Offshore Asset Protection Trust
Most asset protection professionals consider the offshore asset protection trust as the premier legal tool that offers the strongest asset protection benefits in the world – we agree. The offshore trust jurisdiction with the strongest case law history is the Cook Islands.
Offshore Trust Mechanics
The primary function of establishing a trust offshore is that your trustee is bound by fiduciary duty to protect the trust assets for the beneficiaries, including from foreign judgements, meaning your assets are moved outside of the reach of the US legal system.
Offshore trusts are used in concert with offshore companies and bank accounts. Typically an LLC is owned by the trust as a management tool, our clients can manage that company with signature authority over bank and investment accounts with complete protection.
Asset protection trust provisions are carefully written so that in the event of legal duress the LLC manager role is passed to the trustee who acts according to the trust deed. Once any legal duress is no longer present, the trustee can assign management back to you.
The Cook Islands Asset Protection Trust is one legal tool with a flawless case law history of protecting assets. Cook Islands is located south of Hawaii. The Nevis Asset Protection Trust is patterned after that of the Cooks and has some very favorable legislation that, in some respects, has surpassed it. You can read about the 12 Nevis trust benefits such as non-recognition of foreign judgments and rejecting the Mareva injunction. The Mareva injunction is the British equivalent of the temporary restraining order (TRO).
Anatomy of an Offshore Asset Protection Trust
A trust is an agreement that defines roles and the relationship between a trustee, the settlor and trust beneficiaries.
Trust provisions create a binding legal document called the “Trust Deed”.
A trust is a legal entity that can hold title to assets, real property, manage said assets and distribute them to designated beneficiaries.
Several important decisions need to be made when establishing a trust, offshore or not. The type of trust, its duration and other important details such as revocation, discretion and the rights, duties, obligations and roles of the trustee must be clearly defined.
You can create a revocable trust, which is exactly that and can be revoked at any time, or an irrevocable trust with a pre-defined duration. Discretionary trusts can be revocable or irrevocable and offer a lot of inherent flexibility with distributions and trustee actions, such as adding beneficiaries. Discretionary trusts puts a lot of authority into the hands of the trustee which requires careful selection of the individuals or company providing that service role.
Most popular and safe offshore trust jurisdictions have other asset protection, taxation and confidentiality amenities for foreign investors. Assets that are placed in these trust jurisdictions escape some legal burdens of being titled in the settlors home country, such as inheritance taxation. Financial privacy is another amenity that is unparalleled, followed by confidentiality.
Most highly regarded trust jurisdictions boat low/no taxation and regulation legal systems for foreign investment with experienced trust companies, confidentiality laws with regulations based on English common law.
Forming an offshore trust requires a detailed assessment of the assets involved as well as the goals and intent of the stakeholders. Trusts need to be maintained as asset values change, beneficiaries marry, divorce and/or have children and anytime there is a legal update to either the trust jurisdiction or that of the settlor’s domicile.
Offshore trusts provide the most protection of your assets from any predation, scrutiny, litigation and civil issues. Although the most costly out of other asset protection options, the offshore asset protection trust is the only way to establish peace of mind judgment proof protection of your financial future.