Offshore Trusts & Offshore Accounts: What’s the Difference?
By Howard Rosen and Patricia Donlevy-Rosen of Donlevy-Rosen & Rosen, P.A.
Reprinted with Permission from THE ASSET PROTECTION NEWS, January 2019
INTRODUCTION. Potential clients often call us asking if we can set up an “offshore account” for them. Is this what they really mean, or are they (or should they be) asking about an offshore trust? In this issue we’ll compare the asset protection efficacy of an individual establishing an offshore account versus establishing an offshore trust which itself establishes an offshore account.
DISCUSSION. This comparison is best accomplished by example. I am a resident of Florida. If I establish an account in Switzerland, a Florida court (or any U.S. court) could easily order me to repatriate those funds without any impediment whatsoever. Similarly, suppose I give the funds to my wife and she establishes the account in Switzerland. Cutting through all the red tape, the U.S. court could still order her to repatriate funds.
“One cannot depend upon secrecy or hiding assets as a protective strategy – only a properly structured plan based upon established estate and business planning strategies will be effective to protect assets.”
Comparing the foregoing to a properly structured offshore asset protection trust: if I establish a trust in the Cook Islands (our offshore asset protection jurisdiction of preference), I would not be a trustee of that trust (meaning that I would have no signature control over the funds placed into the trust. The trustee, which would have the signature control, would be a licensed trust company. Thus, while a U.S. court could still order me to repatriate the funds, I would not have the power to do so, and, under long standing U.S. Supreme Court holdings, I could not be held in contempt for failing to do that which I do not have the power to do (even if I created the impossibility) See, APN
XXII, No. 2. At the same time, I would still be a beneficiary of my trust, and the trustee could, to the extent set forth in the trust instrument, continue to pay my bills, and, in essence, take care of me. Under property law, if an individual establishes an account in another country, that account, being personal property, is still considered to be located in the situs of the individual (subject to the jurisdiction of those courts having jurisdiction over the individual himself/herself). In addition, since the individual is the signatory on the account (or if anyone within the U.S. jurisdiction is a signatory on the account), a local court could order the signatory to repatriate the funds under penalty of contempt of court. Under trust law, no one “owns” a trust. A trust has a trustee (who administers the trust) and beneficiaries (who receive the benefits of the trust funds as set forth in the trust instrument). In a properly structured asset protection trust, the individual establishing the trust would only be a beneficiary of his or her trust, and would not have the power to direct the offshore trustee, but, rather, could only request distributions. The trustee may make the requested distributions unless the trustee believed that such distributions were being requested by the beneficiary under a court order (or other duress situation). One final note: all such offshore trusts and accounts must be reported to the U.S. government annually. Failure to comply with this reporting requirement is a felony punishable by imprisonment and fine. The point: One cannot depend upon secrecy or hiding assets as a protective strategy – only a properly structured plan based upon established estate and business planning strategies will be effective to protect assets.
CONCLUSION. First, foremost, and most importantly, all trusts are NOT created equal. Our trust documents are the product of more than four decades of our experience, development and “fine tuning”, so nothing, absolutely nothing, is left to chance. Once again, we say that the most important factors to consider in hiring a law firm to implement an effective asset protection structure are the experience and the qualifications of the lawyers.
HOWARD ROSEN is an AV® Preeminent™ Attorney and Certified Public Accountant practicing law in Miami, Florida, as a shareholder (partner) in the firm of Donlevy-Rosen & Rosen, P.A. Mr. Rosen was an Adjunct Professor at the University of Miami School of Law (20 years), and is an internationally recognized authority on the subject of asset protection. Mr. Rosen was the founding author of the original BNA Tax Management Portfolio, “ASSET PROTECTION PLANNING”, used by lawyers, CPA’s, and estate planners nationwide in researching questions on this topic.
PATRICIA DONLEVY-ROSEN is an AV® Preeminent™ Attorney practicing law in Miami, Florida, as a shareholder (partner) in the firm of Donlevy-Rosen & Rosen, P.A. Ms.Donlevy-Rosen is a member of the New York and Florida bars. She is an internationally recognized authority on the subject of asset protection. Ms. Donlevy-Rosen is the author of an RIA Tax Advisors Planning Series Title, “ASSET PROTECTION PLANNING”, used by lawyers, CPA’s, and estate planners nationwide in researching questions on this topic.
Law offices are located at 2121 Ponce de Leon Blvd – #320, Coral Gables, Florida 33134; Telephone: (305) 447-0061. E-Mail: See web site for e-mail form: ProtectYou.com