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There are many ways to legally hide and protect your assets from unscrupulous lawsuits, hungry creditors, and bitter divorces. The different options available all have their own unique features, benefits, and drawbacks.
One thing to know is that a few of these options clearly stand above the rest in the level of protection and privacy which they offer.
One such example is that of an Offshore Asset Protection Trust, which is unparalleled in its ability to protect your assets from lawsuits whilst simultaneously offering numerous other uses and benefits.
Trusts consist of three parties: the grantor (i.e. you), the trustee, and the beneficiaries. With ordinary trusts, the grantor cannot also be the beneficiary. In other words, the one who endows the trust with funds and assets cannot simultaneously reap the benefits of those assets. The situation is quite different with Asset Protection Trusts.
The primary difference between a domestic and offshore trust is that an offshore trust is in a foreign overseas jurisdiction. Having an offshore structure outside of the country where you live is an important aspect of an asset protection strategy. It provides the benefits of having a second legal system in place and makes breaking open the trust most difficult because foreign court orders are usually not recognized.
Furthermore, it is much harder to get access to personal information as most company registries in offshore financial centres are not available to public inspection. Many countries that have a developed regulatory structure have several barriers to entry that prevent parties from being able to indiscriminately make claims.
Countries like Nevis and the Cook Islands for example have a statute of limitations of 1-2 years, must prove fraudulent transfer and in the case of the cook islands, you must post a 100,000USD bail before making your case to the country's court system.
These are just some of the distinctions that make an offshore trust vastly superior to any domestic trust.
An Asset Protection Trust is a special type of trust which is known as a “self-settled” trust. What this means is that you can be both the grantor of the trust and its sole beneficiary.
The only outside party is the trustee, who is appointed to protect the assets in the best interest of the beneficiary. This means, for all practical purposes, you maintain control over the assets, but on paper they are owned and protected by the trust.
Separating assets from your personal estate in this manner has several benefits related to estate planning and tax efficiency. However, the most important benefit which we will look at here is that it provides a bulletproof protection for your assets.
There are two defining features of an Offshore Asset Protection Trust structure which makes it so effective as an asset protection tool. Firstly, there is the fact that the assets in the trust are not legally owned by the grantor.
The trust operates as a separate entity with its own tax number. This means that the assets are not only protected, but also disidentified from your personal name, so they are well-hidden.
If a lawyer does a quick search of your assets, they will not find the assets in the trust as being connected to your estate without some digging. This is even more so the case with offshore APTs. Having an offshore trust in comparison with a domestic trust will provide additional hurdles that will make it much more difficult to break.
Under ordinary circumstances you have full control over the assets in the funds, however, in the case that there is a court order which requires you to hand over your funds to a creditor, the trustee is legally obliged to step in and protect the trust’s assets, and can refuse to hand over the funds.
There is very little that a creditor can do to lay claim over the assets in this case. This is especially true for offshore APTs, as they are in a completely different jurisdiction, far beyond the reaches of domestic courts and lawyers. With specific regulations that prevent a case such as countries like the Cook Islands and Nevis are some of the most well-established jurisdictions in the world precisely because they have iron-clad laws that make it virtually impossible to get access to.
Forcing creditors to:
Fraudulent conveyance has to be proved beyond any reasonable doubt that the beneficiary intended to defraud the particular creditor and that the transfer was done to specifically hide assets that where lawfully theirs.
Lawsuits that are filed against any individual can be held personally liable in many cases. Distancing yourself from your assets can help protect yourself in case anyone comes after you.
Offshore Asset Protection Trusts which are properly formed in the right foreign jurisdiction offer superior asset protection and privacy. Placing your assets in a foreign jurisdiction offers an important additional layer of security, as they are out of reach of local creditors and court orders.
They are also much more difficult to track and connect to your name,
There are certain foreign jurisdictions which are especially conducive for establishing Offshore trusts due to the laws and regulations which govern such entities. One such jurisdiction is the Cook Islands.
Cook Islands’ APTs are protected by layers of legal safeguards and offer the utmost confidentiality. There is extensive case law which demonstrates the effectiveness of Cook Islands Trusts as a legal means for asset protection.
They have consistently proved to be impervious to all kinds of lawsuits and court judgments. Furthermore, owning such a trust can discourage any sensible lawyer from even opening a case against you in the first place. Other well-known and effective jurisdictions include Nevis and Belize.
In the US, there are now a few states in which one can establish a Domestic Asset Protection Trust (DAPT) which offers reasonably good protection for your assets.
The benefit is that Domestic Asset Protection Trusts can be formed quickly and easily, are generally more affordable than Offshore structures, however, the downside is that your assets are still held within your own legal jurisdiction which makes your records more liable to be open to public scrutiny, and makes them much less resistant to legal claims and court orders.
Asset Protection Trusts are not the only way to legally hide and protect your assets. There are numerous other options, including:
These offer limited protection if they are held in an offshore jurisdiction, though not completely confidential, they can be if you have the account held by a Trust and LLC multi-jurisdictional structure.
If you reside in a country that is a member of the CRS then it will be a bit harder. However, your name will not be open to the public and will only be open to governmental tax authorities. The use of legal signatory services, bearer shares, as well as nominee services (depending on the jurisdiction can also add an extra layer of security and confidentiality.
Asset Protection Land Trusts can be used as an effective means to create privacy on beneficial ownership of real estate. It can be used much the same way as a trust, and together in conjunction with an LLC can be effective to create layers of structures that help conceal true ownership which is helpful if you are trying to keep your name unassociated from title deeds. Land trusts are usually revocable and are open to amendments, however, land trusts are primarily used for privacy of ownership and not true asset protection.
Although there are many other ways to protect and hide your assets from creditors, lawsuits, and divorce, none seem to be quite as effective and time-tested as Offshore Asset Protection Trusts if they are properly structured in the best offshore trust jurisdiction.
It is important to realise that these are complex entities. Everyone has unique circumstances that require different solutions which require a professional asset protection planner. What is suitable for you may not be suitable for your neighbour.
It is far easier and more effective to set up your own tailor-made asset protection plan before the storm. Begin taking steps to protect your wealth today, by whatever means is right for you.
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Threats to Your Assets
Global Diversification Planning
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