodian that allows self-directed accounts.

Once the funds are with the new custodian, the custodian invests your IRA funds into a newly formed offshore LLC. The IRA owns the LLC, but you manage it. You can then open a bank account in the name of the offshore LLC at a foreign bank.

This structure works effectively for asset protection because the assets are located outside of U.S. jurisdiction. If a creditor wins a lawsuit against you personally, they cannot easily seize the assets inside the offshore LLC because the manager (you) and the assets are governed by foreign laws that do not automatically recognize U.S. court orders.

For example, Nevis and the Cook Islands have laws that prevent creditors from seizing a member’s interest in an LLC. The most a creditor can usually get is a “charging order,” which only gives them a right to distributions that are never made.

Can You Put an IRA Into a Living Trust?

You generally cannot transfer an IRA into a standard revocable living trust or an offshore asset protection trust without tax consequences.

The IRS considers an IRA to be a trust in itself. If you retitle the IRA account into the name of your personal trust, the IRS treats this as a full withdrawal of the funds. You would immediately owe income tax on the entire balance, plus a 10% penalty if you are under age 59½.

The “Offshore IRA” structure avoids this problem because the IRA remains the legal owner of the assets (the offshore LLC shares). You are simply changing the investment inside the IRA, not the ownership of the IRA itself.

Then, your offshore trust can own the offshore LLC.

How to Set Up an Offshore IRA Structure

Setting up an offshore IRA involves strict adherence to IRS rules and foreign laws. The process typically follows these steps:

1. Establish a Self-Directed IRA: Open an account with a U.S. custodian that permits offshore investments.
2. Form an Offshore LLC: Form a specialized LLC in a favorable jurisdiction like Nevis or the Cook Islands. The operating agreement must be drafted carefully to comply with IRA rules.
3. Transfer Funds: You direct the custodian to wire your IRA funds to the offshore LLC’s bank account.
4. Invest: As the manager of the LLC, you can now write checks or wire funds to purchase assets, such as foreign real estate, precious metals, or other investments.

About the Author

Gideon Alper is a nationally recognized expert in asset protection planning. He has been quoted by major media publications as a leading authority in Florida asset protection and offshore trust formation. Gideon graduated with honors from Emory University Law School and has been practicing law for over 15 years.

Gideon and the Alper Law firm have advised thousands of clients about how to protect their assets from creditors.