Know the basics of an offshore asset trust.
Anyone who has made a substantial amount of wealth throughout their career should consider an asset protection plan. Whether the wealth is earned from the white collar and blue collar worlds, or through self-employment, nobody wants to work hard for their money and watch it slip through their fingers.
Through asset protection planning, you ensure that you don’t lose your most valuable property. You will find that asset protection planning 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 effective ways to protect your assets but there is nothing that compares to an international trust.
What is an International Trust?
Also known as an offshore asset protection trust, an international trust can be one of the strongest asset protection plans for you, if you do it right. With an international trust, you can legally transfer out of reach of future creditors and put them in an impenetrable place.
The way this works is taking the assets out of your name and putting them in the international trust. As the owner of the assets, you choose the trustee, settlors, and beneficiaries and still have control of the assets while in the offshore asset protection trust.
Many jurisdictions, such as the Cook Islands, Liechtenstein, Nevis, and Belize all have international trust laws that provide asset protection and have enough political and economic stability to keep up with them.
Advantages of an International Trust
Asset protection is main reason an international trust is set up. There are many reasons you should make a plan, mainly involving keeping your property safe in the event that someone wins a lawsuit against you. Asset protection planning is key. This means taking assets and putting them out of reach of creditors, turning nonexempt assets into exempt assets.
When kept in an international trust, an investment is held outside of a civil creditors reach because U.S. judges do not have jurisdiction over an offshore asset trust. They cannot ask a foreign trustee or asset protection trust to release the funds to someone who claims they are owed money.
If they really want the money, a creditor will have to sue the person in the country where the trust is held. Many countries have regulations against doing so and some creditors choose not to go through the work of a second lawsuit.
According to Modern Portfolio Theory, diversification is one of the cornerstones of a successful portfolio. In fact, diverse portfolios outperform a concentrated one. By owning a large number of investments in more than one sector or asset class, investors can protect themselves from unsystematic risk, the risk that one encounters when investing in one particular company.
By diversifying with international investments held international trust, an investor is able to fight portfolio volatility while keeping high returns. To do this most successfully, it’s important to invest in non-correlated asset classes.
Going offshore offers a wide range of choices that aren’t found in your home country. The flexibility and choice are due to differing economic and political events happening all over the world. You may also find that one asset class is performing better in a different country. If investments in your country are not providing the returns you are happy with, there is nothing stopping you from investing in markets all over the world.
Many investment opportunities around the world require some kind of offshore entity. By holding an offshore asset trust, you are opening yourself up to those opportunities. When funds only accept international structures, they are staying away from unfavorable US, or your home country’s, restrictions and regulations. This allows the funds to operate in a more efficient manner which, in turn, provides higher returns for the investors.
Privacy offered by an international trust and the investments held within it reduce an investor’s exposure to frivolous litigation. A creditor can easily take money in his home country. When offshore, it is almost impossible to break the protective wall that is provided by the international trust.
What an International Trust CAN’T Do
An international trust is a great way to hold your funds outside of the reach of potential creditors but there are a few things it cannot do. First, an international trust does not shield your investments from taxation. Income earned from the international investments will be subject to taxes. This includes estate taxes when distributed.
An international trust also cannot protect assets from a legal judgement.
How to Create an International Trust
An international trust must be set up by a professional lawyer and the regulations on how to set it up vary from country to country. Any trust, domestic or offshore, has their own application but all require the assistance of an attorney as well as a financial planner.
Generally, when forming an international trust, the individual setting it up 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 will give 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 has registered with the Securities and Exchange Commission (SEC) as an investment advisor and is an SEC-registered financial advisor.
Alpen Partners Wealth Management International AG, the sister company of Alpen Partners Wealth Management AG, is now a registered investment advisor at the U.S. Securities and Exchange Commission (SEC). Together with our partner Swiss private banks, our company can now offer the full Swiss private banking experience to American clients, both resident and non-resident.