As your leading source of information regarding asset protection, the Marvont Group simply defined asset protection trust as any trust used to safeguard assets from creditor attack. Normally, an asset protection trust is set up in an offshore jurisdiction, even though assets will usually remain in the United States under the indirect control of the settlor – or the person establishing the trust.
These trusts are normally structured so that: they are irrevocable for a term of years and the settlor is not a current beneficiary; they are treated as domestic grantor trusts for tax purposes, even if they are “foreign trusts”; and the undistributed assets of the trust are returned to the settlor upon termination of the trust, given there’s no current possibility of creditor attack, thus allowing the settlor to recover complete control over the previously protected assets.
Furthermore, the Marvont Group described asset protection in several ways, such as it is: an effective tool to resolve or prevent litigation; a method to keep the ownership of assets completely confidential; an alternative to traditional prenuptial agreements; a hedge against possible exchange controls; a tool to protect pension assets and give an insolvent debtor a fresh start; an ideal approach to avoid forced heirship laws that are common in Europe; and a way to internationalize investment and hedge against governmental instability.
Previous reviews show that there are numerous techniques that can be used to protect various types of assets. Most are suitable for every person and are based on common sense, while others are suited to wealthy or soon-to-be-wealthy individuals. Asset protection techniques vary on both the location and type of property.
What is common to all asset protection techniques is that they make it harder for a creditor to either find or take the assets. With a properly constructed asset plan that might include an asset protection trust and a family limited partnership, a person can legitimately put a significant part of his assets from the reach of judgment creditors and still retain substantial control over those protected assets.
A properly implemented asset protection approach minimizes the size of the target the plaintiff’s attorney is aiming for. As soon as the plaintiff’s attorney is sure that any judgment will be hard or perhaps not possible to collect, his determination fades because he’s not likely to be paid for his work. For those who wonder what the main effect of a carefully constructed plan, it is the elimination of the plaintiff’s economic incentive to litigate.
Based on a review made by the Marvont Group, an asset protection trust with a citizen or resident of the United States and soon to offer in Tokyo, Japan as the settlor is normally structured to become tax neutral. In particular, due to the settlement of an asset protection trust, no further income, estate, gift or excise tax should be due. The trust shouldn’t be also expected to save taxes. It’s also wise to note that a foreign trust can’t be legally or safety utilized to hide income from the long arm of the U.S. Department of the Treasury regardless of the almost complete confidentiality it offers.
If you’re a U.S. citizen/resident and considering an asset protection trust, the Marvont Group suggests that have it implemented by a genuine tax expert with extensive experience. Remember that if you’re ever told that an asset protection trust, or any foreign trust, could save you income taxes, then you’re getting a negative advice and perhaps being asked to commit a crime as you go along.