Asset Protection Planning
is proactive legal action that protects your assets from threats such as creditors, divorce, lawsuits and judgments. Call now to let our attorneys help you.
Trusts can protect your assets, but domestic trusts have serious limitations in this regard. For better asset protection, consider a foreign, or offshore, asset protection vehicle.
When it comes to offshore asset protection, there is no one-size-fits-all. The most effective offshore asset protection is the one best suiting your purposes. This could include countries that do not recognize foreign judgments, ones that offer divorce protection, protection of personal assets, or business protection.
With an offshore asset protection trust or similar entity, you convey assets to the trust or entity. The best example of this, is putting your assets into an offshore LLC. Then your offshore trust owns the LLC. You are the LLC manager. Although no longer in your name, you control these now-protected assets in much the same way as before. Then, when someone strikes you with a legal attack, your trustee steps in as manager of the LLC. Your local courts do not have jurisdiction over the foreign trustee/law firm. Thus, your opponent cannot attach these assets in a judgment.
Here are four examples of jurisdictions offering extensive opportunities for asset protection. All of them have the advantage of stable governments and conducting business in English.
Most offshore asset protection trust jurisdictions allow a timeframe during which creditors can bring fraudulent conveyance claims against a trust. That is not the case in Belize. A Belize trust protects assets from fraudulent conveyance claims as soon as you establish the trust and convey assets into it, provided you have established it correctly. For all intents and purposes, once a trust is properly established in Belize and assets conveyed thereto, their courts cannot rule it a fraudulent conveyance.
This Central American country, formerly known as British Honduras, also boasts some of the lowest fees and other costs associated with establishing a trust.
In Belize, trusts are exempt from taxation. Moreover, and there is no requirement for any filing of returns, reports, or similar material. This is as long as the settlor — the party settling property in the trust — or the beneficiaries are not Belize residents. Additionally, to be tax-free the trust cannot include Belizean real estate. Keep in mind, the IRS taxes US people on worldwide income.
In addition, Belize does not require any minimum capital amounts for establishing a trust. You may establish a Belize trust using any currency. Plus, there is no requirement for Belizean directors or other officers. Such trusts may have only one shareholder or subscriber, and corporations or trusts may hold the share.
Belizean trusts are among the most flexible of offshore asset protection choices. All offshore trusts must have resident trust agents in Belize. The agent’s office serves as the trust’s office. As such, the agent keeps information regarding the trust to comply with anti money laundering regulations. The trust agent must have the contact information, names and addresses and copies of passports for the trust’s settlor, trustee, beneficiaries and protector.
Experts in U.S. and British law helped to write Belizean trust laws. To date, there has been no compromise of any Belize Trust.
Located in the South Pacific near New Zealand, the Cook Islands was among the first countries to offer offshore asset protection trusts or foundations as lawsuit protection vehicles. The legislature did so via the International Trust Amendment Act in 1989. Notably, asset protection experts still rank it among the best for these purposes. A trustee manages the trusts. A client can even appoint a trust protector to oversee the trustee.
A foundation more closely resembles a corporation than a trust. It does not have shareholders or other types of owners. A foundation can enter third-party agreements. In addition, it can even file civil lawsuits on its own. There is a caveat — a foundation might also become a defendant in a civil suit. Foundations have benefits, however. For example, if the founder declares bankruptcy, there is no voiding of the foundation. Unlike a trust, a foundation cannot engage in trading or commercial activity. However, it is a suitable alternative for estate and charitable planning purposes.
In the Cook Islands, the statute of limitations for a creditor to claim fraudulent conveyance is one to two years after the original action. This depends on various factors. It is one year from the time the trust was formed and funded. Alternatively, it is two years from the cause of action; that is, the event that triggered the lawsuit. For U.S. residents, that means by the time the case winds its way through the legal system, the Cook Islands statute of limitations has already expired. In addition, the Cook Islands does not recognize punitive damages.
Although it is possible for one to sue a Cook Islands Trust or Foundation, the statutes hold cases shall be held in Cook Islands courts. Thus, the regulations base decisions on Cook Islands law. Anyone winning a case in another jurisdiction against a trust or foundation must subsequently appear in a Court Islands court in order to prevail. Flying from New York City to the Cook Islands is 14 hours one way, with two stops included.
There is another crucial caveat for those attempting to sue a Cook Islands Trust or Foundation for fraudulent conveyance. The standard in the Cook Islands is proof beyond a reasonable doubt. This means that there is no other logical explanation. In the U.S., beyond a reasonable doubt is the standard applied to criminal, not civil, cases.
Not even the U.S. government has been able to break a Cook Islands trust. (Keep in mind we would not intentionally set up a Cook Islands trust to protect assets against a government agency.)
Nevis, a former British colony located in the Caribbean, southeast of Florida, has one of the world’s strongest asset protection laws. In addition, the Nevis government intends to remain one of the top offshore asset protection locations. Moreover, it continually upgrades its legislation. Nevis is not a party to any international tax treaties. Most notably, it does not recognize foreign judgments. A creditor has only one year to bring a fraudulent transfer action.
The fact is, it is nearly impossible for a creditor to seize assets held in a Nevis trust or foundation. In addition, if a creditor decides to pursue the matter, all actions must take place in Nevis. Under Nevis law, such proceedings are held in private. On top of this, the creditor must hire a local lawyer. Contingency fees are not permitted, and the creditor must post a significant bond before filing a claim. If he or she loses in court – a virtual certainty — they must pay the legal fees and court costs of the trust. As with the Cook Islands, the burden of proof on a creditor is always “beyond a reasonable doubt.”
Nevis does not impose any inheritance, gift, estate or income taxes. There is no minimum amount required for setting up a trust. If you are in a hurry, it is possible to create a trust in approximately 48 hours. Under Nevis’ law, trusts can last in perpetuity.
For administration purposes, a Nevis multiform foundation is run as a trust, LLC, partnership or company, but is identified as a foundation in its registered name. A minimum endowment of $10,000 USD is necessary for establishing a Nevis Multiform Foundation, in either assets or property. Foundations must hold annual meetings by law. Though, such meetings do not have to take place in Nevis. For convenience, video and telephonic annual meetings are permitted.
In Nevis, confidentiality is paramount, as per its Confidential Relationships Act. There is such a commitment to privacy that Nevis does not require ownership records in its corporate registry. So, finding out who owns what is nearly impossible. The law does not permit any financial disclosure of trust operations and assets.
Along with trusts and foundations, Nevis allows the establishment of single member LLCs, requiring no shareholders or partners.
Not far from the U.S. and in the Eastern Standard Time zone — like New York and Washington, D.C. — the primary industries in this Caribbean nation are tourism and finance.
The Bahamas does not levy an income tax on trust income or its beneficiaries, and its secrecy laws are strict. (The US does, however, tax its citizens on worldwide income.) The name of the trust’s settlors and beneficiaries do not appear in public records, offering excellent privacy. There is no forced heirship, and its laws protect offshore asset protection trusts from foreign court seizure. There are also no reporting requirements for a Bahamas trust.
It is possible to create a Bahamas trust in just 24 hours. Even if the settlor and beneficiaries, as well as trust assets, are all located in other countries, it is still possible to establish a Bahamas trust. All trusts established after 2011 may exist indefinitely.
Along with trusts, an International Business Company (IBC) is one of the best ways to set up an offshore corporation. Not only do IBCs offer shareholder privacy, but there are no corporate taxes levied on them unless business is conducted in the Bahamas. Foreign investors may establish IBCs as sole proprietors.