There are many types of trusts. For this example, I will define an offshore asset protection trust as any trust formed for a term of years in a foreign jurisdiction, which does not recognize (or imposes significant barriers to the recognition of) United States judgments.<\/p>
Honestly, this is every country in the world since every country requires that the case is re-argued under their law.<\/p>
This is not to say that assets have to leave the USA to be protected, they don\u2019t. You simply use a foreign trust to force creditors to litigate abroad, NOT to move your money there.<\/p>
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The reason I will focus on trusts with a \u201cforeign arm\u201d attached is that those are the only types of trusts that are virtually impenetrable by creditors. An asset protection trust is best thought of as a legitimate and internationally recognized vehicle for a solvent person to place a portion of his wealth into a secure entity, which allows that person substantial control over the assets yet protects these assets from future unanticipated creditors.<\/p>
Some jurisdictions require a trial de novo (which means trying the case anew, as if it had never been tried before). Other jurisdictions<\/a> have a procedure whereby certain United States judgments can be recognized (usually not penal or fiscal in nature) provided certain procedural hurdles (which may amount to a mini-trial) are met. No country in the world automatically enforces judgments from any United States court. This is probably because all other nations are worried about one aspect or another of our anti-trust, environmental, securities and tort laws.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t There may be a time in the near future when our government suspends our ability to take money abroad. A foreign asset protection<\/a> trust prevents such restrictions. One managing director of a substantial bank in the Cayman Islands recently remarked, \u201cExchange controls were firmly in place in the United Kingdom before [former Prime Minister] Margaret Thatcher, and one can\u2019t be certain that they will never be reintroduced. In the U.S., with the shape of its national debt, I would not be surprised at all if limits on foreign investment were adopted. The U.S. has had such limits before, in certain forms.\u201d<\/p>\n There are situations where an individual might separate and insulate future start-up business ventures, which are unrelated to his current activities from past creditors by the use of offshore trusts. This is particularly useful when bankruptcy is not a valid option. This is a way where an insolvent debtor who is entrepreneurial-minded can protect future profits from attachment by creditors.<\/p>\n In this case, extreme care must be taken to guard against the possibility of fraudulent conveyance<\/a> issues.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\n\t\t\t\tTable of Contents\t\t\t<\/h4>\n\t\t\t\t\t\t\t
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The trust protector often has the following powers<\/h3>\nThe power to remove and replace any trustees; The power to reject the investment decisions of the trustees; and The power to reject the distribution decisions of the trustees.<\/i><\/li>\n \t
Who Needs Asset Protection?<\/h3>
Any of these could leave you penniless and in debt<\/h4>\n
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Settlement Of The Trust<\/h3>\nThis refers to the complete establishment of the trust, meaning it is created and finalized as an existing entity. Remember, for a trust to serve as a protection from creditors, the settlement of the trust must occur long before any significant creditors or liabilities materialize. I always advise my clients that establishing a trust should involve only a portion of their assets, leaving them demonstrably solvent after the transfer. Done in this fashion, asset protection trust is a very effective tool.\n
Practical Uses Of Offshore Asset Protection Trusts<\/h2>\nThe following is a partial list of the benefits of foreign trusts with asset protection characteristics. Some relate to asset protection and some relate to general business considerations. When documenting the trust the business-oriented justifications for settlement of the trust should be emphasized.\n
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Asset Protection Planing<\/h4>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t