Offshore Asset Protection Trusts: Structuring Foreign Trusts as Part of an Integrated Estate Plan

While offshore planning often connotes thoughts concerning “tax avoidance” and other abuses, these vehicles can play an important role in protecting assets as part of an integrated estate plan. Offshore trusts, in particular, can provide heightened asset protection from potential third-party challenges such as lawsuits or divorce.

A popular misconception is that offshore vehicles are only available to the very wealthy; in fact, any person with assets to protect would be well-advised to explore the possibility of an offshore trust. There are a number of foreign jurisdictions that offer greater asset protection advantages than those provided by U.S. law.

The mechanics of setting up an offshore trust are similar to U.S. trusts, but there are some challenges specific to foreign trusts. Selecting the appropriate jurisdiction as the trust situs is critical to structuring an asset protection trust. Verifying that the offshore situs has stable banking institutions, well-established asset protection laws, and an efficient banking industry are just a few important factors an adviser must do as part of a foreign trust establishment.

Listen as our experienced panel provides practical guidance on leveraging the benefits and risks of establishing an offshore asset protection trust. Advisers must ensure that trust transfers do not run afoul of the U.S. grantor trust rules. Additionally, taxpayers and advisers must also be aware of the U.S. tax reporting regime for foreign trusts.