An Offshore Asset Protection Trust (OAFT) is an effective tool for protecting assets from future lawsuits and potential creditors. A trust is established under the laws of a foreign country and managed by a professional trustee not subject to the jurisdiction of the settlor’s home country.
An OAFT can provide peace of mind to people whose wealth makes them vulnerable to legal threats, like physicians, business managers, and entrepreneurs.
In the United States, the cost of defending a lawsuit can quickly amount to hundreds of thousands or millions of dollars. In the event of a lawsuit, assets placed in an offshore asset protection trust will be extremely difficult to reach, even if the plaintiff gets a favorable judgment in a U.S. court. The most reputable offshore jurisdictions are the Cooks Islands, Nevis, and Belize which have favorable laws and court systems for asset protection trusts.
There are Domestic Asset Protection Trusts (DAPT) available, but they can come with multiple disadvantages in comparison to what an Offshore Asset Protection Trust can offer.
Some of the disadvantages to a Domestic Asset Protection Trust are:
Essentially, in order for a Domestic Asset Protection Trust to work, you must have the perfect trifecta. One, you must live in a state that permits DAPTs. Two, a lawsuit against you must be filed in that DAPT state. And three, your DAPT must be over ten years old.
Knowing some of the disadvantages to have a Domestic Asset Protection Trust, it’s important to understand what assets are protected with an Offshore Asset Protection Trust and the advantages of an OAFT should you consider this option over a DAPT.
An offshore asset protection trust can hold a variety of different assets:
Advantages to an Offshore Asset Protection Trust are:
There are only a handful of jurisdictions around the world with laws drafted to support the highest levels of offshore trust protection. The island nation of St. Kitts and Nevis as well as the Cook Islands serve as the offshore sites of administration for the trust assets. The Cook Islands is widely recognized by legal experts as the nation with the most favorable asset protection laws and the most tested case law history. That being said, assets do not need to be deposited in these same countries, they can just as easily be placed in internationally recognized banking centers such as Zurich, Switzerland or Luxembourg.
If you want to go forth with an Offshore Asset Protection Trust, it is essential that you secure a trusted attorney with experience in establishing foreign trusts like the team at Blake Harris Law. From there, you and your attorney will go through the process of creating legal documentation, a Trust Agreement Formation, that defines the separate parties who will be part of the trust and how it will be managed. Then you will transfer your assets to the trust. And lastly, trust management is established with the responsibilities and obligations as what is outlined in the trust.
Despite what many advertisements say, Offshore Asset Protection Trusts are not bulletproof but they sure are very secure. An OAFT is an effective tool for protecting assets from future lawsuits and potential creditors. A trust is established under the laws of a foreign country and managed by a professional trustee not subject to the jurisdiction of the settlor’s home country. In the event of a lawsuit, assets placed in an OAFT are extremely difficult to reach, even if the plaintiff gets a favorable judgment in a U.S. court. Often, due to the complexities of foreign legal systems, lawsuits aimed at attaining assets within an OAFT could go on for years, dropped, or settled. The most reputable offshore jurisdictions are the Cook Islands, Nevis, and Belize, which have favorable laws and court systems for asset protection trusts.
For more information on how to learn about the highest form of asset protection that Blake Harris Law offers, visit our Cook Islands Trust page.
The typical structure of an Offshore Asset Protection Trusts consists of:
Settlor: He/she is the one who creates a trust and places assets under it—that’s you.
Trustees: There can be more than one trustee. The trustee(s) is the one who holds the assets’ legal title and administers the trust. Also, all trustees are legally bound to protect a settlor’s assets on behalf of the trust’s beneficiaries.
Trust Protector: He/she is responsible for appointing trustees and overseeing their activities. The settlor appoints the protector to supervise the trust and to ensure that the trustee is acting in the settlor’s best interest. The protector may be an attorney, family member, or some other trustworthy person.
Beneficiary: He/she is the one who benefits from the trust. For most trusts, the beneficiary and the settlor are the same person. But the settlor may add other persons (such as family members or other loved ones) to the trust.
An Offshore Asset Protection Trust is 100% worth it. Many high-net-worth people have lost their fortunes to creditors, malpractice claims, lawsuits, and business disputes. In order to protect your hard-earned wealth and gain peace of mind from potential high-risk situations, it is best to establish an OAFT with a trusted attorney.
If you are looking to set up an offshore trust or are looking for guidance with IRS offshore reporting requirements, please contact Blake Harris Law.