Ten Things to Know About Offshore Asset Protection Trusts

Offshore asset protection trust law is complicated. You can learn more about offshore trusts and offshore LLCs, but here are ten things you’ll want to know about offshore asset protection trusts:

1. Offshore trusts are designed to place the trust assets and trust parties beyond the jurisdiction of U.S. courts enforcing a domestic civil judgment. Offshore trusts offer asset protection if the trust assets, the trustee, and the trust protector all are located outside U.S. court jurisdiction.

2. Offshore trusts are less effective in personal bankruptcy because bankruptcy courts have jurisdiction to affect your assets wherever they are located worldwide.

3. Offshore trusts are also less effective against IRS collection, criminal restitution judgments, and family support obligations.

4. Even if a U.S. court does not have jurisdiction over offshore trust assets, the U.S. court still has personal jurisdiction over you, the trustmaker, and the courts may try to compel you to dissolve a trust or bring back trust assets if you retain control over the assets or the trustee.

5. You, the trustmaker, will have to relinquish legal rights and control over your trust assets for an offshore trust to effectively protect these assets from U.S. judgments.

6. Selection of a professional and reliable trustee who will defend your trust is more important than your selection of an offshore trust jurisdiction. You should interview, and if possibly personally meet, prospective trustees of your offshore trusts.

7. You cannot change the beneficiaries, trustees, or terms of an irrevocable offshore trust.

8. Offshore trusts are treated as “grantor trusts” for tax purposes meaning that trust income, including capital gains, is treated as your personal ordinary income for U.S. tax purposes.

9. Most internet information about offshore trusts, including most advertising of offshore trusts, is published by document preparation companies that are not attorneys and that do not employ their own attorneys. If you “buy” an offshore trust package from a non-attorney company, you likely will not have effective asset protection.

10. Offshore trusts are complicated and expensive. Consult with an attorney to see if you can both control and protect your assets with more traditional U.S. based asset protection tools before considering offshore trust planning.

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Ten Things to Know About Offshore Asset Protection Trusts