Foreign Or Offshore Trusts
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The foreign or offshore trust has enjoyed resurgence in popularity over the years for asset protection practitioners. The reason is that if you transfer control of your assets to a foreign trust, creditors generally will be compelled to file a lawsuit in the country where the trust is held to seize the assets of the trust.
If the trust contains a “flight provision” it may be removed to another country in the event a lawsuit is filed or other factors that threaten the trust assets. This provision will give creditors a tough time reaching the trust assets.
Mitton warns, however, that foreign and offshore trusts do not offer perfect protection against lawsuits and liens. Some law firms in the United States now specialize in seizing assets of offshore trusts. The U. S. Supreme Court has made a ruling that when domestic real estate is involved, the laws of the state in which the real estate is located will govern levies and seizures, not the law of the foreign jurisdiction in which the trust is located.
Despite this potentially damaging exception, Mitton still insists that the foreign trust may offer some protection for cash, stocks, and other personal assets. His friend recommends that clients must be willing to invest $1 million with foreign investment managers of off-shore trusts.
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