Offshore Trusts and Real Estate

Putting U.S. real estate into an offshore asset protection plan does not move the property outside the reach of U.S. courts. The land stays where it is, and the laws of that state continue to apply to it.

For that reason, U.S. real estate is usually kept in a domestic LLC. The offshore trust can then own the membership interest in that LLC rather than taking title to the property itself. This allows the ownership interest to be included in the trust while the deed remains with a U.S. entity.

This page explains how that structure works, what happens when the property is located outside the United States, and which real-estate assets can benefit most from offshore planning. For the broader picture — insurance, domestic trusts, homestead planning, equity stripping, and landlord risk — start with our practical guide to real estate asset protection.

Why U.S.-situs Real Estate Behaves Differently from Every Other Asset

U.S. real estate remains subject to the law and courts of the jurisdiction where the land is physically located, regardless of whether an offshore trust ultimately owns the beneficial interest in the structure above it.

That makes real estate fundamentally different from cash or securities transferred to a foreign trustee or foreign custodial account. A parcel of land in Florida, Colorado, New York, Texas, or another state cannot physically leave the United States. A court with jurisdiction over that property can still enforce mortgages, tax liens, mechanics liens, property judgments, foreclosure rights, and other remedies recognized under applicable law.

Putting an offshore trust above the ownership structure does not change that fact.

In practice, this means U.S. real estate usually should not be treated as though it becomes unreachable merely because an offshore trust appears somewhere in the ownership chain. We recommend using a domestic LLC to hold the property, with the offshore trust owning the LLC membership interest.

That structure can separate the owner personally from the real estate and place the ownership interest within an offshore trust, but the underlying property remains subject to U.S. real-property law.

The distinction is critical: the trust can affect who owns the entity that owns the property; it cannot change where the land exists.

The Holding-Entity Structure, Step by Step

We generally do not deed U.S. real estate directly to an offshore trust. Instead, a domestic LLC owns the property and the offshore trust owns the membership interest in that LLC — an arrangement we cover in more detail in can a trust own an LLC.

The property therefore remains titled to a U.S. entity. What goes into the trust is the ownership interest in that entity.

1. A domestic LLC owns the real estate. The deed remains in the name of a U.S. LLC formed and maintained under applicable state law. Property taxes, leases, insurance, mortgages, permits, and ordinary operating obligations continue at the domestic property level.
2. The offshore trust owns the LLC membership interest. Instead of the individual investor personally owning the LLC, the membership interest is transferred into the offshore trust. The asset transferred offshore is therefore the ownership interest, not the physical land.
3. Property income moves through the entity structure. Rent and other property revenue first belong to the LLC. After expenses, reserves, debt service, taxes, and other obligations are satisfied, lawful distributions can move through the ownership structure according to the operating agreement and trust documents.
4. Each layer has its own point of attack. A tenant, contractor, mortgage lender, taxing authority, or other property-level creditor can pursue remedies against the LLC and property when applicable. A personal creditor may attempt to reach the owner's LLC interest under governing state law. A transfer of that membership interest into the trust can also be challenged if it was made after a creditor problem developed.
5. Entity formalities still have to be respected. Commingling assets, ignoring LLC records, retaining inconsistent ownership records, or transferring property after a claim develops can weaken the structure.

The offshore trust adds protection around ownership. It does not erase liabilities attached to the property itself.

Foreign Real Estate, and Why It's a Different Conversation

Real estate located outside the United States presents a different jurisdictional problem because the land itself is governed primarily by the law of the country where it is located.

Property located outside the United States raises a different set of questions. The country where the land is located generally controls its title system and the local rules for liens, foreclosure, inheritance, transfers, and creditor enforcement. Before deciding how the property should be owned, local counsel needs to determine which trust or entity arrangements that country permits.

A U.S. court may still have authority over the person who owns an interest in foreign property. It can issue orders directed at that person even though the land itself is located elsewhere. Whether and how those orders can ultimately affect the foreign property will depend in part on the law where the property is located.

Tax and information reporting also require separate analysis, and the rules here are more specific than they are usually described.

The IRS states plainly that "foreign real estate is not a specified foreign financial asset required to be reported on Form 8938," and that a personal residence or a rental property does not have to be reported. Where the property is instead held through a foreign corporation, partnership, trust, or estate, the interest in that entity is a specified foreign financial asset — and the value of the real estate held by the entity is taken into account in valuing that interest, even though the real estate itself is not separately reported.

FBAR reaches something different again: foreign financial accounts, where the aggregate value exceeded $10,000 at any point in the calendar year. Land is not a financial account, which is why directly held foreign real estate is not an FBAR item. A foreign bank account used to receive rent or hold sale proceeds is, once that threshold is met.

What an Honest Expectation Looks Like

The honest expectation is that the equity surrounding real estate and the cash flow it produces can often be protected more effectively than the U.S. land itself.

A U.S. property remains available for remedies that lawfully attach to that property. If a mortgage lender forecloses, a taxing authority records a lien, or a property-level creditor obtains rights against the owner of the land, putting an offshore trust above the LLC does not make those rights disappear.

What the structure can do is separate the land from the investor's broader personal wealth and place the LLC membership interest, accumulated distributions, sale proceeds, reserves moved outside the operating entity, and other liquid assets into stronger ownership structures when planning occurs in advance.

Real estate usually needs several forms of protection working together. An LLC can contain many liabilities associated with a particular property, while insurance can pay covered claims. State law may protect additional property or assets, including through a homestead exemption.

An offshore trust serves a different purpose. It can protect qualifying wealth outside the property and, where appropriate, hold the ownership interest in the property LLC. It does not make the underlying real estate immune from foreclosure, liens, or other valid claims against it.

The goal is to keep a problem involving one property from unnecessarily putting unrelated personal wealth at risk.

Where an Offshore Trust Fits

For most property owners, the assets that fit an offshore trust are the ones surrounding the real estate rather than the real estate itself: LLC membership interests, accumulated rental distributions, sale proceeds, reserves, brokerage accounts, and other liquid wealth.

Blake Harris Law works with offshore structures in the Cook Islands, Nevis, and Belize, with the Cook Islands serving as the firm's primary jurisdiction for asset protection trusts. Investors who want the structure explained from the portfolio side rather than the property side may prefer our page on the Cook Islands Trust for real estate investors.

The structure is not appropriate for everyone. The economics generally make sense for people with roughly $500,000 or more in personal assets at meaningful creditor risk. It is also not appropriate after a known creditor claim has already developed.

What Is the Major Disadvantage of an Asset Protection Trust?

A major disadvantage of an offshore asset protection trust is the loss of direct legal ownership that comes with an irrevocable structure, together with substantial setup, maintenance, and federal reporting costs.

An independent trustee holds legal title to the trust assets. The settlor can remain a beneficiary and retain the rights the trust provides, but the arrangement is not a good fit for someone who wants unrestricted personal control over every holding.

For a real estate owner there is a further limitation, and it is the point of this page: the trust does not remove U.S. land from the jurisdiction where the property physically sits.

We charge $25,000 to establish a standard Cook Islands Trust. The trustee, Protector, and ongoing legal work cost $7,000 per year. Clients typically pay their CPA another $2,000 to $3,000 annually.

Foreign trusts also create federal reporting obligations. Forms 3520 and 3520-A are commonly required, with FBAR and Form 8938 obligations depending on the structure and accounts. The trust does not reduce the U.S. income tax owed by the settlor.

Cost and Timeline

Structures involving multiple properties, existing mortgages, or foreign real estate may be quoted differently, and domestic LLC formation and any deed work are separate. The full cost breakdown sets out what each figure covers.

Timing: Why This Only Works Before a Claim

Real estate makes the timing rule unusually easy to see, because a transfer of property or of an LLC interest leaves a dated public record.

Transfers made after a lawsuit, demand, or other claim appears are subject to rules designed to prevent debtors from moving property away from creditors. The Uniform Voidable Transactions Act, which has influenced the law in many states, identifies the circumstances a court weighs in deciding whether a transfer was intended to hinder, delay, or defraud a creditor. State law controls the analysis.

A court may also look at what the owner knew at the time, how much property was moved, whether the owner continued controlling it, and whether the transfer left little behind — which is why the four rules that decide how courts treat these structures matter more than the jurisdiction named on the trust deed.

A shorter limitation period under offshore law does not cancel a remedy that remains available under applicable U.S. law. We decline engagements structured to defeat a known creditor.

How Blake Harris Law Works with Real Estate Owners

We focus exclusively on offshore asset protection and work with property owners and investors whose LLC interests, equity, rental income, and sale proceeds remain exposed after insurance, entity structure, and state exemptions are considered.

For new Cook Islands Trust engagements, Blake Harris Law recommends Atlas Trust Company, a licensed Cook Islands trustee co-founded by Blake Harris. That relationship is disclosed, and clients may select another licensed Cook Islands trustee.

Before recommending a structure we look at where each property is located, how it is currently titled, what debt and guarantees are attached to it, which state exemptions already apply, and whether any claim has already developed. Where the property sits outside the United States, local counsel in that country has to confirm what ownership arrangements are permitted before anything is transferred.

If existing protections are sufficient, or the exposed assets do not justify the cost, we will say that an offshore trust is not appropriate.

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