“Ironclad” Protection From Lawsuits.
When you hear about foreign LLCs and foreign trusts… you probably think these are the sorts of things the ultra-wealthy use to protect their riches.
And you’d be right.
But what you might not know is that “foreign legal structures” like these are also available to the rest of us—and can provide big benefits…
Take the Limited Liability Company (LLC). Inside an LLC, you can own assets like real estate—for example a foreign rental property or a second home. And it might be a better route for you than owning in your own name.
Using an LLC can limit your personal liability to tenants and simplify estate planning… especially in countries that force you to distribute your estate according to their laws (rather than according to your will).
For the ultimate in asset protection, however… you don’t want an LLC. Nothing compares to a foreign trust.
A foreign trust has two huge advantages.
The first is common to all trusts, including those set up in the US.
When assets are held in a trust, you can benefit from them, but they belong to the trust—an entirely separate legal entity (an LLC, on the other hand, is in many ways treated as an extension of its owner).
In a setup like that, it’s extremely difficult for anyone to get at the assets in the trust.
Foreign asset protection trusts go one step further.
In the United States, trusts are set up according to the laws of each state. Some states, like Nevada and South Dakota, have exceptionally strong trust rules that make them more difficult to go after with a lawsuit. But even in such states, if a federal court rules the assets in the trust should be seized—you have no protection.
On the other hand, if you set up a trust in a place like the Cook Islands or Nevis—two popular jurisdictions—it is practically impossible for a litigant to get at the assets owned by the trust.
Both countries require that any attempt to seize assets must be conducted through their own courts according to their own laws. And both countries prevent the trustees from dispersing assets under duress, i.e., in the context of a legal action.
Faced with obstacles like those… many people wouldn’t even consider filing a lawsuit. What would be the point? It’s too difficult to get at the assets.
Now, it may sound as though a foreign asset protection trust is only useful if you’re facing potential lawsuits.
But that’s not the case at all.
Foreign trusts can also perform more “ordinary” functions, like owning your property overseas, completely removing it from your estate and protecting it from local inheritance rules.
Trusts in foreign jurisdictions where taxes aren’t levied on those trusts, can save you a lot of money—since you’re not liable for those taxes.
That means you could buy foreign rental properties, have the money go into a trust, and have it grow tax free until you take a distribution of the profits for yourself as a beneficiary of the trust.
Foreign trusts won’t suit everyone’s circumstances… and they do cost a bit of money to set up and maintain every year.
But they’re an important tool you should know about when planning your move or investment abroad.
If you’d like to know more… I’m available to chat.
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