High earner/high net worth (HNW) individuals often are the targets of attorneys and greedy plaintiffs who want to separate the HNW people from their money. Plastic surgeons, other doctors, dentists, attorneys, and business owners --- especially real estate developers --- are frequently sued by aggressive attorneys who use the threat of protracted litigation to extract substantial settlements of questionable claims.
Many people say that having large insurance policies is the best form of protection against these suits. Nothing could be further from the truth. In fact, insurance companies frequently look for every excuse in the book to issue a DOC (Denial of Coverage) letter, leaving the supposedly insured person in the lurch.
The better way to provide peace of mind and a sense of confidence is to create an effective asset protecting plan, consisting of several layers of protection. In my profession, as an asset protection consultant I encourage people to consider the formation of one or more limited liability companies (LLCs) as well as the creation of trusts. These devices, when properly used, create two, three, or more barriers to people finding out who owns property or controls income-producing professions or businesses. Attorneys will almost always perform asset searches prior to filing a big lawsuit. If the attorneys can't find out who owns the property or the business, they will be less inclined to throw everything at the would-be defendant, since it is less likely that the plaintiff will be able to recover anything. This is where having a good domestic asset protection trust is important; but for the higher-risk people, having a good foreign/offshore asset protecting trust is the way to shield themselves from litigation.
Jurisdiction Selection
There a number of countries around the world which offer mechanisms for providing privacy and protection from litigation. It used to be that Switzerland was a haven for privacy, along with the Channel Islands, Guernsey, and islands in the Caribbean. However, due to pressure by the United States and the various regulatory agencies governing relations with non-U.S. banks, finding a nearby locale for asset protection is increasingly difficult. And after the avalanche of publicity following the publication of The Panama Papers, many high net worth investors left Panama and began to look at Nevis and St. Kitts as well as the Cayman Islands, for asset protection.
However, the Cook Islands stands out as the most secure jurisdiction for offshore asset protection trusts, offering several key advantages:
Does not recognize foreign judgments
Requires plaintiffs to litigate within their legal system using local attorneys
Imposes higher burden of proof on plaintiffs
Provides "semi-revocable" trust structure that balances flexibility with security
Essential Setup Steps
1. Initial Planning
Work with an asset protection attorney to evaluate goals and structure
Ensure setup occurs well before any potential legal issues to avoid fraudulent transfer claims
Expect 1-3 months for complete setup process
2. Trust Structure Formation
Create a limited liability company (LLC) in the chosen jurisdiction
Transfer assets to the LLC
Establish the offshore trust and transfer LLC ownership to it
3. Required Documentation
Form 3520
Form 3520-A
FinCEN Form 114 (FBAR)
Trust deed with comprehensive protection clauses
4. Trustee Selection
Appoint a qualified foreign trustee (non-U.S. citizen)
Choose a reputable trust company in the jurisdiction
Ensure trustee independence to maintain legal protection
Asset Types and Requirements
Suitable Assets for Transfer:
Stocks and bonds
Cash
Cryptocurrency
Real estate
Gold and silver
Minimum Requirements:
Recommended minimum net worth: $500,000
Setup costs: $15,000 to $50,000
Coordination with Domestic Trusts
For optimal protection, consider:
Using domestic trusts for U.S.-based immovable assets
Creating a multi-layered structure with both domestic and offshore components
Maintaining separate documentation and compliance for each trust type
Best Practices
Establish trust well before any potential claims arise
Maintain proper documentation and ongoing compliance
Regular review of trust structure and assets
Avoid direct communication with trustees that could suggest control
Work with experienced legal counsel throughout the process
The combination of proper jurisdiction selection, careful structuring, and ongoing maintenance creates a robust asset protection strategy that significantly outperforms domestic-only solutions
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