Domestic Irrevocable Trust vs. Offshore Asset Protection Trust
Offshore Asset Protection Trusts Losing the War with Creditors While Domestic Irrevocable Trusts are Winning Credibility
Individuals, such as doctors, real estate developers, and business owners are exposed to the perils of personal liability from lawsuits
, personal guarantees, and other financial risks. These individuals have been the focus of marketing and solicitations from financial institutions, attorneys and financial advisers lauding the virtues of offshore irrevocable trusts
to protect their assets.
What the advertising and promotional material fail miserably in providing is a true picture of how creditors have used the courts in the United States to defeat many of the benefits offshore trusts might have offered at one time. Creditors have learned tricks, such as cutting a debtor off from access to the assets in an offshore irrevocable trust, that frustrate the asset protection intent of the offshore scheme.
offers asset protection that is far superior to offshore trusts without subjecting a person to the risk of contempt citations, bankruptcy, fraud allegations, or criminal sanctions. There are several reasons why the UltraTrust irrevocable trust is a better choice than offshore irrevocable trusts
for asset protection.
Creditors Have U.S. Courts on Their Side
Creditors learned that chasing assets hidden in irrevocable trusts
in foreign countries rarely meets with favorable results from courts and laws that favor protecting their nation’s ability to attract U.S. investments. Undeterred, creditors turned to courts and laws in the United States for help [FTC v. Direct Benefits Group, LLC
, 2011 WL 3654469 (M.D.Fla., Slip Copy, Aug. 19, 2011), Securities and Exchange Commission vs. Jamie Solow
, 2010 WL 303959 (S.D. FL., Jan 22, 2010), U.S. v. AmeriDebt
, Inc., 373 F. Supp. 2d 558 (D Md. 2005)].
Assets transferred to a properly created, implemented, and funded irrevocable trust are owned by the trust and managed by a trustee
. The creator of the trust is no longer the owner of the assets. This is true whether the trust is domestic or offshore.
Courts have taken the position that a trustee or a settlor in the U.S. is subject to the jurisdiction of American laws regardless of where the trust and the assets are located. Even where a foreign trustee has been used, creditors have obtained injunctions and asset seizure orders against the settlor and anyone living in the U.S. who might be the recipient of benefits from the trust. In fact, a man transferred assets to a Bahama Trust with the help of his attorney [U.S. v. Rogan
, 2012 WL 1107836 (N.D.Ill. 2012)]. The attorney had suggested an irrevocable trust. The man had judgments against him over ten years later. The courts ruled that the state law applied, not Bahama law, and ordered him to turn over the trust assets. The man fled the country and both he and his lawyer were indicted for obstruction of justice and conspiracy to obstruct justice.
As reported in Forbes
magazine, the widow and children of an offshore irrevocable trust settlor was effectively barred from enjoying the benefits of the assets locked away offshore through a series of forfeiture orders and contempt proceedings against her. While the assets might be safe from the reach of creditors, contempt orders against settlors or beneficiaries in the U.S. are highly effective creditor weapons.
Uniform Trust Code Supports UltraTrust as Asset Protection Vehicle
According to article 5 of the Uniform Trust Code published by the National Conference of Commissioners on Uniform Laws, the creditors of a settlor of an irrevocable trust can only enforce their claims against distributions to or on behalf of the trust settlor.
The Uniform Trust Code
recognizes the right of a settlor to retain a limited power of appointment while retaining the protection of the trust’s assets from the claims of creditors. Estate Street Partners requires full consideration to transfer property to the trust to protect its integrity and avoid challenges by creditors.
Asset Protection Is a Legitimate Estate Planning Device
Offshore irrevocable asset protection trusts have become associated with schemes to defraud creditors. Federal disclosure laws target people with offshore accounts because of the widespread illegal, fraudulent and unethical practices that have come to light within the last decade. Offshore accounts must now be reported on personal income tax returns, and foreign financial institutions are being pressured by the federal government to comply with U.S. laws by reporting transactions involving American citizens.
Domestic irrevocable trusts are used extensively for legitimate estate planning purposes and can be effective in asset protection when prepared in consultation with a financial planner and an attorney knowledgeable and experienced in preparing irrevocable trusts for asset protection. The UltraTrust has proven itself as an effective estate-planning tool that surpasses offshore asset protection trusts with specific language complying with current federal and state laws and IRS regulations. Rather than circumvent the law, UltraTrust uses the language of the laws
to protect settlors and their assets.
Contact UltraTrust Before Risking Your Money Offshore
Creditors and the IRS are winning the battle against irrevocable offshore asset protection trusts. Contact UltraTrust to learn how your assets can be safely and lawfully protected without having to leave the country.
Source: Forbes, “The one foreign asset protection trust ‘win’ turns out to be a dud,” Jay Adkisson, April 25, 2013.
Source: The National Conference of Commissioners on Uniform State Laws, “Trust Code Summary,” 2013.
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Protect your assets for yourself and your children and beneficiaries and avoid tax dollars. Assets can be protected from frivolous lawsuits while eliminating your estate taxes and probate, and also ensuring superior Medicaid asset protection for both parents and children with our Premium UltraTrust Irrevocable Trust. Call today at (888) 938-5872 for a no-cost, no obligation consultation and to learn more.
Rocco Beatrice, CPA, MST, MBA, CWPP, CAPP, MMB - Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an "AA" asset protection, Trust, and estate planning expert.