Are foreign trusts always effective to thwart creditors

Are Foreign Trusts Effective to Thwart Creditors?

You’ve worked hard to achieve your legacy, and you want to be able to use it to provide lasting comfort and financial security for yourself and your loved ones. So, the last thing you’d want to do is to put your wealth at risk from creditors.

Protecting assets and making them less vulnerable to creditors that you may not have anticipated is one of the purposes of asset protection planning. One popular and effective type of asset protection is foreign trusts.

For avoiding creditors, foreign trusts are a good option because offshore jurisdictions present geographical, financial, and procedural roadblocks to creditors who want to get a hold of your trust assets. When you set up an asset protection trust in a country whose laws don’t recognize judgments coming from the U.S. or any other country, it results in significant protection of your assets from creditors.

A creditor that has obtained a judgment in the U.S., for example, would need to re-litigate the case in the foreign jurisdiction. This can be a costly proposition for a creditor, thereby encouraging them to reach a settlement for a fraction of the original claim, or it could act as a deterrent to them pursuing the claim altogether.

Due to the fact that many states have laws prohibiting individuals from transferring assets out of their name as a way to thwart or delay a creditor, asset protection planning should take place well ahead of any potential action on the part of a creditor. If not, then you’d be leaving your assets at risk. The result? You could end up in debt, creating financial burdens for you as well as for your loved ones.

Laws and strategies

Setting up foreign trusts is a good option for legally avoiding creditors from collecting unpaid debt providing that it’s done properly. While your assets will be protected offshore, you are still required by law to disclose those assets and all gains to the IRS. Taxes must be paid and filing requirements must be met. The purpose of the foreign trust is not to “hide” assets from creditors or the IRS, but to protect those assets.

The goal of asset protection planning is to remove the economic inducement for creditors to go after the assets that are secured in your foreign trust. At the Jeffrey M. Verdon Law Group, our goal is to pick the right jurisdiction and the right type of trust for our clients. To that end, we’ve found that foreign trusts can provide a significantly better and more protective environment for your assets than domestic trusts.

Consulting an Expert

When it comes to developing a comprehensive estate plan for you or developing a customized strategy to provide protection for your assets in foreign trusts, Jeffrey M. Verdon Law Group has 30-plus years of experience to bring to the table.

Our team will work with you to create a plan that provides asset protection from any potential creditors. We are very knowledgeable with regard to state laws as well as federal laws as they pertain to foreign and domestic trusts. Contact Jeffrey M. Verdon Law Group today.

Posted in Updates.