An offshore trust is an advanced estate planning tool to protect your wealth, which is created in a foreign jurisdiction to provide protection from judgment creditors by moving the trust assets outside U.S. jurisdiction. It is created by establishing a Trust in a foreign jurisdiction and then transferring the assets into the offshore trust. Some foreign countries are renowned for their asset trust protection laws. To name a few: Nevis, Cook Islands, Belize, and the Cayman Islands. For a trust established in the Cook Islands jurisdiction, in order to garnish or levy trust assets, the US judgment creditor would have to file and ultimately obtain a judgment in the Cook Islands to garnish or levy assets from the Trust established under Cook Island jurisdiction. The offshore trust is managed by an offshore Trustee. Many foreign jurisdictions have Trustees to manage the offshore trust with regulations for said offshore trustees.
Benefits of Offshore Trust
- Asset protection
- Financial privacy
- Estate planning and avoids probate
- Easier access to offshore banking and offshore investments
Disadvantages of an offshore trust
- IRS compliance
- Maintenance cost
- Surrender control to offshore trustee
- Legal complexity
It is possible to open an offshore LLC to add another layer of protection to your offshore trust. The offshore LLC serves as another entity and as a separate entity; the liability for debts and obligations cannot be placed on the individual, and the individual’s liability of debts and obligations cannot be placed on the offshore LLC.
Many individuals open an offshore trust and LLC. It is recommended to open the trust and LLC in the same foreign jurisdiction, but it is not required. Many foreign jurisdictions that provide trust protection often have protections for an LLC. Additionally, one can have the LLC manage or be a beneficiary of the trust to add the layer of protection.
Ultimately, creating an offshore trust and offshore LLC can be costly to create and manage. However, it is a great estate planning tool because of the many added layers of protection, and many creditors typically do not have the resources to claw back the offshore assets.