The more assets you hold, the more attractive a target you become for litigation and other claims against your property. Responsible asset management must include protections against attachment of your assets, both to insulate you against spurious claims and to ensure that a single unexpected liability doesn’t wipe out all of your assets.
While irrevocable trusts within the United States provide a degree of protection against these risks, certain countries provide extra layers of protection for the grantor and beneficiaries of an asset protection trust. For example:
- Appointment of an international trustee – usually a foreign financial institution – can place trust assets outside the control of the grantor, insulating them from creditors
- Creditors pursuing the assets will have to seek enforcement in a local court in a foreign jurisdiction, which may have more stringent rules and laws favorable to asset protection and privacy objectives (e.g., Cook Islands, Nevis, Belize, etc.)
- Where a creditor alleges a fraudulent transfer, certain countries have shorter statutes of limitations or place a higher burden of proof on the creditor
- Some countries require posting of a large bond before a creditor can pursue a claim, making it more expensive and less appealing for creditors to pursue offshore asset protection trust assets
Generally, the Cook Islands, off New Zealand, is considered the best location for a U.S. resident to create an offshore asset protection trust. However, there are many other countries with favorable legal structures that are home to many asset protection trusts. The right option for you will depend on your specific goals and the type of property you plan to place in the trust, among other factors.
While an offshore asset protection trust can provide significant protections against future civil liability, it is important to understand the limitations of this type of trusts, as well. For example:
- An offshore asset protection trust is designed to protect against future liability, not to hide or insulate assets from an existing obligation
- The protections that make it difficult and unattractive for civil creditors to pursue offshore trust assets do not apply to governmental entities such as the Internal Revenue Service (IRS) – an offshore asset protection trust is NOT designed to protect assets from governmental entities
- Offshore asset protection trusts are most effective when they hold property such as foreign investments; there are limitations on their effectiveness in protecting property located within the United States
If you’re considering protecting your assets from future liability with an offshore asset protection trust, getting knowledgeable guidance should be your first step. The attorneys at Milvidskiy Law Firm LLC are experienced in managing complex asset protection issues, and can advise you as to the best approach for you.