Structuring Offshore Trusts for Asset Protection

For my subscribers last week, I wrote details on one way to properly structure an offshore trust to maximize asset protection.  Trusts are one of the oldest (if not the oldest) forms of legal ownership for property dating back to the Roman times.  While they are a bit abstract and difficult to understand, they are perfectly legal and one of the best ways to completely insulate yourself and your assets against the many threats to your wealth.

I have many clients inquire about trusts, but the number one question is “what happens if the trustee runs off with my money?”  This is a legitimate question, however the way our trusts are structured using LLC’s or IBC’s, it is impossible for the trustee to make decisions about your assets without your consent.  Let me illustrate a simple example;

Your stock trading account is owned by an LLC.  You are the manager of the LLC giving you full control of the use and allocation of these funds.  However, the trust is the legal owner of the LLC, thus eliminating your ownership of the funds held by the LLC.  The trustee is unable to make decsions without the settlor’s approval and you are the settlor.  In this scenario, you are the LLC manager and the settlor of the trust, but not the owner.  The trustee maintains title to the property until your demise, which at that point, your beneficiaries become the legal owners of the property.

As John D. Rockefeller said “own nothing and control everything”.  This is the ultimate goal and can easily be accomplished using an offshore trust.  By using an offshore trust, it keeps the trust assets outside the reach of US courts.  Unless there is a major crime or terrorism at play, countries like Belize and Cook Islands won’t recognize a US court ruling and thereby fully protecting your assets held within the trust.

Offshore trusts aren’t for everyone.  You must report ownership of any offshore trust to the IRS or risk severe legal penalties.  This reporting is not difficult, but it does create additional administration and for some, it isn’t worth the effort.  But if your assets have significant value and you want the ultimate in asset protection, offshore trusts are the ultimate tool.

Comments

  1. Very cool site and I just bookmarked ya too!

  2. Once more a very good written article from you. Keep it up!

  3. Fred,
    1, trusts are not necessarily for everyone as the abstract nature of a trust is too much for some to grasp. the fear of giving up control to a trustee is more than some can cope with. also, the cost of setting up and maintaining a trust isn’t really practical for someone with just a couple of hundred thousand dollars in net worth.
    2, a US LLC is a great tool for non-US residents/citizens for tax minimization. the US is the largest tax haven in the world for non-US persons.
    3, an LLC is a pass through entity. the owner would pay his/her taxes based on their own personal situation. if you don’t live in the US, you would owe no US taxes.
    4, the purpose of the trust is to give creditor protection, not tax benefit.

  4. Once more a very good written article from you. Keep it up!

  5. Now back to the subject.
    1/ You mentioned that trusts are not for everyone, implying it’s worth setting up such a structure if your assets have a significant value. Can you approximately quantify that”significant value”?

    2/ you’re taking the example of a LLC owning my stock trading account. Do you mean a US LLC for non-residents? If i’ts the case, does trading made on the New York stock exchange create a tax liability for a non-resident LLC since trading operations are conducted in th US?

    3/ Following the same logic, if I’m non resident in the US and I’m the manager of the US LLC, does it create a tax issue if the brokerage account used by the US LLC is opened with a US broker?

    4/ Wouldn’t a non-resident UK company (instead of a US LLC) be a more suitable vehicle if profits are not remitted to the UK? In that case, since you already legally avoid taxation, why would you need the extra layer of a trust in the overall structure? Of course, the same issue as mentioned above remains: must British brokers imperatively be avoided by the UK company so it will not appear as if the company was conducting operations in the UK…?

  6. Valuable info. Lucky me I found your site by accident, I bookmarked it.

  7. Now back to the subject.
    1/ You mentioned that trusts are not for everyone, implying it’s worth setting up such a structure if your assets have a significant value. Can you approximately quantify that”significant value”?

    2/ you’re taking the example of a LLC owning my stock trading account. Do you mean a US LLC for non-residents? If i’ts the case, does trading made on the New York stock exchange create a tax liability for a non-resident LLC since trading operations are conducted in th US?

    3/ Following the same logic, if I’m non resident in the US and I’m the manager of the US LLC, does it create a tax issue if the brokerage account used by the US LLC is opened with a US broker?

    4/ Wouldn’t a non-resident UK company (instead of a US LLC) be a more suitable vehicle if profits are not remitted to the UK? In that case, since you already legally avoid taxation, why would you need the extra layer of a trust in the overall structure? Of course, the same issue as mentioned above remains: must British brokers imperatively be avoided by the UK company so it will not appear as if the company was conducting operations in the UK…?

  8. Before leaving my comment, I’d like to suggest you to review the previous comment. Is it a coded spy message??? If it is posted, does it mean you understood its content? Wow… Would be nice from you to explain it then…

  9. Once more a very good written article from you. Keep it up!

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