Written by Kevin Wessell, Founder of Asset Protection Planners · Reviewed by Bryson Stephen, Attorney at Law
The strongest Asset Protection you can establish is an offshore strategy involving an LLC and a Trust. What offshore asset protection does, is it removes your entire asset portfolio out of the U.S. legal system. You essentially put your assets into a legal system that has the strongest asset protection laws in the world.
With this type of asset protection plan, you are in 100% control of all your assets. When there is time of legal duress, the offshore Trustee can step in to protect you. The Trustee company is not subject to your local court orders. So they can refuse to comply with demands to bring back the funds. A trust protector, who you designate to supervise the asset management, can oversee the trustee. Meanwhile, you can advise the trustee as to how you want the trust company to invest your assets.
Why Go Offshore?
Establishing an offshore trust in the Cook Islands or Nevis is one of the strongest asset protection strategies. When you have an offshore asset protection plan, it ties the hands of the local judge. They do not have jurisdiction over foreign trustees. Plus, a legal opponent must then get through tremendous legal hurdles to threaten your wealth. Your assets are located in another jurisdiction. This means that if your legal enemy pursues them, they must pursue them in that jurisdiction and through its legal system. Now your legal enemy has to post tens of thousands of dollars so that a committee will review the case. The committee assesses if they will even allow their courts to hear the case.
This means that they first have to pay a sizable deposit, up to $100,000 in Nevis. Then they have to hire local representation and cannot have their attorneys work in the foreign jurisdiction. This is generally enough to deter most legal pursuits. However if the case does go to court, there is a statute of limitations.[1] The case is either opened and closed in one to two years, or it is thrown out. These are formidable legal hurdles, and the process takes time. The costs and odds of winning are so steep that your assets are likely to avert the attack. Seizures from properly structured offshore asset protection trusts are exceedingly rare. In fact, as of this writing, we are not aware of any assets having been seized from an offshore asset protection trust that we have established.
How it Works
- Client sets up a properly structured offshore asset protection trust.
- So client can control day to day activities, client establishes an Offshore Limited Liability Company that the trust owns 100%. The LLC holds accounts. Client manages LLC. (String of control = Manager of LLC.)
- When there is an event of legal duress against the Manager of the LLC, the Trustee is duty-bound (under the terms of trust) to protect trust assets. At that point they remove the Manager for the period that the event of duress exists. When the event of duress is over, the Trustee can reappoint the Manager.
Offshore Asset Protection Plan Benefits
- So client can control day-to-day activities, client is Manager of the Offshore LLC
- When the Manager is subject to legal duress, the Trustee must remove the Manager for the period of the legal duress and take up active management of the LLC. When the Trustee is the Manager, the Trustee can accept advice from the independent legal advisers of the client (the grantor of the Trust)
- Outside courts do not have jurisdiction over offshore trustee, therefore do not have the authority to enforce seizure of trust assets
- This structure strengthens the client’s position against a fraudulent transfer argument, since no transfer of assets occurs — only a change in LLC manager, which does not itself constitute an asset transfer.
- If assets are transferred after legal issues arise, the statute of limitations on fraudulent transfer is one to two years. Moreover, in the Cook Islands a plaintiff must prove this in offshore jurisdiction’s courts beyond a reasonable doubt. This is a very high legal hurdle, especially when one can offer legitimate international investing and diversification reasons.
As an alternative to the offshore asset protection trust, there is a legal tool exclusive to our organization called the Trigger Trust ®. The trigger trust is an offshore/domestic hybrid. When legal bullets get too close your co-trustee can trigger the built-in offshore component of the trust.
Note
[1] Cook Islands International Trusts Act 1984, §13B. To establish a fraudulent transfer, a creditor must prove beyond reasonable doubt that the transfer was made with the principal intent to defraud that creditor, and that the settlor was either insolvent at the time of transfer or did not retain sufficient assets outside the trust to satisfy the creditor’s claim. Claims must generally be brought within two years of the transfer, or one year from when the creditor discovered (or should have discovered) it, whichever is earlier.
About the Author
Kevin Wessell has worked in asset protection planning since 1991 — over 35 years — and is the founder of Asset Protection Planners. His firm has structured offshore trusts, LLCs, and equity-stripping strategies for business owners, physicians, and real estate investors nationwide.
Legal Review
This article was reviewed for accuracy by Bryson Stephen, Attorney at Law. While every effort has been made to ensure accuracy, no guarantee is made that this content is complete or error-free, and laws are subject to change. This content is for informational purposes only, does not constitute legal advice, and does not create an attorney-client relationship. For guidance specific to your situation, consult with a licensed attorney.
