Protect your wealth and tap into offshore markets.
Are your assets protected?
When you have worked hard for your wealth, made smart investments, or even if inherited, it is important to implement an asset protection plan. An asset protection plan is the only way to ensure you do not watch your wealth slip through your fingers into the hands of a creditor.
With an asset protection plan, you take your most valuable investments and places them outside of the reach of creditors. Proper asset protection takes early planning and proper guidance to meet the objective of taking the chips off of the table so that if bad times hit, you can walk away less scathed.
There are many different ways to structure asset protection, such as offshore banking, creating a foreign company, and more! Here we will cover five common questions surrounding one asset protection technique, an asset protection trust.
What is an asset protection trust?
Also known as an international trust, an asset protection trust can be one of the strongest asset protection plans when done right. With this kind of trust, individuals can legally transfer out of reach of future creditors and place them where they cannot access them.
This works by taking assets out of your name and placing them into the trust. Individuals choose the trustees, settlors, and beneficiaries and still have control of the assets while in the offshore asset protection trust.
Most asset protection trusts are held offshore, which is why they are often called international trusts. Typically investors will place their trust in jurisdictions such as the Cook Islands, Liechtenstein, Nevis, and Belize that have international trust laws that provide asset protection and have enough political and economic stability to keep up with them.
Why do investors choose an asset protection trust?
As you can probably assume from the name, the number one reason to set up this type of trust is the asset protection advantages.
When assets are held in an international trust, they are held outside of civil creditor’s reach because judges do not have jurisdiction over an offshore asset trust. They are prohibited from asking a foreign trustee or asset protection trust to release the funds to someone who claims they are owed money.
If a creditor is set on getting their hands on those assets, they will have to sue the person in the country where the trust is held. They will more than likely run into significant roadblocks since many countries have regulations against doing just that so most creditors avoid going through the work of a second lawsuit.
Are there other advantages?
An asset protection trust will also allow investors to tap into Modern Portfolio Theory, which states that diversification is one of the cornerstones of a successful portfolio. Diverse portfolios outperform a concentrated one, and by owning a large number of investments in more than one sector or asset class, investors protect their wealth from unsystematic risk.
When utilizing an asset protection trust to make international investments, investors can fight portfolio volatility while keeping high returns. To do this successfully, it’s important to invest in non-correlated asset classes.
Choosing to make investments offshore offers a vast array of choices that may not be found in your home country. Differing economic and political events around the world lend a hand to this flexibility and range of choice given to international investors. For example, because of economic or social factors, you may find that one asset class is performing better in a different country. If you are not happy with the range or performance of the investment options at home, nothing is stopping you from investing in markets all over the world.
An asset protection trust can be the perfect vehicle for offshore investing as many investment opportunities around the world require some form of an offshore entity. When funds only accept international structures, they are staying away from unfavorable restrictions and regulations from strict jurisdictions. This allows the funds to operate in a more efficient manner, which, in turn, provides higher returns for the investors.
As with most international investing and wealth management, asset protection trusts offer significant privacy benefits. The privacy provided by an offshore protection trust and the investments held within it reduces an investor’s exposure to frivolous litigation. A creditor can easily repossess money owed in their home country. When offshore, it is almost impossible to break the protective wall that is provided by the international trust.
Is there anything an asset protection trust can’t do?
While an asset protection trust is a great way to hold your funds outside of the reach of potential creditors, an international trust does not shield your investments from taxation. Income earned from international investments will be subject to taxes. This includes estate taxes when distributed. An international trust also cannot protect assets from a legal judgment.
How do I set up an asset protection trust?
To set up an asset protection trust, an investor will need to work alongside a professional lawyer familiar with the regulations on how to set it up vary from country to country. Every type of trust, whether domestic or offshore, has its own application, but all require the assistance of an attorney, as well as a financial planner.
Typically, the individual setting up the trust is called the settlor or grantor. The settlor will contact a trust attorney who will form the documents that are going to be filed to make the trust legal. The grantor gives directions on how the assets in the trust are going to be managed and assign beneficiaries.
Then, a trustee is appointed that manages the assets. In some cases, the grantor assists with managing. The international trust will receive a title, and the grantor is no longer the owner of the assets.
Alpen Partners and Asset Protection
Alpen Partners is working with the leading tax and legal specialists around the world to advise its clients on the best structure to protect their assets. This typically involves setting up one or several companies or trusts and depositing the assets at one of the Swiss banks we work with, either in Switzerland or in one of the other jurisdictions where our partner banks have banking centers.
Working with these specialists, Alpen Partners has developed a strong expertise in offering asset protection strategies for clients from various industries. Our clients include public company executives, physicians/surgeons and business vendors close to retirement, all of whom typically don’t know of any potential creditors as of today but simply do not want to worry about their future finances.