A foreign trust is a good instrument for assets protection – provided that you give full control over them to a foreign trustee. The problem is that many entrepreneurs and asset owners find it hard to accept the idea of relinquishing control and try to keep it with all their might.
Unfortunately, if you retain control of the assets or directly manage the trust, the court may decide that the trust is a sham and oblige the owner to return the assets. And if you refuse to do that, you may face an imprisonment term.
However, if you correctly choose the jurisdiction for your trust, properly register it and choose not only a trustee but also a protector, the trust can sparkle with new colors. For example, you can opt for the tax-exempt Nevis Tax-Exempt Trust which offers international protection of assets on steroids.
Requirements for an Offshore Trust Used for Assets Protection
How do you correctly establish a trust to protect your assets? Consider the following principles:
- Choose a jurisdiction that is friendly and beneficial to foreign investors
- Choose a place where the interests of creditors from different countries are not put first (as is the case in the United States). The US is, in fact, a leader among the countries concerned with creditors’ interests (and it is hard to find a jurisdiction that would stand comparison)! What we recommend is moving to the other side of the spectrum and choosing a country that favors creditors least of all, like the Cook Islands, the Cayman Islands, Nevis, and some other jurisdictions
- Choose a proven and reliable trustee: the one recommended by experienced people, a team with a large portfolio of trusts under management, or companies with centuries of experience (which is normal in this area)
- Opt for a jurisdiction where it will be very expensive and unprofitable to sue you. For example, if someone wants to file a lawsuit to take away your assets, he will need to go to a local court, pay a bond of $100,000 upfront, hire a local lawyer, and win the case – just to find out that the dividends are the only assets which the creditor can claim (or even understand that the trust has moved to another jurisdiction!).
The procedure described in the last bullet point is no joke but an ordinary course of business in Nevis – and it is no wonder we recommend this jurisdiction to most of our clients as an extremely powerful asset protection solution.
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How does an Offshore Trust Work?
An offshore trust operates on the basis of a trust agreement (called Trust Deed) between the settlor, grantor, trustor, and the other party who performs the trust management function (trustee). The trust is managed in favor of certain persons called beneficiaries. You can also add a fourth party to the system, a protector, who is in charge of overseeing how the trusts fulfill the requirements set out in the deed.
The trustee should manage and have control of the trust – or the trust will be declared void. A protector acts in the interests of the trust founder but does not have access to assets within the trust. He monitors the trustee’s compliance with the provisions of the trust deed and the intention of the trust founder. In a way, the protector is the trustee’s advisor.
At the same time, the protector may have relatively broad powers: for example, to veto some trustee’s decisions or study the trust records. On the other hand, they should not be too broad as the court may recognize that the protector has control over the trust and acts in the interests of the owner, thus providing direct control.
The protector is the person you trust. His presence gives you additional peace of mind as he ensures that the trust works in your interest. If the trustees cease to perform their duties properly, the protector shall have the right to replace them.
Another important thing a protector could do is initiate the trust re-domiciliation to another jurisdiction. When is it necessary? For example, a creditor decided to sue you and seize the assets hidden in the trust. Suppose you decided not to follow our advice to establish a trust in Nevis and set it up elsewhere, and the creditor almost managed to cease the assets despite all the hurdles (which are plentiful in other jurisdictions as well). In this case, the protector will opt for moving the trust to a new location, which means that the creditor will have to start it all over again.
In this situation, creditors usually make a reasonable choice of negotiating a settlement: even though they get cents for a dollar in this case, they risk losing even more if they persist with their claims.
Another reason why you may decide to move the trust assets to another jurisdiction is unfavorable changes in the legislative framework or political instability.
One more thing about the trust safety: when you choose a protector, watch where he comes from. As we mentioned, the laws of the United States are not very trust-friendly, which practically means that a US protector may be forced to transfer assets to the United States by a court decision, or change the trustees and return assets to those who claim them.
Some people make a committee of protectors that includes a US and a foreign protector. The first one resigns as soon as problems become visible, and the second one takes overall responsibility in this case, making the trust a very stable and flexible structure that can escape the US judicial attention.
Therefore, you need to carefully approach trust establishment, and an offshore trust could be your most reasonable choice. Nevis is a jurisdiction whose legal framework protects your interests by itself, without the need to resort to schemes like the one described above.
Nevis Offshore Trust: Protecting Assets on Steroids
Trusts protect assets, and one of the most powerful protection instruments is a tax-exempt trust in Nevis (or simply a Nevis trust).
First, it allows the trust settlor not only to transfer its assets but also become a trust beneficiary, that is, benefit from it by relinquishing control. The trust beneficiaries are a group of people, which may include the trust founder. And this scheme will not deprive you of asset protection!
Second, when choosing a trustee in Nevis, it will be difficult for creditors to make claims against the trust in principle. This will require a $100,000 advance fee, a personal visit to Nevis, and the hiring of a local attorney.
Third, local companies have extensive experience in managing trusts and offshore companies, which allows you to count on them. If you wish, you can find companies that have hundreds of trusts in their portfolio – or have hundreds of years of experience in this area, for that matter.
Fourth, we will help you organize not only the trust itself but also the entire offshore asset protection plan: foreign bank accounts, offshore companies, second citizenship, and residence permit/permanent residence.
Our experts have decades of versatile experience and practical knowledge, and we are still flexible enough to offer tailor-made solutions. A one-size-fits-all approach is not something we practice: you have your own needs and nuances that need to be taken into account, and we will focus on them. If you need an individual consultation, please contact us at info@offshore-pro.info.
