Domestic/Offshore Trusts
Domestic Asset Protection
Persons concerned about protecting their assets do not
necessarily need to seek out a distant palm-fringed island. There
are plenty of asset protection techniques available that do not
involve going offshore. The simplest plans can involve giving gifts
to family members who do not share the same risk of future lawsuits,
shifting property to assets that are exempt from creditors' claims,
and obtaining adequate insurance coverage.
For those who own a business or real estate, entities such as
corporations, limited partnerships and limited liability companies
can shield personal assets from claims associated with the business
or real estate operations.
Alaska, Delaware, Nevada, Rhode Island and South Dakota have
adopted laws that allow the establishment of a trust that is free
from the claims of creditors yet allows distributions to the trust
grantor as a beneficiary. While some may be more comfortable using a
U.S. based trust, many experts are not convinced that these domestic
trusts will provide the same level of protection as foreign trusts.
Offshore Asset Protection
Foreign situs trusts, although more complex and costly than
domestic trusts, provide the ultimate in asset protection. There are
multiple advantages in going offshore as opposed to using U.S. based
techniques. Offshore jurisdictions often have laws that ensure
privacy and are more favorable to the grantor of a trust with regard
to the amount of access to and control over the trust principal.
These jurisdictions generally do not recognize foreign judgments, so
a creditor must file a new lawsuit in the offshore location. Other
laws require that local counsel be used and prohibit contingency
fees. Statutes in such jurisdictions also make it much more
difficult for a creditor to prove his case or file it in a timely
fashion. Distance and cultural differences can provide financial and
psychological barriers as well.
Each of these factors is yet another hurdle for a creditor to
overcome. When confronted with so many barriers, creditors are often
willing to settle for pennies on the dollar.
Anatomy Of An Asset Protection Trust
Asset protection trusts must have a trustee in the jurisdiction
of the trust situs. Most trusts also have a "trust protector,"
(often the grantor of the trust) who retains the power to remove and
replace trustees and veto certain decisions of the trustees. It is
also possible to have several trustees in different jurisdictions as
a way of providing additional safeguards.
Once the trustees have been chosen and the trust executed, the
grantor transfers his or her property to the trust. Beneficiaries of
the trust can include the grantor, the grantor's spouse, and his or
her children.
Foreign-based trust companies generally offer a variety of
financial services such as private banking, insurance, and
investment opportunities worldwide, including U.S. securities.
What jurisdiction is best? In addition to the five states
mentioned above, there many countries with laws favorable for asset
protection, mostly island nations in the Caribbean and elsewhere.
The Cook Islands in the South Pacific and Nevis in the Eastern
Caribbean are particularly attractive due to advanced trust
legislation, political stability and sophisticated communications
infrastructure. In addition, neither jurisdiction is on the
Organization for Economic Co-operation and Development's (OECD)
"Harmful Tax Practice" list. However, the optimum jurisdiction will
depend on your particular situation.
Conclusion
Sophisticated asset protection trusts are not necessary for many
of us, but almost everyone can benefit from making basic asset
protection planning a part of their overall estate plan. And since
asset protection techniques must be put in place before any
liability arises, the time to do such planning is now. Please contact us today or call us at
800-201-0413
Email:
info@trustcounselpa.com |
