August 22, 2022

How Do Offshore Accounts Protect Your Assets?

Written by Erb Legal LLC

Category: Division of Property, Estate Planning, Family Law

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(330) 446-3606

Based on what you see in movies or hear on the news, you may think offshore accounts are only used by wealthy people for nefarious purposes or to hide evidence of financial crimes. But you might not know that setting up an offshore account is perfectly legal, standard, and relatively simple.

At Erb Legal, our attorneys recognize the many reasons you may wish to protect your assets in an offshore trust. They know how to navigate tax and finance laws to help you maintain asset security and financial privacy. Call (330) 446-3606 or use our online form to schedule a consult.

What Is an Offshore Asset Protection Trust?

An offshore asset protection trust is established under another country’s laws to protect the assets placed within it from domestic creditors and future lawsuits. An offshore trust can preserve several types of assets that may become the object of contention in events like divorce, such as:

  • Cash and bank deposits
  • Intellectual property
  • LLCs and small business stock
  • Other types of securities

Why Would I Need an Offshore Trust?

People set up offshore trusts to protect their assets from legal disputes and judgments in U.S. courts. A common reason why you might want to create an offshore trust is in the event of divorce, which can put your business, income, and other assets up for division. When your assets are outside the jurisdiction of the United States, they can’t be touched in your divorce, allowing you to keep more of your property and finances. This is especially helpful in high-net-worth divorces where substantial assets are at stake.

Another reason for using offshore trusts is if you fear losing your assets in a future lawsuit. You can’t create an offshore trust if you’re already getting divorced or if a lawsuit has been filed against you, but taking preemptive action to protect yourself can make a difference in the assets you keep or lose.

Benefits of an Offshore Trust

The most significant advantage of an offshore trust is that it can provide peace of mind to people who wish to protect their assets against legal threats such as divorce or civil lawsuits. Assets placed in an offshore trust are kept out of reach of the U.S. court system and individuals who may try to come after your assets, such as creditors or ex-spouses. A judgment made against you in a U.S. court doesn’t have jurisdiction over assets in a foreign country.

In addition to powerful protection, an offshore trust can ease your overall tax burden while awarding you more flexibility and confidentiality regarding your assets.

Security of Offshore Trusts

Offshore trusts are lawful and secure when organized correctly in an appropriate location. One of the most popular jurisdictions for offshore trusts is the Cook Islands, which has a favorable legal system and tax structure regarding asset protection. A Cook Islands trust provides high anonymity and security for individuals looking to protect their assets. Other countries with solid reputations for safe offshore trusts include Belize, the Cayman Islands, and the West Indies.

Is an Offshore Trust Right for You?

While an offshore trust is an excellent option for keeping your assets safe, the most significant consideration to keep in mind is that setting up and maintaining one can be costly, as you’ll have to pay annual fees and other administrative costs. Depending on the value and type of your assets, your attorney can advise whether an offshore trust is a viable option for you.

How Are Offshore Trusts Taxed?

Many desirable offshore trust jurisdictions don’t impose an income tax, but that doesn’t exempt U.S. citizens from other taxes on their offshore assets. You could still be liable for some taxes and reporting requirements as you benefit from the trust, especially if the assets are business-related or generate income.

Tax law around assets in offshore accounts can be complicated and is best handled by your attorney and financial experts such as accountants, who will ensure all laws are followed, and income is reported correctly.

How Do I Set Up an Offshore Trust?

Setting up an offshore trust is like the process of creating one domestically. You likely will not have to travel abroad to establish a trust in another country. Your attorney will walk you through each stage of creating an offshore trust, but the general process will look something like this:

  • Research and select a foreign country for your offshore trust.
  • Work with your attorney to hire a reputable offshore trust company to serve as your trustee and manage your assets — this company is likely based in the country where your trust will be set up.
  • Follow your selected trust company’s procedures, such as passing a background check and verifying your identity.
  • Draft and solidify your trust documents customized to your asset protection goals.
  • Transfer or consolidate your assets to your new trust.

Erb Legal Can Help Create Your Trust

Despite their depiction in popular media, offshore trusts are a legitimate and safe way to protect your assets from lawsuits, distribution in divorce, and more. No matter why you’d like to create an offshore trust, Erb Legal’s experienced attorneys can guide you through the necessary steps and answer all your questions along the way.

Call our office at (330) 446-3606 or reach out online to get started today.

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