A major goal of asset protection planning is to substantially diminish and reduce your financial profile. If you can restructure your assets in such a way so as to place them beyond the reach of future potential creditors, while at the same time maintaining a beneficial interest in those assets, you have succeeded in substantially reducing your financial profile. Situs PKVA ccordingly, you are a far less attractive target for litigation because of issues of doubt of collectability, thusly reducing the likelihood that you will be sued; or if you are sued, increasing the likelihood of a favorable settlement.
A trust can be an effective foundation for your asset protection planning. Trusts have been utilized for centuries as a means of conserving and protecting property for the beneficiaries of the trust. However, most domestic trusts do not provide protection from creditors. The typical revocable living trust, wherein the trustors are the lifetime beneficiaries and retain the power to revoke, amend and invade the principal of the trust, provides no protection whatsoever against the creditors of the trustors. Accordingly, absent specific legislation to the contrary, self created or self settled trusts are ineffective for asset protection planning purposes.
As was stated previously, most self settled trusts are not protected from creditors. However, recently, several states have provided various degrees of asset protection legislation for a self settled trust. The trust legislation in Alaska, Delaware, Missouri, Oklahoma, Nevada, Utah and Rhode Island is similar in many respects to the asset protection trust legislation found in several offshore jurisdictions. It should be noted, however, that the courts have not had an opportunity to pass muster on this type of legislation because of its recent enactment and because the statute of limitations in most cases has not expired. Depending on the timeline involved with respect to when the claim has arisen, these trusts can be and should be considered in appropriate circumstances, but only by an attorney who understands all of the ramifications.
Offshore asset protection planning normally involves the utilization of offshore trusts and other entities. Offshore planning generally raises justifiable concerns with respect to asset security and tax issues. The most efficacious manner to address these concerns is to make certain that you are receiving the best advice and counsel from a qualified expert in the area. You must be sure that the attorney with whom you are dealing has expertise in the field and is recognized in this regard by his peers.
A FAPT is a trust that is set up in an offshore jurisdiction which has enabling trust legislation providing for substantial protection against creditors of the trustor. One of the greatest advantages of the FAPT is the fact that by its very nature any legal attacks against its assets are transferred abroad to a different legal system. The FAPT is generally much more expensive to set up and create than a domestic trust and requires a certain willingness on the part of the Trustor to deal with offshore jurisdictions and trust entities. The FAPTs’ greatest value is for asset protection planning well in advance of any potential creditor problem. Moreover, many times FAPTs are only used when the client already has some international connections and networking. Recent cases have emphasized the need for careful planning in the structuring of the FAPT if it is to be legally efficacious and successful in meeting the purposes and objectives of the trustor.
Most foreign jurisdictions do not recognize US judgments. This may force a trial de novo on the merits under the laws of foreign situs in order for the creditor to impose liability on the trustor and reach the assets of the FAPT. Obviously, the fees and expenses of this trial de novo and the burden of having to select offshore counsel can be substantial. Moreover, the FAPT jurisdiction, generally, requires plaintiffs to employ attorneys who are licensed in that jurisdiction