Best Offshore Trust Jurisdiction – a Comparison
What is the best offshore trust jurisdiction? We will do a comparison of asset protection trusts around the world. An offshore asset protection trust is considered by many experts to be the strongest asset protection vehicle on the planet when established in the proper jurisdiction. Assets are conveyed to the offshore trusts. You designate the trustees, settlors and beneficiaries. Only a few jurisdictions have laws that strongly favor the offshore asset protection trusts. These jurisdictions are the Cook Islands, island of Nevis and Belize. All three jurisdictions have laws that provide very strong asset protection and are politically stable. Legal experts agree that the Cook Islands has the strongest of asset protection case law history. Please click here for a Cook Islands Trust illustration.
If you would like, you can name yourself as the only beneficiary to the trust. Alternatively, you can have several beneficiaries. Any trustee that is appointed must be licensed to provide trustee services in the jurisdiction. The offshore government thoroughly screens and regularly audits trustees. Any unsuitable trustee can be replaced by you. You can remain in control of the investments or you can legally require the trustee to take your direction on investments.
Click to View Cook Islands Trust Illustration
Advantages of an Offshore Trust
The major advantage of an offshore trust is asset protection. Assets are kept out of the reach of creditors. US Judges and those in other locations do not have jurisdiction over foreign citizens. Local judges cannot legally compel the foreign trustee to release funds to your judgment creditor. The Cook Islands, Nevis, and Belize do not recognize judgments that originate in a foreign country, such as the United States. Any litigation must be initiated in the offshore jurisdiction to reach the assets. Some offshore jurisdictions place many obstacles for those who attempt to bring any litigation to the trust. In Nevis, for example, a creditor must post a $25,000 cash deposit to bring the suit against a Nevis trust. In the Cook Islands, the suit must prove beyond any reasonable doubt that assets were transferred into the trust in order to defraud the creditor in question.
One reason why the Cook Islands Trust is one of the best offshore trust jurisdiction is its short statute of limitations on fraudulent conveyance. It states that the time limit for your opponent to claim fraudulent transfer is one year from the date of the lawsuit or two years after the underlying cause of action. Therefore, when the lawsuit is completed in the U.S., the statute of limitations in the offshore jurisdiction will usually have expired. The lawsuit, therefore, could no longer be successfully pursued in the Cook Islands after that time. As a result, there are exceedingly few trust lawsuits pursued in the Cook Islands.
Moreover even if the lawsuit is brought before the clock runs out, the opponent must prove that your sole intent for creating the trust was to defraud that particular creditor. To top it off, the proof must be beyond the shadow of a reasonable doubt, a very high legal hurdle. So, whereas it is best to place funds inside before legal challenges, this legal tool has consistently displayed its asset protection effectiveness after the fact.
Best Offshore Trust Jurisdiction Strategies
One of the best asset protection strategies combines the Nevis LLC and an offshore trust such as one in the Cook Islands. Assets, such as offshore bank accounts, can be held by the Nevis LLC. All of the membership interest (ownership of the LLC) is given to the foreign trust. A U.S. resident, such as the one having the legal tools created, can be the manager of the Nevis LLC. The manager has all legal control over the LLC and signature authority over the bank accounts. When properly structured and properly operated, assets are protected from seizure by judgment creditors. It is possible, in this case, for a U.S. resident to control all of the assets, have full access to them, and yet own none of them.
When the “bad thing” happens, you temporarily have the licensed, bonded trustee step in as manager of the LLC and manage your accounts. Now the trustee will do for you for which you have paid: protect your assets. This way, the only time the trustee steps in on your behalf is when you assets would be taken by the court. When the “bad thing” goes away you are restored as manager of the LLC.
Occasionally clients ask if they can be held in contempt of court they do not bring back the funds that have been placed offshore. If the trust is drafted properly the law protects those who have placed funds therein. The protection from creditors arises from the Duress Clause. If the Trustee determines that your request for funds arises from court-ordered duress, the Trustee is duty-bound, under the terms of the trust, to step in and protect your assets. Let’s say a judge orders you to bring back the funds. You write a letter to the Trustee letting them know that the court has ordered you to repatriate the funds and make them available to your judgment creditor. The Trustee responds that he senses that your letter was written under duress and that it will not release the money.
So, you go back to the judge on your appointed day and let him know what transpired. The judge puffs up and states his intent to detain you. You reply, “Hold on a minute your Honor. In order to hold me in contempt there are three prima facie essentials. First, there must be a lawful order. Certainly there was one. Second, it must be known to the contemptor. Certainly it was, as I was standing right here when you made it. Finally, it must have been willfully violated. I did not violate your order. I demanded that the trustees return the funds. But they did not. So, I did not willfully violate your order, it is simply impossible for me to comply.” The same steps are used If the judge attempts to make you revoke the trust. Thus, domestic law protects you and Cook Islands law protects your money.
The offshore trust is best suited for holding offshore bank and brokerage accounts. As of the most recent report from Global Finance, of the 50 safest banks in the world, only three are located in the United States. All are on the bottom half of the list. So, there are much safer banks located outside the U.S. than inside.
On another note, U.S. courts have jurisdiction over U.S. real estate. The domestic courts can demand seizure of such assets. Titles for domestic real estate can be held in the Nevis LLC that is owned by the trust, but should be liquidated and funds moved offshore in the event of legal duress. Thus, it is best to keep the assets out of reach of the domestic courts.
Real Estate Asset Protection
So, how do we protect U.S. real estate? We do this through equity striping. That is, we record an equity line of credit mortgage or deed of trust on real estate. Then, when needed, we have an offshore finance company acquire the lien. The loan proceeds are placed in the offshore trust. It would be too risky to the lender for the borrower to run of with cash secured by foreign real estate. So, the funds are placed in account that one can access after the property is sold or refinanced.
Asset Protection and Safety
The trustee is licensed, meaning they went through intensive background checks before a license was granted. The trustee is bonded, meaning funds managed by the trustee are insured. Moreover, the trustee company we utilize is over 30 years old. Again, with most asset protection trusts, the only event in which the trustee steps in on your behalf is when your funds are threatened by the courts. So the main two alternatives in such an event are as follows: 100% chance of funds being seized by the courts vs. accounts being protected by a licensed, bonded trustee that has faithfully protected client funds for over 30 years.
Call us for more information or to establish a Cook Islands Trust, Nevis LLC and offshore account.
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I learned a lot about how exposed I was to lawsuits and judgements, I protected my wealth with several instruments.
- J.P. Dumini
I’ve learned that nobody wins in a lawsuit, the only way to ensure that you don’t lose, is to have something in place when you need it.
- J.M. Ansen, Los Angeles