HOW FOREIGN TRUSTS CAN PROTECT A PERSON'S ASSETS
In the U.S. legal system, the average business owner or professional will be sued several times during his or her lifetime. Failure to do asset protection planning can result in instant loss of a person's lifetime wealth.
How can a person protect his or her assets? By becoming a smaller target for being sued. A person can become a smaller target for a lawsuit by reducing the size of his or her estate so that he or she is no longer the legal owner of the assets to be controlled and enjoyed. One way to do this is by creating a foreign asset protection trust.
WHY USE A FOREIGN TRUST RATHER THAN A DOMESTIC TRUST?
If a person wishes to retain control over the trust's assets and be beneficiary of the trust, he or she must use a foreign trust. Under the laws of all 50 states, a trust created by a settlor and of which the settlor is a beneficiary is void as to the settlor's creditors. In order to create a domestic trust that is out of the reach of the settlor's creditor, the settlor must truly surrender control and enjoyment of property.
A foreign trust created under the laws of the proper jurisdiction will allow the settlor to retain control and enjoyment of property. The U.S. rule voiding a trust created by the settlor for the settlor's own benefit will not be applicable in overseas jurisdictions. U.S. law will not be applied and the judgments and orders of U.S. courts will not be enforced as to these issues. Instead, local law of the overseas jurisdiction which is more favorable will be applied.
The lawmakers of the foreign jurisdictions believe that in the absence of a claim entitling a creditor to recourse against such property, a settlor may freely transfer property to a family trust of which he or she is a beneficiary. The transferred property will be not be subject to future creditor attachment.
Businesses and professional practices in the United States has a high potential for being sued. Anyone who is aggrieved by a deep-pocket defendant or one backed by a deep-pocket insurer feels it is necessary for him or her to retain a lawyer to seek monetary compensation. If a person, as far as potential plaintiffs are concerned, is without property, his or her chance of being sued will be greatly decreased. It is reckless to fail to take steps to protect one's property from such claims.