Asset Protection Through Offshore Banking & Corporation Formation
Asset Protection was a concept that was developed within the estate planning community. The process of offshore asset protection involves creating one or more companies or foundations in a debt friendly country, so that you can prevent or limit your creditor’s attempts to seize and sell your assets to cover the debt that is owed to the them. Most of the time the creditor is seeking cash payment from the award of damages that were obtained in a lawsuit.
The process of protecting your assets, including the use of offshore asset protection works by modifying the definition of the asset from an asset that can be easily taken and sold, to a different asset that the creditor does not legally have the right to take and sell.
They are simply taking advantage of the limited liability protections because one is only liable for up to the amount that they have invested in that entity. When someone with debt is challenged in court, they must have a solid case, based on evidence that supports any inquiries as to whether or not assets were transferred fraudulently.
The whole purpose of asset protection is to place a person assets out of the reach or jurisdiction of U.S. law or creditors. The participation in asset protection does generally appear dirty to many people. Most view it as an attempt to hide assets offshore in a place where it is unable to be challenged by U.S. asset protection.
The attorneys, bankers and foreign countries convince frightened individuals to spend untold amounts of money creating these trusts and companies in their jurisdictions because they have better debtor laws than the U.S.
However, even with these debt friendly laws people are not always safe from their creditors, because foreign laws are set up to protect the debtors because they overrule trust law. These laws can’t hold up to public policy and when challenged in court no offshore asset protection trusts has ever prevented a U.S. court from ruling against the assets or the person who is in debt. Often the person is given a court order to return the assets to this jurisdiction or face charges of contempt of court.
Many people also believe that a foreign country used for asset protection will not enforce a U.S. judgment against them. However, this is not an entirely accurate argument. Often it comes down to the fact of whether a U.S. court has jurisdiction over the individual debtor, because they are a resident of the country. This voids the assets transferred to the offshore asset protection entity, because under state and federal law it is generally illegal to transfer assets to the offshore asset protection entity barring few exceptions anyway. The ins and outs of these rules are very complicated.
Filed under: Business