PURPOSES OF AN INTERNATIONAL TRUST

There are two main purposes of an international trust for U.S. citizens.  The first is to combine domestic and offshore assets into a unified estate plan with a common trustee and set of instructions.  The second use of interantional trusts is for asset protection.

ASPECTS OF AN INTERNATIONAL TRUST

International trusts for asset protection are refered to as “Asset Protection Trusts.”  The countries which provide for Asset Protection Trusts are: The Cook Islands; Nevis; Belize; Bahamas; the Channel Islands; Switzerland; and, Liechtenstein.

According to Jacob Stein’s treatise on asset protection, common provisions enacted among some, but not all, of these countries are:

  1. there is no recognition of foreign judgments with respect to trusts
  2. there is a very short statute of limitations on fraudulent transfers
  3. to establish a fraudulent transfer the creditor must show that the debtor was insolvent, and must establish the debtor’s intent to “hinder, delay or defraud” beyond a reasonable doubt;
  4. the anti-duress provisions are incorporated into the statutes; and
  5. spendthrift protection is extended to self-settled trusts.

CAUTIONS REGARDING INTERNATIONAL TRUSTS

Two things should be noted.  First, transferring your assets offshore does nothing to relieve a U.S. citizen from declaring income for tax purposes; we must declare non-domestic income and capital gains.  Also, there has been an increase in regulation regarding reporting requirements – as a result, some resident trustees in the foreign jurisdictions have either retired or greatly reduced the number of separate trusts they are willing to handle at a time.

Before implementing any estate planning, financial planning, or tax planning strategy, be sure to consult with and heed the advice of a professional certified to assist you with these matters!