A client told me he had purchased a vacation condo in Central America and titled the condo in an offshore trust which he had established himself in a Carribean island. The client had found an offshore company to act as trustee.
The trustee company provided for nominal charge a standard offshore trust agreement. The client had asked me to review the trust agreement and advise whether I though the agreement protected his condo.
I told the client that the trust agreement does not protect him even though it is an “offshore trust”. A creditor or bankruptcy trustee can take over the clients rights under the agreement. The creditor or trustee could either remove the trustee and appoint its own trustee, order the trustee to dissolve the trust, or exercise rights to revoke the trust. The agreement is another example of a foreign trust plan that reserves too much power to the settlor/beneficiary of the trust. If the person who set up the trust and is the beneficiary of the trust reserves power over trust assets, a creditor or bankruptcy trustee can take over those same powers over the person’s assets they are trying to protect.
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