Offshore / Onshore Trusts

Offshore / Onshore Trusts

Offshore Or Onshore Trust

Both offshore and onshore trusts are effective tools and should be at the center of most asset protection plans. Before explaining the difference between an offshore and onshore trust it’s necessary to know that the physical location of assets transferred into a trust, whether an onshore or offshore trust, does not change.

Asset Protection Trust Defined

The difference between an asset protection trust and almost all other trusts is that an asset protection trust allows aTrustor (the party contributing assets to a Trust) to also be the Beneficiary (the party receiving the assets or asset earnings). Any Trust that allows the Trustor to also be the Beneficiary is An Asset Protection trust.

In the US, 12 states have enacted trust laws to create Asset Protection Trusts. There is a great deal of difference in the amount of asset protection provided between these 12 states.

All states have a“statute of limitation” that determines how far back in time a creditor can go to void a transfer and clawback the asset or their cash value if a transfer occurred at less than its value. Most states have a statute of limitations on asset transfers of between 4 and 5years. That means that creditors have up to 5 years to claw back assets if transferred at less than their value.

The 15 states that have passed statutes that allow Asset Protection Trusts have reduced their statute of limitations to between 2 and 3 years. The State of Nevada is the exception in that Nevada has reduced its statute of limitations on transfers for less than value to as short as 6 months if the asset protection trust is properly drafted. The 6month statute of limitations only applies to assets that are transferred into a Nevada Asset Protection Trust. This 6 month limitation has resulted in Nevada being the leading state for Asset Protection Trusts.

Key factors in Selection Assuming that assets are in an exposed position and an asset protection trust should be used the following two factors influence whether the trust should be onshore or offshore.

Choose an Onshore Trust if you are not in litigation and believe that a claim or lawsuit will not be filed or made against you in the next 6 months. Establish your trust in Nevada because of its 6 month statute of limitations on fraudulent transfers. Once 6 months have passed since you transferred your assets into your trust and no litigation or claims brought it will be very difficult for a creditor to reach any asset transferred into your trust.

Choose an Offshore Trust if you are in litigation now or believe a claim or lawsuit will be filed against you within 6to 9months. Even if you face litigation a year away you should choose offshore. If you choose a Nevada trust and pass the 6 month statute you may spend substantial legal fees fighting to preserve the statute. If creditors are expected to be aggressive you can select an offshore jurisdiction that has never allowed one of their trusts to be penetrated.

Before making any decisions relative to your assets you should seek advice from an expert on asset protection. You should find out if any of your assets are held in an exposed position and if they are, what are your options or steps you can take to protect them. After you have this information you can weigh your options and decide on a course of action.

Title To Assets Transferred

An asset protection trust established under Delaware law can own real estate and other assets in several states. Just as a Delaware corporation can own real estate and other assets several states. An asset protection trust established under Cayman Islands law can own real estate and other assets in any state or country in the world, without having to transfer any assets to their island.

Many people rule out using an offshore trust because they would not send their assets to some island in the Caribbean for safekeeping. Add to this misconception is that few US lawyers have ever established an offshore trust. This is because US citizens pay taxes on their worldwide income and an offshore trust is no benefit to their clients.

Understanding that titles and ownership are transferred and not the underlying asset, allows a greater choice in selecting a jurisdiction for their Trust.

The reason for selecting one state over another or one country over another is to select a jurisdiction with THE MOST ADVANTAGES LAWS available to protect the title of assets. There is no “one won best jurisdiction” to select because it depends upon the types of assets being protected, existing or pending litigation, the aggressiveness of claimants.

In order to form an Asset Protection Trust, a jurisdiction must be selected. The laws and regulations of the jurisdiction selected will govern the trust. In addition to asset protection regulations, the debtor-creditor laws of a jurisdiction play a large part in selecting where to establish a trust.

Onshore trusts have the advantages of being less expensive, a short statute of limitations on fraudulent conveyance, allow a friend to serve as the trustee, fewer tax forms, and the trust purpose can be explained to save taxes and to have a trusted friend (trustee) to look after your children and grandchildren’s education and medical needs. The disadvantages are less legal protection and the risk a judge invalidates the trust and distributes your assets to creditors.

Offshore Trusts have the advantage of providing degrees of legal protection from strong to absolute, no recognition of US judgments or court orders, bonded trustees, and trust protectors. Foreign jurisdictions forbid contingent fees lawyers and require the losers to pay. One jurisdiction requires a plaintiff to put up a cash deposit of 50% of their claim. The standard of proof a plaintiff must meet is beyond the shadow of a doubt which means that if 11 or 12 jurors agree with the plaintiff, the plaintiff loses his deposit. The disadvantages are the higher costs of forming the trust, of an LLC to manage the assets and the cost of a corporate trustee. They have alonger statute of limitations, and are not viewed as proving for children and grandchildren.
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2700 E Sunset Road, Suite 13B, Las Vegas, Nevada 89120
Email: info@whitehallcompanyltd.com
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Contact Information
2700 E Sunset Road, Suite 13B, Las Vegas, Nevada 89120
Mon - Fri: 8.00 am - 7.00 pm
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