Asset Protection

Offshore Trusts

Offshore planning has lost a great deal of luster since the Bankruptcy Reform Act of 2006.  Bankruptcy trustees can now look back up to ten (10) years to set aside transactions involving assets being taken off shore.  For asset protection, much of the offshore planning has become very difficult to maintain.  About the only exception is if you are willing to forgo your citizenship and move to another nation. As long as you live in the United States your three largest creditors can force you into Chapter 7 bankruptcy and exercise these powers.  Having litigated and defended several high profile cases involving these issues, we can say with confidence that offshore planning is not worth the money estate planners are charging.

For some, however, offshore planning still has merit.  The analysis must be a careful one and it is more likely that an on-shore Nevada Trust or (NOST) is your better alternative.  A NOST enjoys sovereign protection from the State of Nevada.  Where you hold your assets within the state, you enjoy protection that must be honored by every other state in the nation, and the federal government.

Example:  If you were to take your assets offshore and your creditors placed you into bankruptcy, the last ten years of transfers to any offshore account will be immediately subject to attack by the bankruptcy trustee.  If you decided to ignore the court, then you could find yourself wearing stripes sitting in a prison for contempt.  If you think that isn't possible, we have a few cases we can share with you that put clever people in jail for contempt.  So their money was free, but they were not.

In contrast, a NOST's assets are not reachable after two years after the transfer.  In a bankruptcy, the creditors and bankruptcy trustee have no choice but to respect Nevada law.  Indeed, under federal law, the NOST statutes are as enforceable in New Jersey as they are in California. You have now limited your exposure to transfers occurring only two years ago (or two years from now).  Often times, underlying litigation itself lasts longer than two years.

In truth, a combination of offshore money and NOST planning is likely the best alternative.  In one recent case, defense spending was used first from the offshore funds, thus leaving NOST assets fully protected and unreachable.  Since there was no judgment in the matter, the spending down of offshore assets was not prejudicial and the NOST funds were locked solid against the attack of the creditors and bankruptcy was successful, resulting in the discharge of current creditors.  It was legal, lawful and very discouraging to several large banks,