Asset protection Trusts & You
What They Are And What Benefits They Offer
September 23, 2004
By Monish Datta
Trusts are autonomous legal entities.
They are basically a legal agreement that allows the
settlor to set aside money or property of one person
for the benefit of one or more persons or organizations.
Asset protection trusts are established to
protect a settlers assets against those who may make
attempts to make claims against them. For example,
Creditors, former spouses etc.
The main stakeholders in a trust are :
The Trustee : The Trustee is the person appointed to administer
the trust according to the trust deed.
The Settllor : The person who created or established the
trust is the Settlor
The Benefeciary : The person who may receive income or benefits
from the formation of the trsut is the beneficiary.
Trusts for asset protection are normally established in an offshore
location They are an effective tool to settle or discourage litigation
and It is a means to keep ownership of assets absolutely confidential.
Trusts created for the purpose of asset protection make the enforcement
of judgements against protected assets, virtually impossible and
allows the owner of protected assets to retain control over them.
Selecting the proper jurisdiction for the Offshore Trust is a matter
of critical importance. As a general rule, the jurisdiction should
have a well-established trust law favorable to asset protection
strategies. Further, it should be inconvenient or nearly impossible
for a U. S. creditor to reach the assets of the trust by commencing
an action in the foreign country.
One should consider the following factors when selecting a jurisdiction
for a Trust situated overseas : Ease of communications, Experienced
and well established trustees, Strict secrecy laws and stable local
government.
The Offshore Trust cannot be used to avoid taxes or to "hide"
the proceeds of illegal or fraudulent activities. Properly structured,
the Offshore Trust can be a powerful weapon to discourage frivolous
lawsuits targeting "Deep Pocket" defendants and to protect
against unforeseen liabilities arising out of a business or professional
practice.
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