Misrepresentations Of Offshore Trust Case Law

Critics often claim that offshore trusts are weak or unreliable asset protection tools. A
closer reading of the case law, however, tells a far more nuanced—and
instructive—story. The leading offshore trust cases do not demonstrate that offshore
trusts “fail.” They demonstrate what happens when asset protection structures are
implemented late, structured poorly, or undermined by continued settlor control and
bad faith conduct.
Cases frequently cited as cautionary tales—such as FTC v. Affordable Media, In re
Lawrence, and SEC v. Bilzerian—were not decided on findings that the offshore
trusts themselves were invalid or illusory. Rather, courts exercised personal
jurisdiction over the settlors, relied on contempt and fraudulent transfer doctrines,
and responded to evidence of retained control, non-disclosure, or post-judgment
manoeuvring. The trusts were not pierced; the individuals were sanctioned.
Similarly, cases involving fraud, tax evasion, or post-liability transfers do not expose
structural flaws in offshore trusts. They reflect the predictable outcome of aggressive
or reactive planning conducted in the shadow of enforcement risk.
Properly established offshore asset protection trusts—implemented well in advance
of claims, administered by independent trustees, and governed by jurisdictions that
do not recognise U.S. judgments—remain among the most robust tools available for
lawful asset protection. While no structure is absolute, offshore trusts materially
constrain enforcement options in ways that domestic trusts, which remain fully
subject to U.S. jurisdiction and insolvency regimes, simply cannot.
The persistent suggestion that domestic trusts are inherently superior to offshore
trusts does not withstand careful scrutiny of the case law. What these decisions
actually reveal is not the weakness of offshore trusts, but the consequences of using
any asset protection structure incorrectly.

CASE ANALYSIS

Let us explore some of the cases cited against Offshore Asset Protection Trusts:

FTC v. Affordable Media, LLC (The Anderson Case)

Critics of offshore asset-protection trusts frequently cite FTC v. Affordable Media, LLC (The Anderson Case) as proof that such trusts “do not work.” That characterization overreads the decision. The court did not hold that offshore trusts are per se ineffective or invalid. Rather, the court affirmed a finding of civil contempt because the defendants failed to carry their burden of proving that compliance with a repatriation order was actually impossible.

Under settled contempt principles, once the FTC showed violation of a “specific and definite order,” the burden shifted to the defendants to demonstrate “categorically and in detail” why they were unable to comply. The court emphasized that this burden is “particularly high” in the offshore trust context, given the risk that claimed compliance is “merely a charade rather than a good faith effort to comply”.

Critically, the Ninth Circuit affirmed the district court’s factual finding that the Andersons retained control over the Cook Islands trust. As the court put it, “in the judgment of the Court [and] from the evidence that I’ve heard [the Andersons] are in control of this trust.”

Because that finding was not clearly erroneous, the court concluded that compliance was not impossible and that contempt sanctions were appropriate.

The opinion repeatedly underscores that the problem was not the mere existence of an offshore trust, but the settlors’ retained powers—particularly their role as protectors with affirmative authority to appoint trustees and determine whether an “event of duress” had occurred. The court explained that where a protector’s powers are not limited to purely negative veto rights, “a protector can be compelled to exercise control over a trust to repatriate assets”.

The takeaway, therefore, is narrower and more precise than critics suggest. Affordable Media (The Anderson Case) does not stand for the proposition that offshore trusts are inherently ineffective. It stands for the proposition that a settlor cannot defeat a U.S. court order by pointing to a foreign trustee while retaining practical control over the trust. Where a court finds retained control, an impossibility defense will fail. Conversely, the case leaves open the possibility that a properly structured trust—with genuinely independent trustees and no retained affirmative control subject to U.S. personal jurisdiction—may present materially different enforcement issues.

Re Lawrence

In re Lawrence is often cited as another example of an offshore trust “failing,” but—like Affordable Media—the decision turns on retained control and the failure of an impossibility defense, not on the inherent ineffectiveness of offshore trusteeship.

The Eleventh Circuit affirmed the bankruptcy court’s turnover and contempt orders because the trust was, in substance, self-settled and subject to the debtor’s de facto control. The court expressly relied on the trust instrument itself, explaining that “[t]he primary support for the finding that appellant had the present ability to comply with the Turn Over Order is found in the Trust Indenture itself”. Although Mr. Lawrence had been declared an “excluded person” under the trust, the court found this status illusory because he retained the power to appoint trustees who, in their “absolute discretion,” could reinstate him as a beneficiary.

Reading the provisions together, the court concluded that “the appellant, as settlor and prospective beneficiary, retained de facto control over the Trust through his ability to appoint Trustees who could in their absolute discretion reinstate the appellant as a beneficiary and assign the entire proceeds to him”. Later attempts to make the exclusion irrevocable were dismissed as “nothing more than a smoke screen”.

Importantly, the court acknowledged the practical jurisdictional limit that is sometimes overlooked in popular summaries: the court could not compel the offshore trustee itself to act. Instead, it exercised personal jurisdiction over the debtor. Once the trust was adjudicated property of the bankruptcy estate, Mr. Lawrence had a “continuing statutory duty to turn the Trust res over to the Trustee” and his failure to do so justified civil contempt and incarceration as a coercive measure.

The case therefore does not stand for the proposition that offshore trusts are easily “pierced” by U.S. courts. Rather, the protective wall technically remained intact at the trustee level; it was the grantor’s retained powers and inconsistent structuring that undermined the arrangement. As in Affordable Media, the decisive factor was that the settlor could not credibly demonstrate impossibility of compliance while retaining mechanisms of control that allowed him, at least indirectly, to cause repatriation.

The takeaway is again structural rather than categorical. Re Lawrence illustrates that an offshore trust will not shield assets where the settlor preserves appointment powers or other leverage sufficient to establish de facto control. A properly structured offshore trust—one that genuinely severs the settlor from affirmative control and discretionary reinstatement—would not present the same ambiguity and therefore would raise materially different enforcement and contempt issues.

SEC v. Bilzerian

In SEC v. Bilzerian, the court addressed whether Paul Bilzerian should be held in civil contempt for failing to comply with a final disgorgement judgment entered against him for securities fraud. The case did not involve a finding that offshore trusts are inherently unlawful, ineffective, or invalid as asset-planning tools. Rather, the court’s analysis focused squarely on Bilzerian’s individual conduct, his lack of good-faith compliance, and his continued control over assets following judgment.

After a disgorgement judgment exceeding $62 million was entered, Bilzerian made no meaningful effort to satisfy the judgment and failed to provide a full accounting of his assets. In evaluating his claimed inability to comply, the court examined evidence that he had hidden and routed assets through a complex network of entities and trusts, including an offshore Cook Islands trust, while retaining beneficial enjoyment and effective control. The court described the offshore trust as “the apex of the complex ownership structure into which Bilzerian has transferred his assets,” emphasizing that the structure operated to frustrate enforcement rather than to reflect genuine divestment.

Critically, the court did not base its contempt finding on the intrinsic failure or illegitimacy of the offshore trust itself. Instead, it concluded that Bilzerian acted in clear bad faith, maintaining actual or perceived control over trust assets while asserting an inability to comply with court orders. The court rejected this defense and found that offshore structures do not shield individuals from contempt where they retain control sufficient to influence or benefit from the assets.

The case serves as a reminder that asset protection planning is not a substitute for compliance with legal obligations. At the same time, SEC v. Bilzerian does not discredit offshore trusts per se, but illustrates that their effectiveness depends on genuine relinquishment of control and lawful, good-faith implementation.

SEC v. Jamie Solow

In SEC v. Solow, the U.S. Court of Appeals for the Eleventh Circuit affirmed a civil contempt finding against Stephen Solow for failing to comply with a disgorgement judgment entered in a SEC enforcement action. The decision did not challenge the general legality or conceptual validity of offshore trusts. Instead, the court focused on Solow’s post-judgment conduct and his deliberate efforts to evade enforcement of a final court order.

After an adverse judgment had already been issued, Solow and his wife engaged in what the courts characterized as a coordinated campaign to dissipate and shield assets. The record showed that Solow liquidated more than $1.5 million in securities, transferred funds into accounts held solely in his wife’s name, and encumbered the marital residence with a $5.2 million mortgage. The mortgage proceeds were purportedly used to fund a Cook Islands trust established in his wife’s name, all while Solow claimed he was unable to satisfy the disgorgement judgment.

The Eleventh Circuit emphasized that civil contempt turns on whether a judgment debtor has taken all reasonable steps within his power to comply. It rejected Solow’s asserted inability defense, finding that any inability to pay was self-created through post-judgment asset transfers designed to frustrate enforcement. The timing of the transactions was central: the offshore trust and related transfers were implemented after judgment, when Solow’s obligations were fixed and known.

Critically, the court did not hold that offshore trusts are inherently unlawful or ineffective. Rather, it reaffirmed that offshore structures do not shield individuals from contempt where they are created or funded post-judgment and used in bad faith while the debtor retains indirect control or benefit.

SEC v. Solow thus underscores that asset protection planning cannot substitute for compliance with existing legal obligations, while leaving intact the legitimacy of offshore trusts established and operated in good faith before liability arises.

In re Portnoy

In In re Portnoy, the court examined whether debtor Larry Portnoy had acted in bad faith by concealing assets and misleading the court in the course of his bankruptcy proceedings. The case did not involve a judicial rejection of offshore trusts as a legal structure. Rather, it turned on Portnoy’s conduct, including concealment, misrepresentation, and retention of control inconsistent with his disclosures.

Portnoy had established a trust governed by Jersey law, administered offshore. Despite the formal structure, the bankruptcy court found that Portnoy retained substantial influence and practical control over the trust’s administration and the disposition of its assets. More critically, Portnoy repeatedly failed to disclose the trust’s existence to the bankruptcy court, initially denying that it existed at all. He also failed to disclose that his salary was being diverted into an account held in his wife’s name, and materially misrepresented his financial condition in sworn filings.

The court concluded that Portnoy’s lack of candor and incomplete disclosures warranted denial of relief, emphasizing that bankruptcy depends on full and honest disclosure by the debtor. The offshore trust became relevant not because of any inherent flaw in its design, but because Portnoy used it as part of a broader pattern of concealment and deception, while continuing to benefit from trust-related arrangements.

Importantly, the decision does not suggest that a Jersey trust—or offshore trusts generally—are invalid or ineffective when properly structured and transparently disclosed. Instead, In re Portnoy illustrates the severe consequences that follow when a debtor misleads the court, hides assets, or maintains undisclosed control while invoking legal protections.

The case thus stands as a cautionary example of how concealment and dishonesty, rather than the use of offshore structures themselves, drive adverse judicial outcomes.

Fortney v. Kuipers

In Fortney v. Kuipers, the court considered the relevance of an offshore asset protection trust established by the Kuipers family following a serious automobile accident that gave rise to personal injury litigation. The case did not involve a judicial determination that offshore trusts are invalid or inherently abusive. Instead, the court examined the timing and context in which the asset protection strategy was implemented.

After the accident occurred—but while litigation was still pending and before liability had been reduced to judgment—the Kuipers transferred substantial assets into an offshore trust. The plaintiffs argued that these transfers were undertaken to hinder potential recovery and sought to challenge the arrangement. Although the court expressed concern about the circumstances surrounding the transfers, it ultimately did not pierce the offshore trust or unwind the asset transfers.

Importantly, the court’s analysis focused on evidentiary access and the equities of the situation rather than on condemning the trust structure itself. The trust remained intact, but the case illustrates that asset protection steps taken during active litigation can attract heightened scrutiny and unfavorable inferences, even if they are not ultimately set aside.

Fortney v. Kuipers demonstrates that timing is a critical factor in asset protection planning. While courts may respect properly formed offshore structures, implementing such planning after an event giving rise to potential liability—and while litigation is underway—creates legal risk and adverse optics. The case underscores that prudent asset protection is most effective when undertaken well in advance of known claims and without the appearance of evading responsibility.

Riechers v. Riechers

In Riechers v. Riechers, the court addressed the treatment of assets transferred into an offshore Cook Islands trust in the context of matrimonial equitable distribution. The case did not involve invalidating or piercing the offshore trust itself. Rather, the court focused on the nature of the assets transferred and its personal jurisdiction over the spouse, not jurisdiction over the trust corpus.

The court found that the Riechers Family Trust had been funded almost entirely with marital assets, with only a minimal amount traceable to separate property. Although the trust was governed by Cook Islands law and beyond the court’s in rem jurisdiction, the court emphasized that it retained in personam jurisdiction over the defendant spouse, who had established and funded the trust.

Relying on settled principles of New York matrimonial law, the court held that assets transferred into the offshore trust did not lose their character as marital property merely because they were placed beyond the court’s territorial reach. As a result, the court ruled that the value of the marital assets transferred into the Cook Islands trust was subject to equitable distribution and awarded the plaintiff spouse one-half of that value, enforceable against the defendant personally.

Importantly, the court did not order repatriation of trust assets or declare the trust invalid. The decision illustrates that while offshore trusts may be beyond a court’s direct jurisdiction, courts can still achieve equitable outcomes by exercising authority over individuals who control or benefit from such structures. The case underscores that offshore planning does not alter marital property rights or insulate a spouse from equitable distribution obligations.

Re Marriage of Harnack

In re Marriage of Harnack and Fanady concerns post-judgment issues arising from the equitable distribution of marital property following a dissolution of marriage. The appeal did not turn on the validity or effectiveness of any offshore trust structure, nor did the court adjudicate asset-protection planning as such. Instead, the case focused on clarification and enforcement of the trial court’s existing property-distribution orders.

The Illinois Appellate Court emphasized that its intervention was limited in scope. Because “conflicting interpretations of the transfer provision in the judgment for dissolution of marriage have arisen,” the court sua sponte remanded the matter “for the sole purpose of clarifying the trial court’s intent” with respect to the transfer of shares. The court expressly cautioned that it was “not vacating the judgment for dissolution of marriage and [was] not inviting further litigation” regarding attempts to reopen or undo the original judgment.

Importantly, the appellate court rejected efforts to obtain broader post-judgment relief, holding that the moving party was “not entitled to relief under either section 2–1301 or section 2–1401,” and reaffirmed that the remand was strictly limited to clarification rather than reconsideration of substantive rights.

Viewed in this light, the case does not stand as an example of a court disregarding an offshore trust or “piercing” a foreign structure. Nor does the opinion characterize the dispute as one involving prolonged evasion, contempt, or wholesale refusal to comply with court orders. Rather, Harnack reflects routine appellate supervision of domestic-relations proceedings, addressing ambiguity in post-judgment implementation rather than misconduct tied to asset-protection planning.

The takeaway is therefore procedural, not structural. In re Marriage of Harnack illustrates the consequences of unclear or contested compliance with dissolution orders and the limits of post-judgment relief—not any inherent weakness in offshore trusts or asset-protection mechanisms.

United States v. Thompson

In United States v. Thompson, the court addressed efforts by a treasure hunter to conceal assets derived from recovered gold coins taken from a shipwreck that was subject to competing ownership claims. After recovering the coins, Thompson transferred assets into a Belize trust and refused to disclose the location or disposition of the property despite court orders.

The case did not involve lawful asset protection planning. Rather, it centered on willful concealment, non-disclosure, and defiance of court authority in the context of forfeiture and recovery proceedings. The offshore trust was relevant only insofar as it was used to obscure asset location and frustrate judicial oversight.

The court’s response turned on Thompson’s refusal to comply with disclosure obligations and lawful process, not on any inherent defect in offshore trusts. The case illustrates that offshore structures cannot be used to hide assets subject to court jurisdiction or to evade legal duties.

United States v. Butselaar

In United States v. Butselaar, the Southern District of New York addressed a criminal tax evasion scheme in which a tax attorney helped a high-earning DJ conceal millions of dollars of income through offshore entities and trusts. The conduct involved deliberate misreporting, false structures, and concealment of taxable income from U.S. authorities.

This case was a criminal prosecution, not a civil asset-protection dispute. The offshore trust arrangements were part of an unlawful tax evasion scheme designed to hide income and mislead the IRS. The court’s focus was on intent, fraud, and statutory violations.

Importantly, the case does not suggest that offshore trusts are inherently ineffective for asset protection. Rather, it confirms that trusts cannot be used to disguise income, evade taxes, or obstruct lawful reporting obligations.

United States v. Jerome Schneider

The Jerome Schneider case involved a criminal prosecution arising from the promotion of sham offshore banks and fictitious financial institutions marketed as tools to evade U.S. taxation. Schneider was charged with wire fraud and conspiracy after promoting structures that had no legitimate banking or trust function.

This case did not involve asset protection trusts or lawful offshore planning. Instead, it concerned outright fraud, including false representations to clients and misuse of offshore labels to give credibility to illegal schemes.

Schneider’s conviction reflects enforcement against criminal misuse of offshore entities, not a failure of asset protection trusts in civil litigation. The case underscores that offshore entities used as part of fraudulent or deceptive schemes are treated as instruments of crime, not as legitimate legal structures.

SEC v. Brennan

In SEC v. Brennan, the SEC pursued enforcement actions arising from securities law violations, including efforts to prevent defendants from shielding illicit proceeds. Where offshore structures appeared in the case, they were examined in the context of concealment of fraud proceeds and evasion of enforcement.

The court’s concern was not the existence of offshore trusts per se, but whether defendants were attempting to hide or retain the benefits of unlawful activity. Offshore arrangements used to shield ill-gotten gains are routinely scrutinized and disregarded where necessary to enforce securities laws.

The case reinforces that offshore trusts are not intended—and cannot be used—to conceal proceeds of illegal conduct or avoid regulatory consequences.

SEC v. Greenberg

In SEC v. Greenberg, the SEC obtained a final judgment against Keith Greenberg for violations of federal securities laws, including disgorgement and penalties. Years later, the SEC presented evidence that Greenberg was living an extravagant lifestyle, inconsistent with his claimed inability to pay.

The court’s inquiry focused on non-compliance and potential asset concealment, not on the legality of any trust structure. The case illustrates that courts look beyond formal arrangements when evidence suggests that assets are being diverted or concealed to avoid satisfying judgments.

Here, the possibility of asset concealment or diversion likely played a more important role in the outcome than the mere involvement of an offshore trust.

United States v. Grant

United States v. Grant arose from the government’s efforts to collect substantial unpaid federal tax liabilities from Mr. Grant and related parties. The court found that Mr. Grant owed significant unpaid federal income taxes, and that offshore trusts had been established and funded while those liabilities remained outstanding. The litigation focused not on the formal validity of the trust instruments, but on whether trust assets were being used and controlled in a manner that frustrated lawful tax collection.

A central issue was Mrs. Grant’s retained powers and practical control over the trusts, particularly her ability to influence distributions and the use of trust assets. The court noted that, notwithstanding the offshore situs and formal trustee structure, trust assets were repeatedly transferred into accounts associated with Mrs. Grant’s family, and that “Mrs. Grant directs how these funds are used”. These findings undercut arguments that the trusts operated independently of U.S. persons subject to the court’s jurisdiction.

The court expressly found that Mrs. Grant violated a prior Repatriation Order and failed to show cause for that violation. The court held that she had “clearly violated the Repatriation Order” and therefore held her in civil contempt. The court further emphasized that trust assets continued to be dissipated after judicial intervention, causing “irreparable harm to the United States by dissipating limited assets to which federal tax liens attach”

United States v. Grant should not be read as a judicial determination that the offshore trust itself was ineffective or invalid as an asset-protection structure. The court did not void the trust, condemn offshore trusts as such, or hold that foreign situs alone rendered the arrangement illusory. Instead, the court treated the trust as an existing and operative legal entity and focused its analysis on Mrs. Grant’s retained control, post-judgment conduct, and violations of court orders.

The enforcement measures imposed—repatriation orders, contempt findings, and injunctive relief—were directed at Mrs. Grant personally, based on findings that she continued to direct the use of trust distributions and dissipated assets subject to federal tax liens after judicial intervention. As the court found, “Mrs. Grant directs how these funds are used,” and she “clearly violated the Repatriation Order,” causing irreparable harm through post-judgment dissipation of encumbered assets.

Accordingly, Grant does not stand for the proposition that the trust failed because of any inherent defect in its structure. Rather, it illustrates the limits of asset-protection planning where a U.S. court finds continuing control and noncompliance by a person subject to its jurisdiction. The case underscores that offshore trusts may remain legally intact under foreign law while still exposing U.S. persons to coercive remedies when their conduct undermines claims of separation or impossibility.

In this sense, U.S. v. Grant should not be understood as a case about the intrinsic effectiveness or failure of offshore trusts themselves.

U.S. v. Plath

In United States v. Plath, the court found Mr. Plath in civil contempt for failing to comply with IRS summonses and a court order directing him to produce requested documents. The contempt finding was based on noncompliance with lawful investigatory demands, not on the use of offshore entities or asset-protection arrangements.

Consistent with established contempt principles, the court treated the sanction as coercive rather than punitive, emphasizing that incarceration or custody could continue only until compliance was achieved. As courts have repeatedly explained, civil contempt is intended to compel obedience to court orders, and the contemnor “carries the keys of his prison in his own pocket” by choosing whether to comply.

Accordingly, Plath does not reflect a failure or judicial rejection of offshore planning. Instead, it illustrates the consequences of refusing to comply with IRS summonses and court orders, including the possibility of civil contempt and confinement until compliance is forthcoming.

Offshore trusts or foreign arrangements, where they exist, may not be used to evade lawful tax obligations or frustrate tax enforcement.

Eulich v. United States

In Eulich v. United States, the court addressed enforcement of IRS summonses issued as part of an investigation into the taxpayer’s financial affairs. The IRS sought documents and testimony relating to a Bahamian trust and related entities, and the taxpayer resisted compliance with the summonses.

The court rejected the taxpayer’s challenges and enforced the summonses, reiterating that the IRS need only show a legitimate investigatory purpose, relevance of the requested information, and compliance with administrative requirements. Once that showing is made, the burden shifts to the taxpayer to demonstrate why enforcement would be improper. The court found no basis to excuse noncompliance and ordered enforcement of the summonses, notwithstanding the foreign trust structure.

The decision does not turn on any defect in the offshore trust itself. Rather, it reflects the well-established principle that foreign trusts and entities do not shield relevant records from IRS summons authority, and that taxpayers must be prepared to substantiate their positions with documentation.

The takeaway is evidentiary rather than structural. Eulich underscores the importance of maintaining complete records and being able to produce evidence responsive to IRS summonses; it does not represent a judicial rejection of offshore trusts as such.

FTC v. AmeriDebt Inc.

FTC v. AmeriDebt, Inc. arose from an enforcement action brought by the Federal Trade Commission alleging violations of Section 5 of the Federal Trade Commission Act. The FTC alleged that AmeriDebt engaged in deceptive acts and practices in connection with the marketing and sale of debt-management services to financially distressed consumers.

The court found that the FTC had presented substantial evidence that AmeriDebt misrepresented material aspects of its services, including the nature and amount of fees charged, the role of affiliated entities, and the benefits consumers could reasonably expect from enrolling in AmeriDebt’s programs. The court noted that AmeriDebt’s promotional materials and representations were likely to mislead consumers acting reasonably under the circumstances, particularly given that the target audience consisted of individuals facing serious financial hardship .

The opinion further reflects that the FTC’s claims were supported by consumer complaints, documentary evidence, and testimony demonstrating that fees were often higher than disclosed and that consumers were not adequately informed about how payments would be allocated. Based on this record, the court concluded that AmeriDebt’s representations were deceptive and material, and therefore actionable under the FTC Act .

Importantly, the case does not involve offshore entities or asset-protection structures. Rather, it is a consumer-protection case focused on truthfulness, transparency, and accuracy in marketing financial services, and the legal consequences of misleading vulnerable consumers.

United States v. Rogan

This case arose under the False Claims Act and concerned a hospital administrator’s role in submitting false Medicare and Medicaid reimbursement claims to the United States.

The government alleged—and the court found—that Rogan participated in a scheme to conceal illegal physician referral arrangements and kickbacks in violation of the Stark Amendment and Anti-Kickback Act, while causing the hospital to submit claims for reimbursement that failed to disclose those violations. The Seventh Circuit held that omissions in the reimbursement claims were material, explaining that a statement or omission is material if it is “capable of influencing” the government’s payment decision, regardless of whether enforcement was certain.

The court rejected Rogan’s argument that the government had to prove actual reliance on the false statements, noting that “the truth would have revealed that reimbursement is illegal,” and affirmed a judgment requiring repayment of the full amount received on the false claims. The decision emphasizes that fraud statutes are designed to protect the public fisc and do not depend on the diligence or attentiveness of government officials reviewing claims.

Importantly, U.S. v. Rogan does not involve offshore trusts, asset-protection structures, or foreign entities. It is a case about domestic healthcare fraud and false claims submitted to the government, and the severe financial consequences that follow from unlawful conduct.

As is well known, offshore trusts or other legal structures cannot be used to legitimize, conceal, or avoid liability for illegally obtained funds.

Indiana Investors v. Victor Fink

In Indiana Investors v. Fink, the defendant transferred assets into a domestic trust structured to allow a future shift of control offshore upon the occurrence of legal threats. Before that transfer could occur, plaintiffs obtained temporary restraining orders, freezing accounts and preventing any migration of control.

The case highlights that until trust administration and control are actually moved offshore, U.S. courts retain full authority over trustees, protectors, and financial institutions within their jurisdiction. The trust remained vulnerable because control had not yet left the United States.

This decision illustrates a structural—not doctrinal—point: asset protection strategies relying on future offshore transfers are ineffective until implemented, and remain subject to U.S. court orders in the interim.

Gilmore Bank v. AsiaTrust New Zealand Ltd.

In Gilmore Bank v. AsiaTrust New Zealand Ltd., the California Court of Appeal held that California courts could exercise specific personal jurisdiction over AsiaTrust, a New Zealand trust company, based on its purposeful and ongoing contacts with California residents. The court found that AsiaTrust had “created continuing obligations between itself and California residents, purposefully directed its activities towards California residents, and purposefully derived benefits from its activities in California”.

The court emphasized that AsiaTrust drafted and negotiated trust documents with California trustees and counsel, communicated regularly by email and telephone with California residents, invoiced and received fees in California, and repeatedly wired trust funds into California bank accounts pursuant to instructions from California-based trustees. These activities established a substantial connection between AsiaTrust’s California contacts and the judgment creditors’ claims.

The decision did not involve a court invalidating or “defeating” an offshore trust. Rather, the holding was jurisdictional: because AsiaTrust purposefully availed itself of the benefits of conducting trust business with California residents, it could be required to defend itself in California litigation arising from those activities. As the court explained, exercising jurisdiction was “fair and reasonable” given California’s strong interest in enforcing its judgments and the plaintiffs’ interest in effective relief.

THE REAL PATTERNS OF FAILURE

The cases mentioned are not failures of FAPT law, but failures in execution:

Retained Control / Self-Created Impossibility

Some cases involve the settlor retaining control over the trust, or creating a defense that is impossible to support while still controlling the assets. FTC v. Affordable Media (Anderson) serves as a prime example. The debtors in this case were protectors of the trust, lied under oath, and had the power to repatriate the assets. No serious FAPT professional would set up a trust like this today.

Fraudulent Transfers After Legal Trouble

Transferring assets offshore after a lawsuit, bankruptcy, or judgment is a guaranteed recipe for failure, regardless of whether the trust is domestic or foreign. Cases like In re Portnoy and Fortney v. Kuipers failed not because the trusts were offshore, but because the transfers were fraudulent.

Criminal Acts / Divorce / Tax Fraud

Courts tend to be unsympathetic (or even unforgiving) in cases involving criminal fines, restitution orders, or divorce settlements. A DAPT would not have withstood these situations either.

U.S. Contempt Power Over the Debtor

A common misconception is that U.S. courts can compel foreign trustees to release assets. They cannot. When U.S. courts jail debtors, it is not to compel trustees to release assets, but to pressure the debtor into complying. The trust itself does its job: the assets remain offshore. Whether the debtor sits in jail or requests the repatriation of the assets is their choice, not a legal failure of the trust.

THE JURISDICTIONAL ADVANTAGE

Domestic trusts remain under U.S. jurisdiction and subject to U.S. court orders. A domestic judge can compel a trustee within their reach to turn over assets. That is a significant vulnerability. Offshore trusts, on the other hand, add jurisdictional insulation. While courts can hold someone in contempt, they cannot compel a foreign trustee governed by the laws of another country to act.

Therefore, from a purely asset protection standpoint, offshore trusts, when set up timely and properly, offer significantly stronger protection than domestic trusts. The case law does not contradict this; it reinforces the need for proper planning, regardless of jurisdiction.