Offshore Asset Protection Trusts

Offshore Asset Protection TrustYou and your legal exposure exists in one country. It’s a good idea to have your assets somewhere else. That’s true whether you reside in the United States, all the way down in Australia, or somewhere in between. Portable Offshore Asset Protection Trusts™ offer the solution to that problem.

The portable offshore asset protection trusts that we create give clients the option to send their asset protection planning offshore if the need arises. In most cases, the plans aren’t located offshore from the start. Rather, plans start out as domestic trusts, which gives you maximum flexibility and control. The question naturally arises, “When should an asset protection plan be moved offshore?”

Basics of Portable Offshore Asset Protection Trusts

A few things are required in order for a trust to exist:

  • One or more trustees
  • Beneficiaries
  • Assets held in trust

These things are typically required regardless of where the trust is formed. So it doesn’t matter if the trust is formed in United States or in some other jurisdiction. The requirements are largely the same. A trust document (also called a “deed of trust”) specifies the laws that should govern the trust. A deed of trust can also specify conditions under which the jurisdiction governing the trust should change. That’s what legally enables trusts to lawfully moved from one jurisdiction to another and even offshore under certain circumstances, and virtually every jurisdiction (including the United States) recognizes a trust’s right to change its governing law and jurisdiction. In legalese, this right is generally referred to as choice-of-law.

When Should An Asset Protection Plan Move Offshore?

The answer to this question is unique to each scenario. First, it’s really a good idea to have your plan in place before there’s ever legal trouble looming – before potential creditor claims appear on the horizon. That avoids the problem of fraudulent transfers. Assuming your plan was properly and timely created, it’s generally a good idea to move your plan offshore when you’re facing potentially catastrophic litigation. Offshore asset protection planning is intended to protect assets against lawsuits.  So when you’re facing a claim that could be potentially devastating, something that could really hurt you and your family financially, then it’s a good idea to move your assets offshore. I work very closely with my clients to ensure that they make the right moves at the right times to get the full benefit of being offshore.

Is It Legal To Move My Asset Protection Trust Offshore?

Absolutely. In fact, about 13 U.S. States have enacted domestic asset protection statutes that are very similar to the offshore asset protection statute we use in the Cook Islands, The International Trusts Act 1984. You might wonder why we don’t just use one of the U.S. States with an applicable asset protection statute. Well, we do create domestic asset protection trusts (a.k.a. DAPTs) for clients, but they aren’t the best option for U.S. residents (though they work beautifully for residents of other countries). Here’s why:

  • Again, you and your legal exposure reside in one country, so it’s a good idea for your assets to be somewhere else. Think of it as a form of diversification. That’s just common sense.
  • DAPTs haven’t been fully tested in court for U.S. residents. Since most states don’t recognize DAPTs, there is high potential for a state court to invalidate the planning.
    • For example, Florida does not have a DAPT statute, so Florida courts have no incentive to uphold Delaware DAPTs, and because of the Full Faith and Credit clause of the U.S. Constitution, a Florida court can indeed invalidate a Delaware DAPT and Delaware would have to recognize the judgment.
  • In many cases, DAPTs are actually more expensive than offshore asset protection trusts (i.e. plans that give you the option to go offshore).

 What About Contempt Of Court For Having An Offshore Trust?

Offshore asset protection planning has been the subject of a lot of controversy in recent years. Most potential clients feel concern about whether the use of an offshore trust could result in them being held in contempt of court. That has certainly happened a few times (never to any of my clients). In most of those cases where people have been held in contempt, the people using offshore trusts have been in engaged in blatant fraud or criminal activity, and they set up their asset protection plans after legal trouble had been lurking for some time. You can read about a good example is this New York Times Article where an offshore trust was created after a jury verdict had been returned. Again, timing is crucial. Set up your planning before you detect any trouble. Then your trust will be bulletproof if you’re ever sued, and your assets will be protected from lawsuits.

The offshore trusts we create for clients have an anti-contempt of court mechanism built into them. Unlike some other asset protection attorneys, we don’t think it’s a good idea to snub our noses at the U.S. legal system, so we have developed systems to make the U.S. legal system work in our favor to give clients peace of mind that they won’t be held in contempt of court.

Take Control With An Offshore Asset Protection Trust

Offshore trusts were put in the spotlight with Mitt Romney’s 2012 Presidential campaign. Yes, Romney was scrutinized for his use of an offshore asset protection trust, but Romney did something that most people don’t do. He took control of his situation to make sure that his hard earned assets were fully protected. He acted to secure himself and his family. That’s commendable, regardless of whether or not you agree with Romney’s politics.

You can also get offshore protection for your retirement accounts. Click here to learn about the benefits of an offshore IRA.

If you’d like to learn how you can secure yourself and your hard earned assets with an offshore asset protection trust, then please call us today at (850) 803-1166.