Managing Investments held in an offshore Asset Protection Trust

Managing Investments held in an offshore Asset Protection Trust

As much as you may be told otherwise, using the massive deterrence and level of protection available in offshore Asset Protection systems can very complicated. This complication requires a team of experienced and knowledgeable professionals working to make sure that you are doing things safely, legally and effectively. That team typically includes an Asset Protection attorney, trustee, offshore bank, a great CPA, and an investment advisor. As a team they watch over your family and assets. Financial Advisor Richard Arnold is one such experienced professional. We asked him to share some important basics below. -Ike


By Richard L. Arnold

Physicians, business owners, real estate developers and others are increasingly concerned with protecting their assets/net worth in these difficult economic, political and litigious times. Those who have prepared in advance for potential lawsuits or negative economic events have considered establishing Asset Protection Trusts. These Trusts can have their assets held by a foreign bank, and managed by a financial advisor in the U.S. An Investment Policy Statement is prepared that defines the return objectives, risk tolerance and time horizon of the trust.

Here are a few answers to FAQ’s related to managing your investments in an offshore Asset Protection Trust:

• The foreign bank is the custodian for the investments in the Asset Protection Trust, therefore it is important to choose a bank that is financially solid as the investments will be in excess of insurance on deposits. Financial information on the banks can usually be obtained and evaluated.

• Generally, foreign banks can buy any U.S. individual stock, ETF or mutual fund. They can also buy foreign stocks, bonds and mutual funds, but contrary to typical wealth management in the U.S., money managers are normally not used due to the volume of transactions. If the trust is using a U.S. Advisor, purchase recommendations are sent by the Advisor to the Trustee, who then instructs the bank to make the purchase.

• The custodian bank charges transaction fees to buy and sell securities, which are about 1.8% for both a purchase and a sale. If the bank is managing the assets, additional fees run about 1.1% to 1.3% depending on the size of the account. This fee can be avoided by using a U.S. Advisor whose fees generally range from 70 to 90 basis points depending on the size of the trust. Be sure to choose an advisor who is experienced with offshore trusts.

• IRS rules require the preparation of various forms and there have been recent changes to the reporting requirements. Consult a knowledgeable tax specialist to be sure you are complying. The tax requirements are not onerous, but of course must be complied with. We work with tax advisors who have experience in reporting offshore investments.

We operate as a multi-family “family office”, managing approximately $1B in assets. Please call me if you are interested in discussing our services further, or contact Ike Devji.

Richard L. Arnold, Advisor and Operations Manager
CB&T Wealth Management and The Corundum Group
1 South Nevada Ave., Suite 200
Colorado Springs, CO 80903
Direct (719) 228-1083 Cell (719) 330-1226
Rick.Arnold@centralbancorp.com www.centralbancorp.com

Doctors Asset Protection 101 - Featured on Wills, Trsust & Estates Blog

The Wills, Trusts and Estates Prof blog of Professor Gerry W. Beyer recently featured my article "Asset Protection 101 For Physicians".

Professor Beyer, a Governor Preston E. Smith Regents Professor of Law at Texas Tech Univ. School of Law, has a great, informative blog that draws upon a variety of sources in related fields and it is an honor to have been included.

The link to the post, summary and downloadable PDF are below.


http://lawprofessors.typepad.com/trusts_estates_prof/2010/08/asset-protection-for-doctors.html

NEVADA TRUST FOR ASSET PROTECTION? BETTER MAKE SURE YOUR TRUST COMPANY STILL EXISTS

Even within the specialized Asset Protection legal community professional opinions vary on the use and effectiveness of Nevada and other states' Domestic Asset Protection Trusts (DAPT's). One thing all agree on however, is that for such a strategy to hold up to even the weakest attacks the formalities of the state's trust laws must be met to the letter.

Since many Nevada DAPT's have been created by attorneys in other practice areas who dabble in Asset Protection or by promoters with no on-going guidance or client contact available (often not even attorneys) I think it is inevitable that a large number of people who have purchased Nevada trusts are going to wake up one day, need to "use" their trust and find that the trust company appointed and required by the state laws of Nevada no longer exists or that they have moved. In this case the trust, lacking proper legal formalities under Nevada Law, would offer little or no protection at all.

The full article on the Nevada trust business and those leaving, including the oldest trust company in the state, is here:
Nevada’s Oldest Trust Company Calls it Quits After 107 Years in Business

I suspect that we will see many planners and clients caught unaware by theses changes. Even worse, we will also hear tales of trust companies collecting fees and continuing to manage trusts even with their legal status revoked.

As always, we are watching the development and defensibility of the DAPT in various jurisdictions and hope to use it when and if it ever becomes a viable alternative to to the proven results of International Asset Protection Trusts. We don't feel the case law and the courts are there yet, especially given the current social and political climate that is so hostile to wealth and business owners.

Ike Devji

ASSET PROTECTION F.A.Q.s - WHAT YOU SHOULD KNOW

What is Asset Protection?
Assert Protection is a proactive, holistic system of legal and financial tools and strategies that preserve wealth and assets in all forms from loss, waste or spoilage. It also accurately analogized as NET WORTH INSURANCE.

Is it Legal?
Absolutely, if done at the right time by a professional and in a tax neutral way. Asset Protection planning in and of itself, if done at the right time, is a valid legal purpose on its own. Many of the tools and strategies used in Asset Protection also have legitimate business purposes for other reasons like tax efficiency, investment management consolidation, wealth transfer, and estate tax avoidance to name just a few.

Am I wealthy enough to do Asset Protection?
Probably, there are good strategies available at nearly every income and net worth level. The number one mistake made by lawyers, CPAs and Financial Advisors when advising clients if they need Asset Protection is telling them they are “not rich enough” to worry about it. That is terrible advice. While most of our clients are seven to nine figures in net worth, we also have a large group that is on their way to accumulating significant wealth. What all these clients have in common is that they have worked hard to accumulate what they have, regardless of the total dollar value. If the loss of all or most of your current assets would pose a significant threat to your family, business and way of life, you should probably examine the options available to you.

Will it get me in trouble with the IRS?
Not if it’s done the right way. The tools and strategies we use to protect thousands of clients are tax neutral and require full compliance and tax reporting. We never want to see your planning jeopardized because it put you harm’s way with the IRS. None of plans involve “secrecy” or “hiding” assets. Those amateur plans often assume that you will commit perjury and are based on the “hope” that you can hide something and that the courts won’t find it or ask about it. Hope is not a plan.

I already have a Revocable Living Trust (RLT), isn’t that Asset Protection?
No, if that’s the case you have great estate planning, an important and necessary part of any good system. However, an RLT provides absolutely ZERO protection against judgments, lawsuits and a hostile world. The first word is “revocable” so the courts will simply order that you revoke the trust and hand over the house, investments and other assets it holds. An RLT is Death Planning, as opposed to Asset Protection which is Life Planning.

Can I wait to do it until I really need it?
No. The number one flaw in most Asset Protection plans is TIMING. Most people wait until they have an exposure to take simple steps that could have protected a lifetime of effort. Trying to gift, move or hide assets after you have an exposure is fraud. In fact there is a specific name for it, Fraudulent Conveyance. Transfers you make under this harsh light can be set aside completely and create a hostile situation with the courts. The best time to act is always now, and every day that passes makes the planning you do a little stronger. Just like with insurance, you can’t insure yourself against an event or loss that has already occurred, only against future exposures.

What can be protected?
Almost everything, a partial list of the assets that can be protected would include:
- Investments like cash stocks, bonds and etc.
- Residences
- Investment Real Estate
- Interests in Businesses
- Valuable personal property like Art, Jewelry, Collections
- Business Equipment
- Future Income
- Cash Value of Life Insurance Policies

Do I lose control of my assets?
No, most our tools allow direct control by the client or someone the client wants in control, until and unless it is more efficient or safer for the client to delegate management to a fiduciary like a trustee. You will decide when and if that happens.

Are your Asset Protection tools International (offshore) or Domestic?
We use a system that incorporates both kinds of tools, but primarily domestic ones. What specific tools we prescribe to any individual client depend on a variety of factors including the nature of the assets they have, their value and the threats the clients faces. Every plan, like every client, is unique.

Can my lawyer do this?
Probably not. The upper level tools and strategies we use to protect thousands of clients and billions of dollars in assets are unique and special tailored to this purpose. If your planner was aware of these tools and risks, and was informed about your risks and the options available to you, it would already have been done and you would not be reading this. There are many potential planning pitfalls that lawyers who work primarily in other areas are simply not aware of and now matter how smart your counsel is they can’t be an expert at everything. Asset Protection is the sole focus of our legal practice.

How Do I start?
Just call and we will set a mutually convenient time to talk on the phone or in person. We will ask you a series of questions covered by attorney-client privilege that will allow us to get a real idea of the risks you face and what needs to be done to address them. You don’t need to do any “homework” before the call and most of the people we talk to can provide us enough detail to create a good plan. We will create a specific written plan of action and also provide you a very specific fee quote that will allow you to see how a small investment can protect a lifetime of hard work.

Beyond Prenups - Where Asset Protection meets Domestic Relations Law

We advise all of our clients to address pre-nuptial planning and tell them that combined with what we do, the value and surety that tools like the Asset Protection trust and our other tools provide will give them great additional security and take a great finite "snapshot" of their assets entering the marriage.

It has been our experience that careful planing also reduces or eliminates areas of conflict and dispute and helps control the financial and legal costs of such battles that enrich no one but the lawyers.

The link below is to an article in Private Wealth magazine that exapnds upon this concept.

Beyond Prenups - Where Asset Protection meets Domestic Relations Law
http://www.fa-mag.com/component/content/article/5521.html?issue=144&magazineID=3&Itemid=211#josc601

STATES WITH MOST ABUSIVE LAWSUIT SYSTEMS

A TRIO of startling articles are linked below for your information. The first one highlights the erosion of what we have always cautioned as being the "emperors new clothes" tort reform and med-malpractice caps which the penny-wise and pound foolish have always thought would protect them. The second article is on the most abusive lawsuit jurisdictions in the U.S. which include not only what you'd expect (California) but also some southern states; good ol' boys love torts too. Finally, a short piece on illinois and the lawsuit crisis there. All good quick reads.

Yours, Ike

THE LINKS:

Georgia Supreme Court declares caps on malpractice lawsuits are unconstitutional

California has one of the worst legal climates

Illinois' Lawsuit Climate Among Worst in the Country

The Foreign Account Tax Compliance Act of 2009 (Rangel-Baucus Bill)

The Foreign Account Tax Compliance Act of 2009 (Rangel-Baucus Bill)



Recent Offshore Tax Haven Legislation

Since 2007, numerous attempts have been made at passing targeted tax haven legislation. Although none of these initiatives has progressed in any meaningful way thus far, under the Obama Administration there is a much higher likelihood that this type of legislation will be promoted.

SEE THE WHOLE STORY HERE

http://www.lexology.com/library/detail.aspx?g=0bab19ec-e537-4822-bf77-f67d6ebf0dcd&utm_source=Lexology%20Daily%20Newsfeed&utm_medium=Email&utm_campaign=Lexology%20subscriber%20daily%20feed&utm_content=Lexology%20Daily%20Newsfeed%202010-01-29&utm_term=

People Don’t Live In Delaware. But They Keep Their Money There.

We see lots of discussion about the "best" legal & financial jurisdictions. If you are familiar with my writing or the work we do in protecting billions of dollars for our clients you know what I think of most domestic jurisdictions and that we think that they have little or no value for Asset Protection despite any nominee corporation b.s. and promises of secrecy that the snake-oil salesmen in various states pedal.

The link below is to an interesting piece about Delaware, which is also now promising Asset Protection through domestic asset protection trusts that we never use because they fly in the face of full faith and credit laws and we don't want our clients to be test cases.

Yours, Ike

See the story here on DEALBREAKER:

Its beaches don’t compare with those of Bermuda or the Cayman Islands. You can’t ski there. But the most boring state in the union is best damned tax shelter on earth.

The First State is finally first at something else, according to the Tax Justice Network. It’s the best place for non-Americans to hide from their taxmen, earning the august moniker, “most secretive financial jurisdiction.”

http://tinyurl.com/DELAWAREWTF

ARE YOU AN ACCIDENTAL TAX CHEAT? THE IRS IS LOOKING FOR YOU.

The IRS is currently running a "Voluntary Disclosure Opportunity" that expires October 15, 2009.

You have likely heard reference to this amnesty event in the context of allowing those with "secret" offshore accounts (see my other posts on this amateur practice) to report them and get square with the tax man - but there are many other situations that require reporting and which are often intentionally or accidentally overlooked - be sure you and your clients are fully aware.

If any of the following situations apply in your case, make sure that you file proper forms to report these transactions and if required declare income prior to the extended deadline of October 15, 2009 in order to avoid severe and harsh penalties including criminal penalties:

1. Do you have a foreign bank account including a security account, credit
card account etc outside the United States that you did not report as
required by law?

2. Do you have unreported income from a foreign country?

3. Do you own any unreported foreign entities such as corporations, trusts,
partnerships or disregarded entities?

4. Do you own Mexican real estate through Mexican Bank Trusts?

5. Do you have rental income from property outside the United
States?

6. Did you receive unreported inheritance from outside United States?

7. Are you a beneficiary in any trust formed in foreign jurisdiction? Did
you receive any unreported distribution from the trust?

8. Have you sent money outside United States by way of loan, equity etc in
last few years and not reported it to the IRS?

If any of the above situations apply to you, please contact professional accounting help as soon as possible so that they can help you - Penalties will be exceptionally harsh after October 15, 2009.

My thanks to Pallav Acharya, CPA, FCA, CIM of CPA global Tax & Accounting
for this list. Phone: (480) 889-8949 - Pallav is in Scottsdale, AZ and works with clients all over on international taxation issues.

MOST COMMON ABUSIVE TAX SCHEMES - WHAT THE IRS SAYS

I continually warn clients and advisors that there are good and bad methods, tools and practitioners in every business including Asset Protection. The worst plans I see combine abusive tax plans with supposed Asset Protection benefits. These plans typically involve IBCs, Nevada Trusts, and Domestic Asset Protection Trusts in some combination. Generally speaking these are the WORST tools to use for a variety of reasons. We use offshore tools effectively and legally everyday for Asset Protection and other issues. The tools we use are explicitly TAX NEUTRAL because we don't want our clients relying on these tools for protection and estate preservation and fighting the IRS at the same time, a common fatal flaw that is spawned by greed and promises of tax savings that top professionals will never make. Below is what the IRS has to say in their own words.


Yours, Ike


Tax evasion using foreign jurisdictions is accomplished using many different methods. Some can be as simple as taking unreported cash receipts and personally traveling to a tax haven country and depositing the cash into a bank account. Others are more elaborate involving numerous domestic and foreign trusts, partnerships, nominees, etc. The following schemes are not all-inclusive, but just a sample of abusive tax schemes.


Abusive Foreign Trust Schemes: The foreign trust schemes usually start off as a series of domestic trusts layered upon one another. This set up is used to give the appearance that the taxpayer has turned his/her business and assets over to a trust and is no longer in control of the business or its assets. Once transferred to the domestic trust, the income and expenses are passed to one or more foreign trusts, typically in tax haven countries.

As an example, a taxpayer's business is split into two trusts. One trust would be the business trust that is in charge of the daily operations. The other trust is an equipment trust formed to hold the business's equipment that is leased back to the business trust at inflated rates to nullify any income reported on the business trust tax return (Form 1041). Next the income from the equipment trust is distributed to foreign trust-one, again, which nullifies any tax due on the equipment trust tax return. Foreign trust-one then distributes all or most of its income to foreign trust-two. Since all of foreign trust-two's income is foreign based there is no filing requirement.

Once the assets are in foreign trust-two, a bank account is opened either under the trust name or an International Business Corporation (IBC). The trust documentation and business records of this scheme all make it appear that the taxpayer is no longer in control of his/her business or its assets. The reality is that nothing ever changed. The taxpayer still exercises full control over his/her business and assets. There can be many different variations to the scheme.

International Business Corporations (IBC): The taxpayer establishes an IBC with the exact name as that of his/her business. The IBC also has a bank account in the foreign country. As the taxpayer receives checks from customers, he sends them to the bank in the foreign country. The foreign bank then uses its correspondent account in to process the checks so that it never would appear to the customer, upon reviewing the canceled check that the payment was sent offshore. Once the checks clear, the taxpayer's IBC account is credited for the check payments. Here the taxpayer has, again, transferred the unreported income offshore to a tax haven jurisdiction.

False Billing Schemes: A taxpayer sets up an International Business Corporation (IBC) in a tax haven country with a nominee as the owner (usually the promoter). A bank account is then opened under the IBC. On the bank's records the taxpayer would be listed as a signatory on the account. The promoter then issues invoices to the taxpayer's business for goods allegedly purchased by the taxpayer. The taxpayer then sends payment to the IBC that gets deposited into the joint account held by the IBC and taxpayer. The taxpayer takes a business deduction for the payment to the IBC thereby reducing his/her taxable income and has safely placed the unreported income into the foreign bank account.

Original Link:http://www.irs.gov/compliance/enforcement/article/0,,id=105822,00.html

How Many Lawsuits are There in the U.S. & What are They For?

The article below has a great summary of lawsuit facts that helps shed light on what all this "lawsuit and Asset Protection fuss) is about. Your wealth is the product being sold by attorneys nationwide, choose not to let them have it and take action. - Ike Devji

(Reprinted with Permission from the SixWise.com Security & Wellness e-Newsletter www.sixwise.com)

The U.S. legal system ensures that every American who feels they have been injured or victimized is able to seek justice through the court system -- clearly a noble and necessary protection. However, in recent decades the United States has earned the nickname as the most "litigious society" out there, in part due to major increases in lawsuits involving everything from hot spilled coffee to neighbors' disputes.

The United States has more lawyers per capita than any other country.
In fact, Americans spend more on civil litigation than any other industrialized country, according to a study in the Economic Journal, and twice as much on litigation as on new automobiles.

Why the disparity? Part of the reason, according to the Economic Journal study, has to do with incentives to sue, of which Americans have plenty. While in most European legal systems the loser in a suit must pay a large portion of the winner's legal fees, in America each party pays their own. So, simply speaking, in America there's nothing to lose.

More Lawyers Per Capita Than Any Other Country
As of 2006, there are over 1 million lawyers in the United States, according to the American Bar Association -- more per capita than any other country.
As the number of lawyers has increased, so has the number of civil claims, up 12 percent from 1993 to 2002.
In all, over 16 million civil cases were filed in state courts in 2002, according to the State Court Guide to Statistical Reporting,2003, from the National Center for State Courts. Trial lawyers earned an estimated $40 billion in lawsuit awards that same year.

What Are All These Lawsuits For?
Demand for legal services is increasing across the board, but particularly in such areas as health care, intellectual property, venture capital, energy, elder, antitrust, and environmental law.

The largest jump in lawsuits has been seen in the health care industry, where doctors have been paying significantly higher liability premiums to defend against potential litigation. While some say the increase in health care lawsuits may provide a safer environment for patients, opponents believe they are keeping patients from receiving the best care.

Some interesting facts:
- Over 16 million civil cases were filed in state courts in 2002.
- 79 percent of doctors report that they've ordered more tests than they would based only on professional judgment due to litigation fears, according to a Harris Interactive Poll.
- The American Medical Association lists 21 states as being in a "medical liability crisis."
- 71,000 drug lawsuits have been filed in federal courts since 2001 -- and have outnumbered asbestos, tobacco and auto safety lawsuits since 2002.
- 45 percent of U.S. hospitals reported that the liability crisis has caused a loss of physicians and/or reduced coverage in emergency departments.

How do Americans Feel About the Legal System?
News about frivolous and controversial lawsuits makes headlines just about everyday. But when a 14-year-old sues her friend for losing her iPod, the music industry sues a 12-year-old for downloading music from the Internet, and lawyers are eyeing fast food companies and snack food makers as targets in potential class-action lawsuits of the future, litigation, it seems, gets taken to a new level.

Frivolous lawsuits alone are said to cost the United States $200 billion a year, according to Congressman Terry Everett, and all of these potentially unwarranted claims are having an affect on how Americans view the legal system.

According to a survey conducted by Harris Interactive, 76 percent of those surveyed feel that fear of frivolous lawsuits discourages people from performing normal activities.
Further:
- Only 16 percent trust the legal system to defend them against frivolous lawsuits.
- 54 percent do not trust the legal system.
- 67 percent strongly agree (and 27 percent somewhat agree) that there is an increasing tendency for people to threaten legal action when something goes wrong.
- 83 percent feel that the legal system makes it too easy to make invalid claims.
- 56 percent think that there are fundamental changes needed to make the civil justice system work better.

Perhaps most telling of all, most Americans surveyed (55 percent) strongly agreed (and another 32 percent somewhat agreed) that the justice system is used by many as a lottery, to start a lawsuit and see just how much they can win.

THE ROLE OF "SECRECY" IN ASSET PROTECTION

The Excerpts and Links below emphasize yet another reason that the
best Asset Protection plans are:

1. Tax Neutral;
2. Involve paying and reporting taxable income from all sources;
3. Are drafted by a professional with experience in such issues;
4. AND DON'T RELY ON SECRECY


I tell our clients this:

Secrecy is hiding something and “hoping” no one finds it. Hope is not a plan as we have learned since the last election. Secrecy based plans rely purely on that hope of secrecy and your willingness to perjure yourself before the courts.

Have a real plan that is tax neutral and which you CAN disclose without fear.

The Cost Of Secrecy
By Barbara T. Kaplan
On February 18, something happened that should be taken as a wake-up call by investors with secret foreign bank accounts: UBS AG signed a deferred prosecution agreement with the U.S. Department of Justice that resulted in the names and private Swiss account records of 300 U.S. taxpayers being released to the IRS. A second agreement announced this month is expected to result in UBS turning over thousands of more names.

SEE THE WHOLE STORY HERE: http://tinyurl.com/lt8kc3

STORY #2
U.S., Swiss nail deal on secret bank accounts The Swiss and U.S. governments announced a deal Wednesday to settle American demands for the identities of suspected tax dodgers, despite Switzerland's vaunted bank secrecy.
http://www.msnbc.msn.com/id/32386100/ns/business-world_business/from/ET


STORY#3
Days of Secret Swiss Bank Accounts May Be Numbered

http://www.cnbc.com/id/32389493

TOP 10 ARIZONA LAWSUIT VERDICTS OF 2008

ASSET PROTECTION UPDATE - TOP ARIZONA LAWSUIT VERDICTS OF 2008

We are continually surprised by the number of successful and educated business people and their advisors that underestimate the exposure they and they clients face just from “walking around rich” or even with just the appearance of wealth. We warn people about these exposures and seek to place barriers between this kind of harm and the assets of those we protect on a daily basis.

Sometimes our advice and experience is well-heeded, sometimes it is not. Don’t take our word for it – here are the facts; see the original story store as published in ARIZONA ATTORNEY, the magazine of the State Bar of Arizona by clicking here.

ARIZONA LAWSUIT AWARD SUMMARY

- True to what we are seeing in the real estate market, a home building company claimed the top verdict of $269 million;
- Once again, each of the top 10 verdicts was more than $5 million. The lowest was for $6Million;
- 9 out of the top 10 were more than $10 million;
- There were 24 verdicts over $1 million;
-Other verdicts resulted from actions for breach of contract, condemnation, product liability and elder abuse.

WHAT DOES THIS TELL US?

- That in almost all cases, the amount of liability insurance carried by the defendant was insufficient to meet the verdict;
- That liability insurance remains and important first line of defense, just the cost of defending one of these suits could be financially devastating;
- That the insurance coverage needed to be supported and further recovery limited by active Asset Protection planning;
- That in several cases it is unlikely that the assets of the corporation involved will be sufficient to pay the judgment, placing owners and officers in harm’s way;
- That all industries are vulnerable, this not “just” about any one group or profession;
- That a lifetime of work and the security and future of any of these defendant businesses and their owners and employees can be destroyed by a single law suit;
- That we are in a time, socially, politically and economically that requires each of us to take proactive responsibility for protecting our wealth, or the wealth of those that we serve as advisors.

UNDERSTANDING THE CHECKS AND BALANCES OF THE ASSET PROTECTION TRUST

We have many questions on how Asset Protection Trusts work and how you and your money are protected in international or "off-shore" jurisdictions. My friend Doug Lodmell created this great piece for our many clients and advisor & attorney partners that explains the basics.

UNDERSTANDING THE CHECKS AND BALANCES OF THE ASSET PROTECTION TRUST

By Douglass S. Lodmell, J.D., LL.M.


Since Asset Protection ultimately relies on removing the assets from both the U.S. jurisdiction, and the control of the clients, a very good question would be: How can a client be sure that the new foreign Trustee doesn’t run away with the money should we ever need to use the Trust? To answer this we need to look at the intricacies of how a well-drafted Asset Protection Trust creates internal and external ‘checks and balances.’

To begin, let’s look at how the plan ‘controls’ the money:

1) We create a legal structure which requires the approval and consent of various parties who act as checks and balances on the assets, and

2) We create a physical tracking mechanism directly with the independent client chosen bank, which holds the money, so that the client is always aware of where the money is.

The Asset Protection Trust has 4 primary roles:

1) The Settlors (the clients)
2) The Trustee
3) The Protector
4) The Beneficiaries


The legal control of the assets is done through a 2 party approval mechanism. This is kind of like requiring 2 signatures on a check. The Trustee is responsible for the management of the assets and has legal title. However, unless the Trustee is the client, they do not have physical possession of the money, which is held at an independent and unrelated bank.

In order for the Trustee to actually do anything with the money, they then must also have the consent of The Protector. This would include things like wiring the money to another bank or even to another account with a different name, or making any changes whatsoever in the physical location of the money

The role of Protector is just that, to protect the assets of the Trust for the benefit of the Beneficiaries. As such the Protector has 2 primary jobs: 1) to approve of the actions of the Trustee, and 2) to remove the Trustee if the Trustee is not acting in the best interests of the Beneficiaries. This is what ensures that the Trustee doesn’t run off with the money.

So who keeps an eye on the Protector? This is where the loop closes back to the only location in which the clients can have 100% security – themselves. The Settlors (clients) have the power to remove and replace the Protector for any reason they choose to at any time. The only exception is if a U.S. court is demanding that they do so to appoint the court or a court representative as Protector, in which case that particular order is ignored.

The only other possible loophole that could endanger the money is if both the Trustee and the Protector conspired together to defraud the Trust. This is highly unlikely in and of itself due to the fact that the Trustee is a large Trust Company and has their own internal checks and balances as well as the fiduciary duty and liability to the Trust, and the fact that the Protector is personally chosen directly by the client and has the same fiduciary duty. Nevertheless, the plan has one final check that ensures that the client themselves always have full knowledge of where the money is, and where it is going to.

This final check is called a “client acknowledgment” procedure. The bank, typically a large private Swiss bank, chosen by the client, will have a hold period prior to the execution of any orders to withdraw funds, or move money from the Trust account. This procedure would require the bank to have a personal confirmation that the Beneficiaries (also the clients) have direct knowledge of the proposed transfer.

While the Beneficiaries are not in “control” of the money directly, since the bank must have a direct personal verification that the Beneficiaries are aware of the transfer, if a proposed transfer is not approved, the bank will be so informed, by the clients themselves. The order would then be delayed for a sufficient period of time for the Settlors to appoint a new Protector, who will appoint a new Trustee.

As you might imagine, the net effect is that it is virtually impossible to make any move with Trust assets without the client’s direct knowledge and consent. This combined with the fact that any serious Asset Protection Plan is going to use only the most stable and reputable institutions to fill any fiduciary role makes having your assets offshore safer than the local bank down the street by far.

The difference is that the bank down the street is in the jurisdiction of the court at the other end of the street. And right in the middle is the all-too familiar lawyers office, which is where all the trouble began in the first place.