It’s common knowledge among wealthy individuals that a trust can help you protect your assets from creditors and lawsuits. However, not everyone knows that offshore trusts provide far stronger protection than domestic trusts. As soon as individuals learn that fact, a question naturally follows: “What are the best countries for asset protection trusts?” We have the answers.
At Asset Protection Planners, we’ve set up offshore trusts for over thirty years; we have firsthand experience with every top jurisdiction. In this article, we’ll share which countries provide the best protection available and important factors to consider when choosing a trust jurisdiction:
- 5 Best Countries for Offshore Asset Protection Trusts
- Factors for Determining the Best Countries for Offshore Asset Protection
- Protecting Liquid Assets vs. Real Estate
5 Best Countries for Offshore Asset Protection Trusts
Dozens of countries allow people to set up offshore trusts, but only a few are worth considering. Here’s a quick overview of five of the most popular destinations to establish an offshore asset protection trust:
The Cook Islands
The Cook Islands is a small group of islands south of Hawaii that has a free association with New Zealand. This group of islands has offered offshore asset protection trusts for decades and is well-known for its lack of corruption. Our firm has set up more Cook Islands trusts than any firm worldwide. To date, we have never seen a creditor breach a properly created Cook Islands Trust.
Nevis
Nevis, a Caribbean Island nation, has allowed offshore trusts since the mid-90s. After decades of offering fairly high-quality trusts, the country’s lawmakers improved their trust statutes in 2015. These updated statutes provide protection that matches and sometimes exceeds that of trusts in the Cook Islands.
Belize
Thanks to its nonexistent statute of limitations on fraudulent conveyance, Belize is one of the world’s top destinations for offshore asset protection trusts. This means that once you transfer assets into a Belize trust, they are immune from court challenge. The country is home to countless capable trustees and has favorable laws that prevent creditors from gaining access to trust-held assets
The Bahamas
The Bahamas is an increasingly popular offshore asset protection trust jurisdiction. However, this benefit comes at a cost. Rulings from foreign jurisdictions can be enforced in The Bahamas if they’re reviewed and approved by Bahamian judges.
The Cayman Islands
The Cayman Islands is a famous offshore trust destination with many of the same asset protections that locations like the Cook Islands and Nevis offer. Unfortunately, Cayman Islands trusts are subject to a six-year statute of limitations on fraudulent transfers, which limits their ability to defend against unexpected lawsuits. This alone puts the Caymans toward the bottom of our list.
Setting up an offshore asset protection trust in any of these countries will provide far more protection than a domestic trust ever could. For more information on the best jurisdictions, check out our article comparing popular offshore asset protection trust jurisdictions.
Factors for Determining the Best Countries for Offshore Asset Protection
To select the best country for your offshore asset protection trust, you need to know what factors to prioritize. Though there are countless trust aspects to consider, we believe the following factors are most important when selecting an offshore asset trust jurisdiction:
Ability to Ignore Foreign Judgments
Unlike domestic trusts, offshore asset protection trusts are not subject to rulings from your home country. Virtually every offshore asset protection trust offers this benefit. However, some countries will enforce your home country’s ruling if it is deemed valid within their court system.
Additionally, creditors use tactics to freeze trust funds. The best-known tactic is the Mareva Injunction, which can freeze assets, preventing your trustee from properly protecting them. Very few jurisdictions have laws that can counter this injunction, but some, like Nevis, do.
When selecting a home for your offshore asset protection trust, choose a country that refuses to enforce rulings from your home country.
Strong Financial Privacy Laws
Financial privacy is a key component of asset protection. Creditors cannot attack assets they aren’t aware of. The Cook Islands, Nevis, and Belize all have favorable laws regarding financial privacy. None of these jurisdictions require the settlor to publicly register their name. They only require the names of the trust and trustee, and the trust deed date. Additionally, the laws in these jurisdictions do not require the public disclosure of a limited liability company (LLC).
When establishing an LLC in Nevis, Belize, or the Cook Islands, few people have access to the ownership information. The company name, the resident agent’s name, and the agent’s address are the only details the general public can see.
You can gain additional privacy by transferring your personal assets to an LLC within your trust. This is because both the trust and the LLC do not require registration details from the settlor or founder.
Multi-Entity Asset Protection Structures
If you’re looking for the best asset protection available, find a country that offers multi-entity asset protection structures. This is when two entities that provide asset protection can be used in tandem. The most common example of this is creating an offshore LLC and then placing it in an offshore trust. When you do this, the trust owns the LLC in its entirety. You can then transfer your assets to the LLC.
Under the laws in the Cook Islands, Nevis, and Belize, the trust’s settlor can act as the manager of the LLC. This allows the settlor to control the day-to-day operations of the LLC. These laws also enable the settlor to control the trust assets.
During times of legal duress, the trustee can step in to control the LLC. This legally separates the ownership of the assets from the settlor, protecting them from court orders. We typically structure our clients’ offshore trusts in this manner to provide them with the best possible asset protection.
Fraudulent Transfer Protection
When it comes to asset protection strategies, fraudulent transfer claims are the kryptonite. The act of fraudulent transfer occurs when someone moves assets into a trust with the intent of delaying or defrauding creditors. In the Cook Islands and Nevis, a successful claim of fraudulent transfer is the only way a creditor can access trust-held assets. However, the likelihood of a creditor winning such a clam is remote. In fact, we have never seen it with one of our trusts.
It is important to note that since these three countries do not recognize foreign judgments. A creditor would have to travel to these jurisdictions to have their case heard. This is so expensive and time-consuming that most creditors choose not to pursue claims in these jurisdictions. If they choose to make a claim, there’s a tough road ahead.
In the Cook Islands and Nevis, fraudulent transfer must be proven beyond a reasonable doubt. The creditor must prove that the transfer rendered the settlor insolvent. They must also prove that the intent in making the transfer was to evade creditors. Ultimately, most creditors are deterred by the inconvenient process of filing a claim and then having to overcome a high burden of proof. Moreover, looking at the case law history, they are very unlikely to win.
Short Statute of Limitations
Another way that the best countries for offshore asset protection trusts defend settlors is with short statutes of limitation. Most of the top jurisdictions, like the Cook Islands and Nevis, have a statute of limitations of two years or less. In practice, this means a creditor has only two years to claim that a fraudulent transfer was made. Most of the time, creditors fail to file a suit on time, leaving assets completely protected. Some countries, like Belize, take this a step further and eliminate the statute of limitations altogether.
Access to Assets Under Legal Duress
During times of legal duress, a person may need access to their assets. The LLC and trust structures available in the Cook Islands, Nevis, and Belize, allow settlors to access their money when needed. The provisions of Cook Islands, Nevis, and Belize trusts also allow the trustee to pay bills for the settlor or pass funds to trusted family members or friends.
The Impossibility to Act Defense
“Impossibility to Act” is a legal situation where the settlor is under pressure from a judgment. When a duress clause is placed in the trust deed, trustees must refuse to release the assets to the settlor when they are under legal duress.
After a settlor attempts to get their assets out of the trust and fails due to the duress clause, they have fulfilled their obligation to their local courts. Once the creditor drops the claim and the settlor is no longer under legal duress, they may again access the assets.
Estate Planning Benefits
Great countries for offshore trusts also include provisions for effective estate planning. Some of the top destinations, like the Cook Islands, Nevis, and Belize, allow settlors to create dynasty trusts. Dynasty trusts are trusts that can exist in perpetuity. These trusts allow the settlor to plan how their assets will be allocated across several generations. Additionally, trusts in these countries are not subject to the foreign inheritance law, so more money goes to your beneficiaries.
Protecting Liquid Assets vs. Real Estate
Offshore asset protection trusts are most effective at protecting liquid assets. Though it’s possible to hold U.S. real estate in an offshore trust, those properties will still be subject to certain claims in the U.S. Liquid assets, however, are not subject to those same claims.
In situations of legal duress, it is preferable to sell the real estate, collect liquid cash, and transfer it into an offshore trust. Alternatively, you can record a lien against it, which is payable to the LLC inside the trust. Then, if needed, we can have a third party purchase the mortgage and place the proceeds in an inaccessible account in your offshore trust.
Choose the Best Country for Your Offshore Trust
Anyone planning to establish an offshore asset protection trust can’t go wrong by setting one up in the Cook Islands, Nevis, or Belize. Each of these countries excels at every factor we listed in this article. Though, if we could only choose one, it would be the Cook Islands. We’ve been establishing offshore trusts since 1995 and none of our Cook Islands trust users have lost money in a judgment.
If you’re ready to protect your assets from creditors, lawsuits, and even divorce, we’re ready to help. Click the button below to see how we can help you establish your offshore asset protection trust.
