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Asset Protection Trusts
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Asset Protection Trusts

Asset Protection Trusts are a great tool in the right hands and for the right reason. The use of an Asset Protection Trust can be an advantageous legal tool to secure and protect assets such as real estate, bank accounts, company assets, annuities, dividends, stock portfolios, furniture, artwork, precious jewels, and estate valuables.

Asset Protection Trusts, also known as Foreign/Offshore Asset Protection Trusts have evolved from Common Law to protect the assets of debtors from the courts by removing legal ownership from the debtor, while the debtor maintains control and beneficial enjoyment.

The Basic Concept of Asset Protection Trusts

Asset Protection Trusts are also known as Foreign Asset Protection Trusts, (FAPTs), or Offshore Asset Protection Trusts (OAPTs).

In any event, an Asset Protection Trust is a basic trust with special provisions designed to protect the asset being held. It is not is a tax shelter. The US government makes it very clear that all its citizens must report all worldwide income and comply with all tax demands.

Most other governments make similar stipulations as trends favor the protection and security of all assets, corporately, personally and governmentally. In a post 9-11 world, the protection and movement of assets are still legal and entirely possible; reporting has only become more stringent.

In the 1980's a new era of “off shoring” began when some island nations offered themselves as “tax havens” where business people (especially those in the U.S.) could divert their assets to FAPTs to avoid taxation. Changes in the U.S. tax code and defeats in court ended this roaring tax-evading epoch in US history.

Protection from Creditors

An APT is a trust formed in a global jurisdiction that must adhere to specific trust and procedural laws designed to thwart creditors of trust settlors. The laws result from business decisions by the jurisdiction. These laws are created to attract trust business and trust assets.

Asset Protection Trusts are nothing new. Municipalities and countries have offered them for centuries to shield assets and income from creditors. Allowing creditors to invade trust assets destroys the business in the country of jurisdiction. In essence, the APT jurisdiction will not automatically recognize U.S. judgments, and the courts of the jurisdiction are predisposed to protect trust assets from creditors.

When these new trust statutes came into being, many lawyers claimed that judges in the U.S. would be unable to find trust settlors in contempt for failure to obey an order to repatriate their assets. The concept is that if creditors want to get the assets, they would have to take their fight to the courts in a asset protection jurisdiction, only to find, for political and legal reasons, no asset protection trust would be broken. This is assuming there is no fraud, criminal or goverment related issues.

How does a Trust protect me?

The truth is that a trust must be properly implemented to protect you. A trust takes advantage of the jurisdictional laws. When you put your assets into a APT, it will keep creditors from retrieving your assets directly from the trust. However, the creditor can retrieve the assets indirectly if he is able to convince the judge that you can retrieve the assets yourself.

In order to avoid any Fraudulent Conveyance or Contempt of Court charges, you must be protecting your assets and not willingly avoiding creditors. This is why you must enact your APT when the seas are calm.

The Advantage of Asset Protection Trusts

In a properly constructed APT the asset remains in place for the beneficial enjoyment of the settlor.

The Disadvantage

Timing – you must have good timing. If you wait for the financial seas to swell with duress, it may be too late to invoke an APT.

Make sure your planner discusses all of the aspects regarding Asset Protection Trusts.