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Offshore Trusts No Longer a Panacea for Asset Protection

May 22nd, 2013 by The JetSetter Team | Comments Off on Offshore Trusts No Longer a Panacea for Asset Protection

JS - Jason Hartman Income Property InvestingThanks to our ridiculous American tax code and lawsuit-crazy national mentality, it’s not surprising that those among us lucky enough to have a little money are looking for ways to protect it from the IRS, litigants, ex-spouses, and maybe even to stiff a few creditors in the process. (We’re not making moral judgments here, just calling them like we see them).

In case you missed the news, the United Bank of Switzerland, formerly a bastion of stability and privacy, has reached an agreement with the IRS to turn over personal information related to account holders suspected to be engaged in tax fraud. Ouch. The bottom line is that the Swiss banking system, which was built on a rock solid devotion to secrecy, now only offers stability, privacy, and protection to clients against private parties. An additional disincentive to go offshore is that domestic judges have taken to jailing people who refuse to disclose or turn over assets stashed there.

So, what are you going to do? One option is to take advantage of a growing trend in domestic trusts. Seeing an opportunity to carve out a slice of a lucrative market, individual states like Alaska, Delaware, Nevada, and South Dakota have promulgated the most attractive trusts and pro-debtor laws. These new domestic trusts aren’t your grandfather’s trust. They’ve been tweaked to allow you to put money in and benefit from it but also to prevent creditors from getting it out, after a certain period of time.

For example, during a bankruptcy hearing, a federal court can access trust assets going back ten years, which probably makes most readers wonder why even bother? The good news is that the window of opportunity for private creditors to claim your assets is much shorter when the federal government isn’t involved, as little as two years in Nevada. These new trusts also prevent ex-spouses from claiming funds for alimony, property settlements, and (surprisingly) child support.

Jason Hartman would like to remind you that these new types of domestic trusts haven’t been fully tested in a court of law. While many lawyers believe they will hold up, you might not want to volunteer yourself as a guinea pig. The bottom line is that the best strategy to protect a large amount of cash is to spread it among several jurisdictions, both foreign and domestic. Diversification still works better than anything else. It’s more time consuming and expensive for a creditor to fight a legal battle on several fronts simultaneously, making it more likely they’ll agree to a settlement. (Top image: Flickr | twicepix.com)

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The Jetsetter Team


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