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Asset Protection Trusts & Estate Planning Vehicles

By John Dietz - Email Editor

Date: 01-Dec-2005

I regularly get calls from people who suspect that they are the beneficiary of a Foreign Trust. The news is not always good because there is a terrible trap some people fall into: They actually trust the foreign trustee when they don't need to. This can backfire.

Let me give you a hypothetical situation: Let's say your dad dies, and when going through his papers, you discover that he has an Offshore Trust. Of course, youll want to collect whatever money is in the Trust, so you begin to search through the documents. You will sometimes find that the Trust was set up by some phony straw man settlor (more on this next week). You will often discover that your dad made the terrible mistake of trusting some foreign trustee in some far away place with money you think is rightfully yours.

If your dad put control into the hands of the foreign trustee, and did not put in the normal checks and balances typically found in a properly done Kinetic Asset Protection Trust, you may find that you are at the mercy of the Trust Company.

At this stage, hoping against hope, you call the foreign trustee. It is your expectation that they will discuss the matter with you and arrange for you to receive your inheritance. I hope you this works; however, you will sometimes hear a pleasant voice refer you to a senior partner in a related law firm who will politely refuse to speak with you.

Im sorry to say, but it's nearly impossible to investigate the status of a Foreign Trust formed by a relative, especially if the foreign trustee refuses to provide the information you request. If that's the case, you'll have to hire attorneys in the foreign jurisdiction, which is both time consuming and very expensive. It is quite possible that every attorney you attempt to hire will have a conflict with the local Trust Company.

So, in short, beneficiaries of a Foreign Trust have little control over the information available regarding the Trusts term's or its financial status.

This is a situation easily avoided in a properly set up Kinetic Asset Protection Trust. Such a Trust is not set up as the ultimate estate-planning vehicle. Instead, the Kinetic Asset Protection Trust refers to whatever will or Estate Planning Trust the settlor has set up. Whenever the settlor changes his will or Estate Planning Trust, this automatically revises the dispository provisions of the Kinetic Asset Protection Trust.

In addition, as I have discussed in detail in several prior newsletters, a properly done Kinetic Asset Protection Trust never gives a single trustee complete control over the protected assets.

It is NEVER wise to put yourself at the mercy of some far away foreign trustee. A plan, properly done, never exposes you to theft. Dont allow your desire for stealthy Asset Protection to cause you to make the mistake of moving out of the frying pan and into the fire.

In short: Since you never have to give a single foreign trustee complete control, DONT.

Assume everybody is a crook (and most aren't!!!!), trust no one with your hard earned savings, and your son will never be calling your foreign trustee hoping that he can get his hands on the money you thought you set aside for him.

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