To Trust Or Not To Trust

Date : March 20, 2008

For years I have harped on my belief that you should never trust anybody with your hard earned assets unless you have to or choose to for some good reason. I even go so far to say you should NEVER trust a foreign trustee because, if a trust is done when the financial seas are calm, you never have to. This irritates many trust companies and flies in the face of traditional “Give it to the Trustee” Asset Protection Planning.

A bit of explanation first: The Asset Protection wave in the USA got started with a few trust companies, typically from the Cook Islands, traveling around the country meeting with lawyers and financial planners. The representatives were armed with fancy “Asset Protection Trust” documents which the trust guys gave to the lawyers. The pitch was something like this:

Here are some fancy documents. Fill in the blanks and you can sell them and this fancy plan to your clients for a minimum of $25,000.

The trust companies often had related banks and offered (as they continue to do) hefty undisclosed referral fees to the lawyers for referring their clients. If the lawyers gave enough business to the trust companies, there were lots of other travel related benefits in addition to the juicy referral fees.

ALL of these trusts had one element in common: They delivered complete control of the funds to a far away trust company, owned and run by individuals who usually had about the same net worth which I have (and believe me that isn’t enough). The trust companies are usually monitored by some governmental agency manned by fraternity brothers of the trustees who, if there ever is any trouble, will investigate it in a completely confidential, unreported manner. In short, there is normally little or no effective monitoring of the performance or integrity of these trustees.

So, what we have traditionally seen with typical Asset Protection Plans is lawyers delivering their clients to fancy, far away trustees, often in exchange for referral fees. I have often railed against this practice because I think it puts the client in grave jeopardy if the trust company wants to play fast and dirty with the clients’ money. Of course, I am aware of many cases where the trustee did run away with the protected assets, and I have reported many of these instances here. Even though I was aware of lots of the bad acts which took place, I have never, ever been involved with a client who actually had trouble with a foreign trustee…until recently when I was approached by a lawyer for a client who just couldn’t get a fancy trust company with lots of his money under their control to account to him. His requests for information were met with silence. His request to change the trust company was met with silen ce. His request to disband the trust was met with silence. His requests for a meeting were refused even after he traveled, with his attorney in hand, to the jurisdiction of the fancy trust company. His request to the Financial Services Commission was met with a response that they do not get involved with resolving civil disputes and that they would be happy to receive a complaint which would be investigated and resolved in utter and complete secrecy so that no person on the planet would even know if there had been a problem.

I actually experienced a creepy trust company first hand. Of course, it was more complex than this, and I have changed some facts to protect the innocent; however, the bottom line is that my client was being treated like an outsider. He couldn’t get a straight answer from his trusted trustee. THIS NEVER NEEDS TO HAPPEN, AND IT NEVER SHOULD HAPPEN TO YOU.

With a properly done Plan you can and should always know where your money is and you should always be 100% confident that your money is not exposed to any risk of theft. Please do not ever purchase one of the “give-your-hard-earned-money-to-a-foreign-trust-company” Asset Protection Plans. ALWAYS make sure that there are checks and balances and that you are never vulnerable to theft.

ABOUT THIS EDITOR:

Rob Lambert, Founder and former law professor is considered to be foremost expert on tax compliant asset protection structures. A contributing editor to Lexus Nexus debtor creditors series of law books Rob's passion is implement client wealth plans that stand the test of time and hold up under duress.

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