What is offshore asset protection with trusts?
Anyone with a moderate or large net worth should benefit from my site to protect assets. But this strategy will be of particular interest to those working in professions where there is a high risk of litigation – for example, doctors, dentists, chiropractors, veterinarians, lawyers, entrepreneurs, and investment managers, to name just a few!
There is a growing number of lawsuits (especially in the US, UK and Canada, but now it is becoming a worldwide phenomenon, also in Spain and Latin America), in which the defendant is used as a target not for his guilt, but for their ability to pay. People in this category of “deep pocket” risk losing everything if they do not put the appropriate protection measures.
A concrete example: a patient was prescribed drugs that can cause drowsiness, was warned not to drive, but he did anyway and crashed the vehicle, causing serious injuries to a third party. Guess who issued? That’s right, the doctor. Despite having warned the patient of the dangers, he should have known that the other could have driven under the influence and cause serious injuries. Therefore, I should not have prescribed those medications.
It is not about who is at fault, but who can pay more! If your assets are obvious and easily visible, you will be an easy target.
And it’s not just doctors who are exposed to this kind of thing. Anyone from the professions mentioned above, or simply someone with significant net worth, could find himself involved in a meaningless lawsuit.
Will a Civil Liability Insurance protect you? It is possible but at a cost. But it might not cover all the risk with the policy.
Asset protection strategies basically work by making a person’s assets not readily available or recoverable (unattractive) in case of a legal proceeding against them, by employees, clients, patients, relatives or others.
Asset protection can take several forms, and while there are many local alternatives, such as life partnerships, limited liability companies, and limited family businesses and associations, offshore resources tend to be more effective for this purpose. Trust is the backbone of offshore asset protection, although “offshore” bank accounts by themselves can provide improved private banking and confidentiality, they are usually an integral part of an asset protection strategy. Banking secrecy laws in offshore jurisdictions tend to be much stricter than national laws unless there is suspicion of money laundering or criminal activity.
Offshore companies and trusts can be used separately or in conjunction with asset protection purposes (usually in relation to the offshore bank account). In a trust agreement, the trustor (who transfers assets to the trust) legally gives control of their assets to a trustee (s), who manages and controls these in favor of a beneficiary or beneficiaries (among which may be the same trustor ). Although it is usually the trustor who accompanies a letter of intent that details how you want the money to be administered and distributed, it is the administrator who has the legal control over the assets.
Recent legislative developments in certain offshore jurisdictions have significantly enhanced trust in the original common law, offering effective defenses against forced inheritance provisions and imposing time limits on claims by creditors.
In order to ensure effective protection of offshore assets, then, it is necessary to establish the company in a jurisdiction with the effective privacy legislation of international companies, strong banking secrecy laws, and modern trust laws. The Caribbean island of Nevis, for example, has one of the best-designed asset protection structures in the world in its statutory codes.
Important note: asset protection is not something that can be put in place when there are imminent or ongoing legal actions. Any attempt to transfer the assets under these circumstances would be considered fraudulent. However, a well-designed asset protection structure can result in a very effective tool to protect wealth.