Offshore Trusts: An offshore asset protection trust is a financial account set up with contingencies and agreements, structured under the laws of foreign governments. Such trusts can help you:
- Avoid litigation — You may want to set aside money that can’t be seized in criminal and civil cases if you hit any legal entanglements that can come about when you run a business. It might make sense to set aside money in a trust so that you can put in stipulations that ensure the money won’t be mishandled, especially for your descendants.
- Protect yourself from liabilities — You can avoid probate costs and other fees when you transfer money. After all, you want to keep more of your money without addition costs eating into your account. But like everything else, you’ve got to make sure you understand the tax enforcement implications before setting up your trust.
- Build and protect wealth — The trust is set up under the terms of a foreign government — you don’t want your money to be subject to seizures. The trust can help save money for retirement, protecting assets as you grow, but you’ll need to be sure you understand the reporting requirements.
- Save money if you’re going through a divorce — You don’t want to be left open to seizure of assets. But you need to understand the divorce laws in your state — you may still have to disclose offshore money. States differ on what constitutes marital property, so know for sure before you try this way of protecting assets.
- Manage an inheritance or other lump-sum payout — It will ensure that your money is protected and that you can use it when you need to if you’re dealing with the succession of a business, a transfer of assets from an investment, or a buyout.
- Cope with new laws that might hurt you financially — Government liabilities can potentially cripple your business, tying up your finances. Managing a trust can help you avoid tax issues that aren’t advantageous to your business or financial needs.
How is an offshore asset trust created? The reason you’re setting one up will dictate the type you’ll want to purchase, the location and the governing laws you subject yourself to. Some of the best locations for offshore trusts are Belize, the Grand Cayman Islands, the British Virgin Islands, Luxembourg, Germany, the Cook Islands and Nevis because they have laws that are friendly to account holders and make it easy to access your money on your terms.
An offshore trust account does not come cheaply — you might pay between $5,000 and $10,000 to set one up. There also are fees for entry and obligations you’re signing on for, so you need to make sure you’re setting up a trust that is most advantageous to you, whether it be a hybrid trust, a fixed trust, an irrevocable trust, a discretionary trust or a revocable offshore trust.
Offshore asset protection trusts are not for everyone — it takes some capital upfront to make sure that you’ll be able to build the trust that will be beneficial to you. The costs of running the trust can be prohibitive as well. Bringing in professional assistance — an estate lawyer who’ll help you find a government jurisdiction that’s tax-exempt, stable and has a sound reputation is a good idea. If you’re looking to protect a lot of assets from civil judgments, it can be a useful estate planning tool.
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