Asset Protection is the effort to protect assets for estate planning, or in the face of potential creditor attack. The procedure typically involves transferring assets into other entities, and to affirmatively shield them from potential foreign court awarded monetary judgments. This is done by employing an inventory of legal tools including: Asset Protection Trusts, Private Foundations, International Business Companies (sometimes referred to as IBC’s), and other custom devices. These tools can be configured to be either domestic or foreign entities.
A common theme in the use of these structures is to gift some portion of the asset to a Private Foundation. Frequently, the Private Foundation is created in Panama that has legislation that caters to this type of structure through very favorable and flexible provisions. These same provisions provide little relief to potential creditors seeking to attack the assets. Normally foreign jurisdictions will not recognize foreign judgments unless there is a treaty in effect authorizing such an action.
The trust or foundation assets do not have to reside in the same jurisdiction as the trust or foundation. In fact, they may return to your city and be invested in brokerage or bank accounts in the name of the trust or foundation. However, that approach could diminish some asset protection benefits depending on the specific circumstances.
The location of the trust or foundation provides a significantly higher barrier for any potential creditor attack than a domestic trust, however the ultimate safety of these assets will be somewhat determined by the provisions the client makes when designing the trust or foundation. The basic tenet determining the asset protection qualities of the final design hinges on the types of transfers done, who are the beneficiaries, was the transfer subject to any foreseeable creditor attack at the time of the transfer, and the degree of control of the trust or foundation and its assets mandated by the client.
While not providing any specific legal or tax counsel, nevertheless for some individuals or companies, offshore companies may offer specific tax advantages over other jurisdictions. Any potential client seeking an offshore structure should consult with their individual legal or tax advisor.