Practically everyone sets up a trust sooner or later, especially for estate planning purposes. But the majority of American trusts are domestic – they’re set up in America and are subject to US court judgments and rulings.
Domestic trusts aren't the only protective, highly effective financial vehicles you can set up. In fact, the more money you earn, the more foreign trusts become necessary elements of a comprehensive, well-planned asset protection strategy.
Let's take a closer look at foreign trusts, what they are, and why you might need one as a high-net-worth individual.
What is a Foreign Trust?
A foreign trust is simply a trust that you set up in a foreign, offshore, or extra-national jurisdiction. In a legal sense, a jurisdiction is the country or legal framework you are subject to – as a US citizen, for example, your jurisdiction is the United States.
So if you set up a trust in the Cook Islands, in Japan, or anywhere else, it’s a foreign trust. Foreign trusts operate pretty similarly to domestic trusts, and you can typically open up the same kind of trust in a foreign jurisdiction as you can in the US.
For instance, if you want to set up an estate planning trust in a foreign jurisdiction, you can do just that with the right legal assistance.
How Does a Foreign Trust Work?
A foreign trust works similarly to a domestic trust in that it has the same core components or actors:
- The grantor or settlor (you), which is the individual who sets up a trust
- The trustee, who administrates and manages the trust
- The beneficiary(s), who receives distributions or access to the assets in the trust
Of course, by nature of being set up in another jurisdiction, a foreign trust will be subject to different laws, case precedents, and other details. Because of this, it’s important to work with the right legal advisors when you wish to set up a foreign trust. They are the experts who will know:
- The right kind of foreign trust for your needs based on the jurisdiction’s laws in case precedents
- How the foreign jurisdiction will impact your trust’s operations, fees, distributions, etc.
In addition, foreign trusts need to be set up with authorized attorneys based in those jurisdictions. As an example, you can’t have a licensed US attorney set up a trust in the UK (unless they are also licensed to practice in the UK, of course).
Are Foreign Trusts Legal?
Absolutely. So long as you set up your foreign trust properly and with the right procedures, your foreign trust will be 100% legal. Don’t be fooled by terms like “offshore,” which are sometimes associated with criminal activities.
In truth, offshore trusts can be just as legally airtight and defensible as domestic trusts, and oftentimes are even more protective!
When is a Foreign Trust Necessary?
A foreign trust might be necessary in a variety of circumstances, particularly as a high-net-worth individual with lots of enemies (now or later).
As you make more money, your legal opponents will become more numerous and motivated to get your assets, whether that includes liquid capital, real estate, or other property. In most cases, the legal attacks you’ll face will come through court claims and creditor claims.
However, legal claims typically only apply to assets that are based in the same jurisdiction in which those claims are made. To put things more simply, if someone sues you in the US, assets that you have in the US could be on the table for seizure or damage payments.
What about assets that are stored in other jurisdictions? Things become a lot more complicated, which is a benefit for the defensive side in any legal matter!
In theory, it’s still possible for a US court, for instance, to demand that you take offshore assets to pay for US bills or lawsuit plaintiff claims. But in reality, it’s much harder for a lawsuit plaintiff to succeed in that way.
This is doubly true when you set up a properly strategized offshore asset protection trust: the gold standard when it comes to asset defense.
What is an Offshore Asset Protection Trust?
An asset protection trust or APT is simply a specialized trust instrument designed to store assets so they are safeguarded against legal claims and creditor attacks.
For example, if an angry and injured customer sues your business because of a defective product, they may try to claim assets like cash or property to pay for their medical bills. However, even if the lawsuit is successful, you’ll only be able to possibly pay those dues with assets that you personally own.
So how does an offshore asset protection trust come in?
Any assets that are stored in an offshore, foreign trust are legally not owned by you. The beauty of this legal defense is that it’s totally impenetrable, so long as it is created wisely.
You’ll legally be able to tell a judge that you don’t own the assets the plaintiff wants to claim, and they won’t have any legal standing to disagree with you.
Essentially, an offshore asset protection trust nullifies a wide range of different legal threats. This is why offshore asset protection trusts form the cornerstone of all the asset protection strategies we set up for our clients at Dominion.
Foreign trusts, by nature of being subject to different jurisdictions and laws, simply aren’t as legally vulnerable as domestic trusts based in the US.
For context, even if you set up an asset protection trust in the US, it won’t be nearly as effective as an offshore counterpart. That’s because a domestic asset protection trust is subject to US court laws, claims, and case precedents.
If you set up an offshore trust in a country that doesn’t have any case precedent for US courts taking assets from within that kind of trust, what can the court do? Nothing. That’s the kind of protection you can buy as a high-net-worth individual.
Setting Up a Foreign Trust for Maximum Protection
Of course, setting up a trust isn’t as simple as signing a few documents and calling it a day. In general, it’s best to start your asset protection strategy as early as possible.
Even in the best of circumstances, it will take several months for your asset protection trust to be fully set up and any assets you want to protect to be placed within the vehicle.
Therefore, your best bet is to get in contact with experts like Dominion right away. When you do this, you’ll have an initial consultation that covers:
- What your goals are for your asset protection strategies. For instance, do you just want to protect your assets, or do you want to incorporate some estate management elements and strategies at the same time?
- What kinds of assets do you need to store in the trust?
- What kind of jurisdiction is best for your unique needs? There are dozens of different jurisdictions that might be appropriate, and the experts at Dominion know the case laws and legal intricacies for each
Once you have your consultation and outline your strategy, we'll get to work connecting with lawyers, trust specialists, and other individuals who are part of our personnel infrastructure.
Part of the benefit of working with an asset protection services firm like Dominion is you don't have to contact any of these individuals yourself.
We handle everything from the get-go, ranging from making introductions to contacting different banks (that you can’t contact by yourself or without having the right industry connections) to setting up your trust documents to guiding you through the signing process one line at a time.
Once your foreign trust is set up, you can continue to receive distributions from the assets within, plus receive regular reports on the management and activity of your trust depending on your needs. Even better, Dominion never stops working with you for the duration of our partnership.
Decades into the future, you can count on us to continue to manage your trust effectively and provide you with regular updates.
When you work with Dominion, you work with the best, and that partnership doesn't have a time limit if you don't want it to.
Contact Dominion Today
In summary, a foreign trust is the best way to protect your assets as you build wealth and accumulate property. Compared to other possible defensive tactics, foreign trusts are safe, secure, and profitable, provided you set them up with the assistance of experts like Dominion.
Over the years, we've gained a reputation as being the best in the business at offshore asset protection trust setup, and we've helped high-net-worth individuals like you protect hundreds of millions of dollars collectively.
If you have questions, we have answers. If you have concerns about the safety of your assets, we have defenses. And if you need help, we can provide it. With our help, you’ll never worry about the protection of your assets ever again. Contact Dominion today to learn more.