Do you have several high-value assets? Are you in a field like medicine, engineering, or a different high-income industry where you could face judgments in lawsuits? When do you need an offshore trust over other asset protection measures to guard your real estate, investments, cryptocurrency, and other assets?
Offshore trusts maintain your assets in foreign jurisdictions that don’t recognize the authority of a U.S. court order to relinquish assets held in a trust based in that jurisdiction. They offer asset protection, privacy, and other means to protect your assets from creditors or lawsuit judgments.
Reasons To Consider an Offshore Trust
There are several reasons to consider an offshore trust to hold your assets. An offshore trust offers many of the same benefits as other irrevocable trusts, but the jurisdictions best known for offshore trust protection won’t give up the assets held in trust to the home countries of their investors.
Some of the primary reasons to choose an offshore trust include the following:
- Asset Protection: Certain jurisdictions that are popular for offshore trusts are famous for not recognizing foreign court orders to claim assets held in trust within their borders. You can protect your cash, stocks, bonds, cryptocurrency, home, real estate investments, business ventures, and other assets from creditors, civil lawsuits, malpractice claims, and divorce.
- Privacy and Confidentiality: The deed of trust remains private in most foreign jurisdictions, protecting the value of the assets contained in the offshore trust from the public record. Many jurisdictions protect the assets contained in the trust as well as the grantor’s interest in storing their assets in that jurisdiction.
- Diversification of Investments: Can you rely on the same government that can seize your assets to protect them? Diversifying your investments and other assets in other countries with offshore trusts can help you protect your investments in gold, stocks, digital currency, foreign currency, and real estate with additional layers of protection from seizure.
- Protection Against Political Instability: If you see the signs of political shifts in your state, province, or country, storing your assets in a more stable economy and political environment can help protect your assets from tax reforms or seizure of physical assets.
What Is an Offshore Trust, and How Does It Differ From a Regular Trust?
An offshore trust is formed in a foreign country into which you transfer assets for asset protection and tax benefits, among other advantages. These differ from trusts in many grantors’ home countries because foreign jurisdictions often don’t recognize the legal authority of a court order from outside their borders.
The key difference between offshore and domestic asset protection trusts (DAPTs) is that the offshore trust is much harder to reach by the U.S. court system. Since the management of an offshore trust is located in a distant country, they are beyond the normal jurisdiction of state and federal courts. In order to reach trust assets, a plaintiff must bring the lawsuit in the jurisdiction where the trust was established. DAPTs on the other hand are established in the U.S. and can be forced to comply with U.S. court orders.
What Are the Best Offshore Trust Jurisdictions?
“When do you need an offshore trust?” isn’t the only question you must ask. “Where should I set up my offshore trust?” might be an even more important question to answer. Many countries offer legal trust protection, beneficial tax policies, shorter statutes of limitations, and other advantages that make them preferred offshore trust jurisdictions.
Some of the best offshore trust jurisdictions include:
- St. Kitts and Nevis is one of the most protective jurisdictions for asset protection. It is a jurisdiction that allows grantors to create a Trust that require plaintiffs to pay a $100,000 bond to file a claim against a trust in St. Kitts and Nevis.
- The Cook Islands protect assets in trust from court orders with the highest degree of asset protection. The jurisdiction requires a hefty bond to file a case against a trust in the Cook Islands. The Cook Islands also requires an extremely high standard for the burden of proof on a plaintiff to prove a fraudulent transfer of assets by a grantor.
- Belize trusts protect assets with no mandatory minimum transfer amount and no look-back period for fraudulent asset transfer claims.
These are some of the world’s most well-established offshore trust jurisdictions. There are many other countries where offshore trusts are popular asset protection strategies such as:
- British Virgin Islands
- Cayman Islands
- Isle of Mann
- St. Vincent and Grenadines
Factors To Consider When Setting Up an Offshore Trust
Creating an offshore trust is a complex procedure. There are many factors to consider when choosing an offshore trust for asset protection, such as the following:
- Where do you want to establish your trust?
- Who will manage your trust as trustee?
- What local laws must your trustee obey if a creditor seeks a claim against your trust?
- How much will it cost to establish and maintain your trust?
Choosing the Right Jurisdiction
The jurisdiction where you establish your trust should be economically and politically stable, protect your assets from seizure by the U.S. court system, offer beneficial tax structures, and allow you to move assets into your trust or distribute them to beneficiaries without excessive oversight.
Selecting the Right Trustee and Advisor
If you establish your offshore trust in the Cook Islands, you need a Cook Islands trustee to manage your trust. However, many people don’t like the idea of transferring large sums of money or valuable assets overseas for management by a foreign trustee.
Several companies offer trust protector services to monitor how a trustee manages your trust, including NZ Protectors, Southpac, and Asiaciti. These companies can terminate a trustee who isn’t acting in your best interests and appoint a replacement trustee on your behalf.
Ensuring Compliance With the Local Laws and Regulations
Trust companies do their due diligence to ensure that the clients they represent are legitimate and that they legally obtained their wealth. Many trust providers adhere to “know your client” rules and must maintain their reputations to keep their operating licenses.
Understanding the Costs and Fees Involved
Most costs and fees to establish your offshore trust will include attorney fees and administrative costs. You can reasonably expect to spend about $10,000 to $50,000 for the initial cost, plus $5,000 to $10,000 in annual administrative fees if you choose the right service providers for your offshore trust. The cost can increase significantly if you want a top attorney to create your trust.
Advantages of Creating an Offshore Trust
When do you need an offshore trust, and what are the advantages of having one? You need an offshore trust if you have significant wealth or valuable assets or have a career in a highly litigious field, such as medicine, professional sports, or architecture. Advantages include:
- Asset protection
- Tax benefits
- Higher burden of proof for fraudulent transfer claims
- Shorter statute of limitations for fraudulent transfer claims
- Bonds to file a claim
- Some jurisdictions don’t allow foreign claims
- Attorneys may not work on contingency in some jurisdictions
What Are the Potential Risks of an Offshore Trust?
There are some prospective risks or downsides to transferring assets into a foreign trust, including:
- Fines for failing to report on trust assets and transfers to the IRS
- Foreign trustees charge yearly fees in order to manage the trust
Appointing a trust protector can greatly reduce the risk of trustees acting in bad faith.
Contact Blake Harris Law To Create an Offshore Trust for Your Assets
So, when do you need an offshore trust? Now that you know, consider what you need to create an offshore trust for your assets. Contact us today at Blake Harris Law by phone at 786-559-1209 or by email at Info@BlakeHarrisLaw.com to schedule a consultation with an asset protection attorney.