Recent Developments #4

Recent Developments – Asset Protection with Trusts

Public opinion, policy and the law in general is now favorable to asset protection planning as long as the planning is not intended to defraud creditors or violate existing laws against Fraudulent Transfers.

Based on these new laws and advances in technique, trusts can be designed which combine the best features of domestic and offshore arrangements within a single trust. All of your assets can be held within the trust–but governed by special terms appropriate for that asset.

For example, your trust may be designed to hold your home, interests in an LLC, accounts receivable, and your savings and brokerage accounts. This trust should contain specific language to:

1. Protect the residence while preserving the tax benefits associated with the home (mortgage interest, property taxes, avoidance of gain in sale;
2. Protect the LLC (or FLP) interests from charging order or foreclosure;
3. Protect the accounts receivable or other business assets with an equity strippng strategy;
4. Protect the savings and brokerage accounts with one of many available options-depending upon your current and anticipated needs and liability concerns;
5. Create the degree of privacy that you wish to accomplish; and
6. Provide  the traditional estate planning features of a living trust as well as advanced estate tax savings measures if needed.

An additional feature which may be valuable permits a migration of the trust to a more favorable jurisdiction – domestic or foreign-when and if necessary. In the right situation, this provision can be used to force any future plaintiff to proceed with a lawsuit against you in a string of unfriendly foreign jurisdictions to which the trust has continuously migrated. For example, under normalcircumstances, the trust exists and is governed by whatever domestic law we choose. But, if circumstances warrant, we can convert all or a portion of the trust or it’s assets into an offshore trust or LLC- legally protected and effectively out of reach. A plaintiff attempting to litigate in a foreign country, such as the Cook Islands would be faced with nearly impossible hurdles, subject only to local Fraudulent Transfer rules and the applicable Statutes of Limitations