This trust is the ultimate in asset protection. It is drafted in accordance with the laws of a foreign country in order to keep the assets safe from creditors. The Settlor of the trust, also known as the creator, gets to choose which country’s laws to abide by, and selects the provisions and the trustee of the trust.
What are the benefits of seeking foreign jurisdiction over your assets? In the event that you are sued, if your assets are protected in a foreign jurisdiction that doesn’t necessarily recognize United States judgments, you have a much greater chance of your assets being untouched. Normally, foreign jurisdictions will not allow for contingency fee law cases. So if someone is set on suing you, they have to go to considerable trouble to hire an attorney outside of the US, which increases their costs, effort, and their risks. Winning a civil suit in a foreign territory is generally very difficult as the burden of proof is much greater. The difficulties that the potential plaintiff will face make Foreign Asset Protection Trusts worth considering.
Did you know that many foreign jurisdictions actually encourage American citizens to draft asset protection trusts within their country? Because the laws in these territories typically are more favorable to the party who is guarding their assets, this is yet another reason Foreign Asset Protection Trusts are popular.
Think about this: in more populated cities in the United States, you can expect to wait more than 3 years for a court judgment. How would you handle it if you couldn’t access your funds while you waited for the court ruling? If you had your assets in a foreign trust, it wouldn’t matter if you won or lost because your assets would be immune to the creditor because a shorter statute of limitations to file a lawsuit in the offshore jurisdiction would have already passed in most cases.
Asset Protection Trusts are generally fairly complicated, but if well written and executed they can keep your wealth safe from creditors and judgments. Some people are uncomfortable putting their assets overseas. The most common technique for dealing with this is to create a limited liability company (LLC) or limited partnership (LP) in the US that works directly with your Foreign Trust. Foreign Asset Protection Trusts can be extremely effective if put together properly. Remember its not the trust per se that protects the assets, it’s the jurisdiction of the assets.