Should I Stay or Should I Go? The Erosion of the Offshore Asset Protection Trust and the Rise of Its Domestic Analogue

The average American has always been suspicious of using foreign banks to hide money. When the “Panama Papers” were released in 2016, it made people even more wary of this practice. Offshore asset protection trusts (OAPTs) used to be the only way for people to protect their money from creditors, because the laws in most states didn’t allow for domestic asset protection trusts (DAPTs). But now, 16 states have changed their laws to allow for DAPTs, which offer similar protections and tax advantages without the negative associations and extra paperwork of OAPTs. So now, people have to decide if the benefits of OAPTs are still worth it, or if it’s better to use a DAPT. Asset protection trusts, both domestic and foreign, are created to protect a person’s property from creditors. These trusts have different tax treatment – for example, a DAPT can get a tax deduction when it distributes income to beneficiaries, while an OAPT has to include income and capital gains in its taxable income. OAPTs also have strict reporting requirements and can be subject to additional taxes under the Foreign Account Tax Compliance Act. Offshore Asset Protection Trusts (OAPTs) used to be seen as a way to protect assets from creditors, but U.S. courts have become better at going after them. They can freeze trust accounts and force Swiss banks to reveal information, and U.S. bankruptcy courts have also been successful in including OAPT assets in debtors’ bankruptcy estates. In some cases, debtors have been denied bankruptcy discharge for using OAPTs to shield assets from creditors. U.S. courts have found ways to enforce their orders and judgments, even when dealing with international banks or foreign financial institutions. They have made these entities disclose information to litigants, even if it violates the confidentiality laws of their home country. Courts have also used civil contempt orders to make people turn over assets held in offshore trusts, even if the trust documents say they can’t. If someone owes money and tries to hide it in a trust overseas, it’s still possible for domestic courts to make them pay up. Even though it can be hard to enforce a U.S. judgment in another country, going after the person who owes the money or their relatives in the U.S. is the best way to get the money they owe. DAPTs have two big benefits that traditional offshore trusts don’t have. First, U.S. courts are less likely to cancel a trust if the person who made it keeps control over the money. In other countries, those kinds of trusts are usually considered fake and canceled. Second, in some U.S. states, trusts can last forever, which is not true in most offshore jurisdictions. If someone with an offshore trust wants to move it to the U.S., there are three ways to do it, depending on the trust and what the trustee and beneficiaries want. Moving a trust from a foreign country to the United States can be done in a few ways. The easiest way is to have the foreign trustee resign and appoint a new trustee in the U.S. Another method involves transferring the trust’s assets to a new trust in the U.S. without needing the beneficiaries’ permission. If those options don’t work, all the beneficiaries can agree to end the original trust, distribute the assets, and create a new trust in the U.S. This last option is more complicated and may have tax consequences. Basically, when it comes to setting up a trust for your money, a trust located in the US offers many of the same benefits as a trust located in another country. In fact, it may even offer more benefits, like being easier to manage and costing less. Plus, US trusts have better tax advantages and are more likely to be respected in court. If you already have a trust in another country, it’s pretty easy to move it to the US and get some tax benefits. So, if you want to protect your money and pay less in taxes in the long run, a US trust is a good option to consider. This is a list of references to the Internal Revenue Code of 1986, as amended, along with information about foreign trusts and tax regulations for them. It also mentions penalties for not reporting required information and the Foreign Account Tax Compliance Act. Additionally, it includes information about migrating an offshore trust to a U.S. jurisdiction. This article talks about how people use trusts to protect their assets from creditors. It gives examples of court cases where the use of these trusts was challenged. It also mentions how U.S. judgments may not always be enforced in other countries. This is a law article about moving a trust from another country to the US. It talks about different laws and rules related to trusts and taxes. The author is a lawyer who practices tax and probate law. The article was written for a section of lawyers who focus on tax law.

Source: https://www.floridabar.org/the-florida-bar-journal/should-i-stay-or-should-i-go-the-erosion-of-the-offshore-asset-protection-trust-and-the-rise-of-its-domestic-analogue/