Why Should You Set Up an Offshore Asset Protection Trust?


In today’s increasingly litigious world, creating a solid asset protection plan is important in safeguarding an individual’s wealth. One of the best-known legal tools for protecting assets is setting up an offshore trust. Trusts have become one of the most efficient tax and estate planning tools used by high-net-worth individuals around the world. It is recommended that you seek the guidance of a seasoned financial advisor or wealth solutions firm, such as Ora Partners, Morgan Stanley, or J.P. Morgan Chase, to navigate the intricacies of establishing offshore trusts.

While there are many onshore trusts in the U.S. and U.K., they are legally bound to the laws of said jurisdiction. It may diminish the asset protection abilities of the trust, as onshore trusts are generally linked to the individual and must always respond to local court rulings. On the other hand, offshore trusts are trusts formed under the law of a foreign jurisdiction. They generally offer legal and tax laws that are favorable to the settlor.

What is an offshore trust?

An offshore trust is a fiduciary relationship between 3 to 4 parties — the settlor, beneficiaries, trustees, and, in some cases, a protector—where a legal agreement is established. This legal agreement is called the Trust Deed, where the settlor transfers their assets to the trustee. The settlor has to define the terms and conditions as well as the objectives for how the assets should be managed and distributed to the beneficiaries.

An offshore trust is a legal agreement formed under a jurisdiction beyond the reach of U.S. Courts. Offshore trusts offer a strong legal framework. They provide better asset protection laws to increase the financial security of the individual or family while offering great tax advantages as well.

Why set up an offshore trust?

Offshore trusts offer numerous benefits that onshore trusts cannot provide. Clients set up trusts for several reasons, including:

  • Protecting their assets from legal disputes
  • Protecting their assets in divorce proceedings
  • Diversifying wealth
  • Donating to charity
  • Retirement planning
  • Avoiding complicated probate processes in the event of the settlor’s death
  • Reducing their estate and inheritance taxes
  • Assisting with minor’s expenses, including college tuition.

Who should set up an offshore trust?

Trusts are a great tool for asset protection and estate planning, as well as tax planning. Setting up a trust can be complicated and expensive. Depending on the purpose of the trust, it may or may not be the best option for you or your family. It is best to contact a seasoned financial advisor to determine whether proceeding with a trust is the best option for you. However, offshore trusts are advised for individuals with high-risk occupations, individuals who are often targeted by claims, legal disputes, creditors, or high-net-worth individuals or families.

When should you set up an offshore trust?

Preventative action is always better than correction. Setting up asset protection prior to any legal disputes will ensure that the wishes of the settlor are carried out accordingly and diligently.