fbpx

Better Than an Offshore Trust

Our 541 Trust® is proven to work better than an Offshore Trust (or trusts that shift offshore when under duress). While Offshore Trusts are marketed heavily, their promoters fail to mention the abundance of law showing how they fail to protect assets as promised. Our trusts are supported by generations of legal precedent and have been upheld in lawsuits, bankruptcies, and IRS audits. The chart below explains in detail the flaws of Offshore Trusts and the benefits of a 541 Trust®. The chart includes an extensive list of court cases proving that Offshore Trusts don’t work as promised.

CriteriaOffshore Trust541 Trust®
Case LawUS Courts have established enormous precedent to allow them to defeat an offshore trust. Click HERE for a list of over 2 dozen court cases defeating offshore trusts.There is an enormous body of law supporting the 541 Trust®. There is no need to leave the US because the US has supported this strategy for generations. Click HERE for a listing of cases supporting the asset protection provided by our trusts.
UsefulnessIt is a universally understood and accepted fact that an offshore trust is not effective at protecting onshore assets. Courts have also prevented assets from shifting to an offshore trust when under attack. See In re Brooks, 217 B.R. 98 (D. Conn. Bkrpt. 1998) and Indiana Investors, LLC v. Hammon-Whiting Medical Center, LLC No. 45D02-0807-CT-201 (Lake Superior Court, Lake County, Indiana).Our Trusts can be used to protect any type of asset in any location.
ConfidentialityAssets in offshore trusts MUST be disclosed on a standard bankruptcy questionnaire; and failure to disclose can result in bankruptcy fraud and criminal penalties.Assets in a 541 Trust® are not required to be disclosed on a bankruptcy questionnaire. While privacy is important to many, even if discovered or disclosed, our 541 Trust® still protect the assets, unlike offshore trusts.
AppearancesBecause there is no legitimate purpose for an offshore trust that cannot be accomplished with an onshore trust, the offshore trust includes a reputation associated with criminal activity and unethical conduct.  If a judge, jury, or government agency learns that you have an offshore trust, they will view you as a criminal who is attempting to hide assets or evade the law.The 541 Trust® is an ordinary estate planning tool established for legitimate purposes and do not raise a red flag or indicate unethical or inappropriate activity.
Cost & ComplexityOffshore trusts are notoriously expensive to create ($20,000 – $40,000+), and they require annual payments to a foreign trust company in the range of $5,000 to $10,000 per year. Offshore trusts require the completion of IRS Forms 3520, 3520-A, and 1041.  Offshore accounts and investments must be reported on IRS Form TD F 90-22.1, which requires you to disclose the exact location, account numbers, and the maximum dollar amount in each account each year.  Foreign accounts must also be reported on your personal income tax return, Form 1040.  Starting in 2011, Form 8938 also must be filed for all offshore accounts.  Failure to properly report offshore trusts and accounts can result in criminal penalties and severe civil penalties which can exceed the amount in the offshore accounts.The set-up cost of a 541 Trust® is usually about one-fourth of the cost of an offshore trust.  Because our trusts are accepted and upheld in all jurisdictions, it is be possible to minimize or avoid significant annual fees. The tax reporting for our trusts is minimal and very simple.

 

1.  The court will rule that a self-settled offshore trust is against public policy and the court will order the defendant to turn over the assets of the trust.

2.  If the defendant refuses to obey the court order, the court will hold the defendant in contempt of court and send the defendant to jail until he complies.

3. If the trust or its assets are onshore and it attempts to shift assets to the offshore trust when under attack courts can freeze the assets or get a restraining order preventing the assets from crossing to the offshore jurisdiction.

There are numerous court cases supporting the above.

Click HERE for Court Cases Defeating Offshore Trusts

Click HERE to read more about how Offshore Trusts fail to protect assets.

1.  They will cite old Supreme Court cases (including Maggio v. Zeitz (1948) and Rylander (1983)) which say that impossibility is a defense to contempt of court.  Those old cases are meaningless because all they do is state the general rule that impossibility is a defense.  They ignore the fact that the law has developed over time and more recent cases have found that a self-created impossibility (such as an offshore trust) is not a defense.

The truth is that the Rylander case was cited by Lawrence and many of the recent cases where the courts have found that a self-created impossibility is not a defense.  When Stephen J. Lawrence appealed to the Supreme Court citing the Rylander case, the Supreme Court refused his appeal. They will also cite Bellinger (2014) where the debtor was not held in contempt (the only case where this has happened). Commentators agree that in Bellinger, the creditor didn’t even argue or provide evidence of the debtor’s fraudulent intent but merely assumed that the court would accept it as a given. This is merely one case balanced against dozens of cases going the other way. The scale is not leaning toward those hoping to rely on this single case. Despite the ruling in Bellinger, all other cases have shown that a self-created impossibility is not a valid defense and the debtor can go to jail for contempt for failure to repatriate the offshore trust’s assets. This is a dismal record for offshore trusts in the courts.Branch Banking & Trust Co. v. Hamilton Greens, LLC, 2014 WL 1493086 (S.D. Fla. Mar. 24, 2014).

2.  They will claim that their trust agreement includes a duress clause or a flight clause that will solve the problem.  The truth is that there is no clause that you can include in a trust agreement that will prevent a US court from finding that the settlor created those provisions, and that a self-created impossibility is not a defense.

3.  They will claim that a US court cannot order you to repatriate the assets if you establish the trust in advance of a problem.  The cases cited above clearly refute that idea.

4.  They will cite the Raymond and Arline Grant case as authority that offshore trusts work.  Recent developments in that case have turned that conclusion upside down (See Forbes, “The One Foreign Asset Protection Trust ‘Win’ Turns Out To Be A Dud” by Jay Adkisson, 4/25/13).

5.  They will try to claim that a US court can use the same tools against an onshore trust that they can use against an offshore trust. This assertion is completely false because the offshore trust fails to comply with US law and attempts to avoid the law, while the 541 Trust® complies with the law and is upheld by the law. Click HERE for law and precedent supporting the 541 Trust®.

6.  They will claim that they have established many offshore trusts and none of them have been defeated by the US courts. This is like saying that I have never been robbed so my dog must be a great watch dog.

7. They will claim that the trust makes creditor attacks more difficult so that the creditor will likely settle for pennies on the dollar rather than attack the trust. Creditors are increasingly more knowledgeable about the flaws of offshore trusts and the list of court cases defeating them continues to grow. Why would you spend an enormous amount of money to set up an offshore trust, knowing that it is used as a “smoke screen” to try to get a settlement from a creditor rather than to actually protect the assets, and that the court cases clearly show that if challenged, the trust will not hold up? If a creditor isn’t fooled by the smoke screen, all of the trust assets are vulnerable.

8. They will claim that they use a transferable offshore trust, which is a domestic trust which avoids fees and reporting requirements of an offshore trust but when the trust is under attack it shifts to the offshore jurisdiction. There is zero court case authority showing that this shifting strategy is going to work. In fact, the court cases have ruled otherwise. See Indiana Investors, LLC v. Hammon-Whiting Medical Center where the court prevented the assets from shifting to the offshore trust.

What the promoters of offshore trusts do not tell you is that there are dozens of US Court cases showing that you can be ordered to turn over the assets of your offshore trust or go to jail.