A trust is an estate planning tool where you create a legal entity that holds your assets. In a lot of ways, it’s like a business, except instead of managers it has fiduciaries and beneficiaries. Whether your trust is domestic or foreign, it holds and manages its assets to the benefit of those named as beneficiaries. In some situations, you may want to set up your trust in a foreign jurisdiction. Doing so has advantages and disadvantages. You should carefully weigh before determining the best way to proceed.
Since a foreign trust is, by its nature, formed in another country, it is subject to the laws and regulations of that country. Depending on the jurisdiction, for example, they may not enforce the judgements of US courts. The Cook Islands and Belize are popular for this reason. Further, different jurisdictions may offer more privacy for trusts. In addition to making your assets more difficult for creditors to reach, they also make it harder for other court-ordered liens and seizures to stick.
Of course, moving your assets to an account overseas has some potential drawbacks as well. There is an increased risk of political turmoil and economic problems. It’s important to understand not only the laws of the country you’ve moved your assets to, but also the geopolitical situation. Moving your assets overseas may also mean your subject to the fluctuations of a different currency, which can be another factor to calculate into your costs.
If you are in litigation and a domestic court finds you’ve moved all your assets overseas and out if their reach, you run the risk of being found in contempt of court and jailed until you are able to retrieve the assets.
Visiting an attorney can help you determine whether a foreign asset trust is the right fit for your unique situation. Your attorney may suggest a domestic trust or another arrangement that will provide the asset protection benefits you desire with less risk and complexity than what’s involved in moving your assets overseas, i.e. irrevocable life insurance trust, limited liability companies, domestic asset protection trust, spousal lifetime access trust.
In some situations, setting up a foreign asset protection trust is a great way to gain additional advantages and hold a variety of different assets. Any trust you create should be outlined as part of your estate plan and carefully recorded and managed, just as you would a revocable living trust.
If you would like to schedule a consultation give Virtus Law Firm a call at 612.888.1000 or email us at firstname.lastname@example.org. We have significant experience helping individuals review their assets and goals and set up comprehensive plans to meet their needs.