Will I Be Held in Contempt If I Create an Offshore Trust?
Why Properly Structured Offshore Trusts Remain the Strongest Asset Protection Tool in the World
Offshore asset protection trusts, such as those formed in the Cook Islands, sometimes give rise to concerns of possible civil contempt charges. This narrative is not only exaggerated, but also inaccurate. When structured correctly, offshore trusts offer the most reliable and time-tested asset protection available anywhere. They can withstand legal scrutiny, pressure from U.S. courts, and operate entirely within the boundaries of international law.
The fear that someone will be held in contempt of court simply for creating an offshore trust is based on a misunderstanding of both the law and the case history. In reality, no one is held in contempt because they have an offshore trust. Contempt arises only when individuals engage in misconduct, such as fraudulent transfers, dishonesty, or retention of control over the trust, regardless of whether a trust is domestic or offshore.
My firm has likely drafted more Cook Islands trusts over the last several years than any other law firm. Not one of our clients has been held in contempt for having an offshore trust. That record speaks for itself: offshore trusts are safe, predictable, and exceptionally effective when done correctly.
The Law Is Clear: Creating an Offshore Trust Is Not Contempt
To be held in contempt of court, a person must violate a court order or obstruct judicial authority. Establishing a foreign trust, in and of itself, is not a violation of any law or court order. U.S. courts have repeatedly acknowledged that individuals are allowed to engage in pre-litigation planning and to protect their assets using lawful tools, including foreign trusts.
Where clients get into trouble is not in creating the trust, but in misusing it. Every instance of contempt in the case law stems from one of three issues:
- Retaining control over the trust.
- Transferring assets after a lawsuit or judgment has already begun. Transferring assets after a lawsuit has begun or a judgment has been entered—without properly setting aside funds to cover the potential liability of the lawsuit or the liability of an entered judgment.
- Engaging in fraud, dishonesty, or criminal conduct.
None of these problems are inherent to offshore trusts. They are the result of poor planning, bad timing, or outright misconduct. These are issues that proper legal counsel avoids entirely.
What the Real Cases Show: Offshore Trusts Work Exceptionally Well
Critics frequently point to a handful of cases as supposed evidence that offshore trusts “don’t work.” But when these cases are examined carefully, they tell a very different story—one overwhelmingly favorable to offshore planning.
FTC v. Affordable Media (“The Anderson Case”)
Often cited as the “failure” of a Cook Islands trust, this case demonstrates the opposite. The court held the Andersons in contempt because they lied under oath and retained powers inconsistent with a properly drafted trust. Yet despite intense pressure, Cook Islands trustees never repatriated the assets. The trust structure itself held firm.
In re Lawrence
Again, contempt stemmed from the debtor’s own behavior—retained control, questionable timing, and inconsistent testimony. The offshore trustee still did not return funds to the U.S. The trust worked; the settlor did not.
SEC v. Bilzerian
The court sanctioned Bilzerian for bad-faith concealment and manipulation of assets. The offshore trust was not the issue. His conduct during the litigation was.
These cornerstone cases all reinforce the same conclusion: properly structured offshore trusts remain resilient even under extraordinary pressure. Contempt arises when a debtor refuses to comply with orders—not because the trust fails.
“After-the-fact” Transfers: Why Timing Matters
Cases such as SEC v. Solow, In re Portnoy, and Fortney v. Kuipers all involve transfers made after litigation had begun. Courts might not look favorably on late-stage transfers, whether the assets go into a foreign trust or a domestic trust. If a defendant has received an order from the court preventing him from moving funds, then transfers can clearly give rise to a contempt charge.
These cases are not failures of offshore trusts. They are failures of clients who attempted to retrofit asset protection after they were already in legal jeopardy.
Criminal and Bad-Faith Conduct: Trusts Are Not the Problem
A large number of cases critics cite such as Thompson, Butselaar, Schneider, Brennan, Greenberg, Rogan, AmeriDebt, involve tax evasion, fraud, or outright criminal conduct. Offshore trusts were merely adjacent to the misconduct, not the cause of any legal consequence. No asset protection tool, foreign or domestic, can insulate criminal behavior.
Jurisdictional Cases Reinforce Offshore Strength
Other cases, such as Indiana Investors v. Fink and Gilmore v. AsiaTrust, simply demonstrate that if a trust is still controlled domestically or if a trustee creates significant connections to the U.S., domestic courts may assert jurisdiction. Again, this underscores the importance of proper structuring, not a weakness in offshore trust law.
U.S. v. Grant: The Best Illustration of Offshore Strength
Perhaps the most impressive case in the entire body of asset protection jurisprudence is U.S. v. Grant. Despite a $36 million IRS claim and an imperfectly drafted trust that gave Mrs. Grant undue control, the IRS still could not seize trust assets. If anything, this case highlights the strength of offshore protection.
The Consistent Pattern: Offshore Trusts Succeed When Done Right
A properly structured Cook Islands trust, with an independent trustee and no retained control, created before any legal conflict arises, is virtually impregnable to U.S. court orders. It is the gold standard in asset protection for a reason: it works.
When clients follow proper protocol and work with experienced counsel, offshore trusts provide stability and security that no domestic structure can replicate. This is also why, despite establishing vast numbers of Cook Islands trusts over many years, none of our clients has ever been held in contempt for forming or maintaining such a trust.
Conclusion: The Case Law Unmistakably Favors Offshore Trusts
The myth that offshore trusts lead to contempt is not supported by the legal record. Courts do not penalize clients for having an offshore trust; they penalize clients for dishonesty, improper transfers, or illegal activity, issues that can arise regardless of the existence of an offshore trust.
When created correctly, offshore trusts are not only safe and compliant, but they are also the most effective asset protection structures available anywhere in the world.
Offshore trusts offer jurisdictional insulation. While courts can hold someone in contempt, they cannot compel a foreign trustee governed by the laws of another country to act.
From a purely asset protection standpoint, offshore trusts, when set up timely and properly offer safe and significantly stronger protection than domestic trusts. The case law does not contradict this; it reinforces the need for proper planning, regardless of jurisdiction.
