You Don’t Have To Move Your Money Offshore To Get Asset Protection

If you're aiming to stiff creditors, litigants or an ex-spouse, should you hide your money in Nevis or Nevada?

From the article:

Forget about hiding money offshore from the Internal Revenue Service--unless you want to risk the penalties, back tax bills and threat of prosecution that thousands of American clients of ubs now face. But what about protecting your cash from vexatious litigants, a grasping ex-spouse or pesky creditors? Then offshore trusts are still an option, but a far less attractive one now that legal reporting requirements for offshore holdings have become more onerous and some U.S. judges have taken to jailing folks who won't (or can't) turn over offshore assets.

Full Article Here

My comments on the article:

1. Asset protection planning is never used to “stiff” creditors. All fifty states have laws that support legitimate asset protection planning that is done in advance of a problem. It is commonly acceptable behavior to create legal entities to protect personal assets from business liabilities or to set aside assets for the security of your family. Future creditors have every right to ask for your financial statements, obtain appropriate security, and decide whether to deal with you based on your personal financial condition whether or not you have done asset protection planning.
2. It is true that US courts have jailed some folks for refusing to repatriate assets, but only in situations involving criminal activities and fraudulent transfers. Offshore entities may still be viable options if done in advance and for ethically appropriate purposes as described above.
3. I agree that Nevada is the best state in which to create a domestic asset protection trust, followed closely by Alaska, Delaware and South Dakota.
4. The article makes it sound like domestic asset protection trusts are always self-settled trusts. It is possible to design a domestic asset protection trust that is not self-settled and eliminate most of the risk!
5. The article makes it sound like these trusts are not effective for a period of time. That is not true. These trusts are effective immediately if there is no fraudulent transfer. The time limits discussed in the article only apply if the transfer to the trust was a fraudulent transfer.
6. The article quotes Steve Oshins in saying that these have been tested and have worked well in obtaining favorable settlements. I have also had several of these tested and they have held up very well. If the trust is designed so it is not a self-settled trust, there are numerous court cases that support the asset protection provided by a discretionary trust.
7. The article names twelve states that have passed laws upholding self-settled domestic asset protection trusts. Hawaii should be added to that list as well. This trend indicates that it is less likely that another state will refuse to recognize the laws of one of these states because it is against public policy.
8. The article indicates that annual maintenance costs average between $5,000 and $7,000. In my experience, this can be done for as little as $2,000.