Many Americans are becoming more familiar with what’s known as international cross-border planning and offshore asset protection trusts offered by financial advisors and wealth solutions firms such as Ora Partners, Morgan Stanley, and Wells Fargo. Offshore trusts are not just an asset protection and estate planning tool for the very wealthy. Individuals of modest means can also use them in some situations, and they can be affordable. One of the primary reasons that people use offshore trusts is to protect their assets.
What is an Offshore Trust?
A trust is a written agreement wherein a “settlor” or the person establishing the trust transfers their property to the trust. The settlor then chooses a “trustee” who agrees to manage the trust for the benefit of the settlor and their beneficiaries. In an offshore trust agreement, the trustee must be located offshore. It generally is a trust company that is experienced in acting as a trustee for an offshore trust. An offshore trust is designed to insulate the assets placed into the trust from any potential claims. Here are the major benefits of an offshore trust:
It Creates a Legal Barrier for Potential Creditors.
Offshore jurisdictions have more protective trust laws than the U.S. Creditors only want to pursue a lawsuit if they can force a distribution from the trust to satisfy a judgment. If you are sued by a creditor in the U.S. and the assets in question are in an offshore trust, the U.S. court does not have jurisdiction over your assets. Therefore, the legal battle would need to take place abroad. Many U.S. attorneys who contemplate a lawsuit to recover assets from an offshore trust know little or nothing of the foreign country’s laws, procedures, costs, customs, or even currency. Many foreign jurisdictions do not recognize a U.S. judgment. It means the case must be brought in a foreign jurisdiction, and often, by the time a U.S. attorney figures out this fact, the foreign statute of limitations will likely have expired.
Security and Privacy.
Offshore trusts provide security and privacy. A trust is a contractual agreement and, therefore, is generally not a public record. All personal and financial matters associated with the trust are kept private. An offshore trust offers asset protection through foreign laws that do not recognize U.S. judgments.
Diversification of Your Investment Portfolio.
An offshore trust can hold interests or titles in domestic and foreign assets under certain conditions, several domestic and foreign currencies, and other investments. Offshore banks generally have more investment options than U.S. banks and may also offer higher interest rates for savings accounts.
Peace of Mind.
Offshore trusts are similar to the concept of insurance. With an offshore trust, you can rest assured that your assets will be secure and protected from potential creditors and lawsuits and that your wishes will be followed and honored for the benefit of your beneficiaries.
