An offshore trust is established in a foreign country such as the Cook Islands. The trust is funded with assets of the wealthy person. Since the assets are in a foreign country, they are difficult for creditors to reach. Creditors must proceed with a law suit in the foreign country in an effort to gain access to the offshore trust property. In addition, many foreign countries have enacted laws which require the foreign trustee to move the assets to another country for further protection from law suits as soon as the foreign trustee is notified of the law suit.

This sounds like an excellent method of asset protection and was used frequently in the 1990s, however, judges in the United States are now ordering wealthy individuals to repatriate these assets and make them available to judgment creditors. When the wealthy individual attempts to comply with the judge’s request, the foreign trustees are often unwilling or forbidden by the laws in their countries, to return the assets to the United States. This sometimes results in jail time for the wealthy person for contempt of court, since the wealthy person did not comply with the judge’s order to repatriate the foreign trust assets. With the very real threat of jail time, the attractiveness of this form of asset protection has declined greatly.

In addition, the cost of establishing and maintaining a foreign trust is expensive and foreign trusts are often not economical for amounts less than 10 million dollars.

Return to: Summary of Asset Protection Methods  - at Ourednik law offices in Jacksonville Beach, Florida.

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