By: Edward Brown, Esq.
The crème of the crop asset protection planning simply comes down to you (the creator) creating offshore trust structures with foreign professional fiduciaries and non-fiduciaries (such as professional protector companies). The reason these designs are the most effective is that assets are placed well beyond the reach and control of any US parties (such as courts and creditors). These designs have thrived because creators who engage in high risk activities would prefer that his or her family’s tucked-away emergency funds (or eventual inheritances for the trust-creator’s surviving spouse and descendants) be in friendly hands who act in the best interests of the family and in a manner consistent with the creator’s intended structure design, as opposed to being seized and in the hands of those who have a whole different agenda (and possible motives to do the greatest financial harm to the creator as possible).
Nonetheless, there are those who cannot get comfortable with such an extravagant set up. There are alternatives that are consistent with U.S. law that involve no third-party professionals or parties, no annual fees, and no depending on total strangers (although the offshore design mentioned above still has unbeatable aspects). These non-offshore structures still involve a trust (known by numerous different names and acronyms) to be executed by the creator, that can be operated (in the role of a “trustee”) (i) by the creator (as opposed to third party professionals) but with some limitation on the trustee powers, or (ii) for added protection, by a close family member or friend of the family, or the family accountant or financial planner (someone comfortable and familiar with the family’s financial matters). These trusts name family members, known as “beneficiaries” (other than the creator) as being eligible to either receive distributions or to use trust assets, as determined in the discretion of the trustee. Broad powers can be granted in the trust (although the broader, the more vulnerable the trust can become) such as (i) designated persons’ or beneficiaries’ powers to appoint (direct) assets to be diverted to anyone in a defined class (ii) trustees’ powers to appoint (direct) trust assets to anyone other than themselves and (iii) lending powers. State laws provide further powers (if the proper state law is designated under the trust instrument) to shift the trust assets (via decanting) to another friendlier trust or to modify the trust to take into account the collective beneficiaries’ change in desires as to how they would like to see the trust operated. The fine line intimated above is that the creator is not a beneficiary. Nevertheless, if certain intervening events were to occur (which can be events that most likely coincide with the times the creator would have any need for access to the trust assets), the trust design can at least provide a more favorable environment with regard to how the trust assets are maintained, but short of allowing free access to the trust assets by the creator. Even though such access is still limited, the trust design continues to be highly preferable over losing all the trust assets to a creditor who convinced a court the creator had too much retained interest over the trust assets that could vitiate any protection for the creator.
Perhaps this less extravagant trust can be used for only the assets over which the creator is willing to release certain controls, with the creator keeping other assets in the more extravagant offshore trust that allows the creator to be a beneficiary with more avenues of access. Bottom line, trust designs can generally be created in a way that the creator can remain comfortable with the options provided within the trust instrument, and yet designed in a way that leaves the creator less vulnerable to financial devastation instigated by a creditor or any financial predator. A critical factor in all this is to hire a highly skilled and experienced trust attorney who can properly craft such a trust instrument.
*The information in this article is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Greenspoon Marder LLP or the individual author(s), nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.
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