The accumulation of wealth doesn’t happen overnight. However, assets, financial resources, and investments can be threatened by unforeseen circumstances. In recent years, offshore asset protection strategies have become an increasingly popular legal vehicle for safeguarding generational wealth. One of the most common methods is to set up an International Protection Trust.
What is an International Asset Protection Trust?
An International Protection Trust or an IAPT is a protective entity that may also be known as; a creditor protection trust, foreign trust, asset conservation trust, or foreign grantor trust. The IAPT trust type was created in the 1980s when certain countries enacted laws to assist residents and investors with their asset protection needs.
Are International Trusts only used for Lawsuit protection?
No, international trusts are used for a variety of reasons. Including but not limited to international business planning, traditional estate planning, transfer of wealth or property, protecting pre-marital assets, avoidance of forced heirship, and more.
Is an IAPT stronger than a regular Irrevocable Trust?
A U.S. Irrevocable trust can be revoked in a U.S. court by existing creditors, whereas an IAPT cannot. IAPTs are governed by the International Finance Corporation (IFC) and favor the debtor/borrower. For this reason and many others, an international trust offers significantly more protection.
What powers does the International Trustee hold?
In the event of a request or court order to repatriate the trust assets, the designated international trustee can refuse the demand, which prevents the surrender of assets to the creditor(s). If the trust is threatened or compromised, the trustee has the ability to relocate trust assets to another IFC. Added protections also include withholding distributions to a beneficiary who is being pursued by creditors.
Overall, an IAPT is most comparable to the U.S. domestic irrevocable trust (DAPT), one of the most commonly used trust types in traditional estate planning. The same mechanisms and roles apply. For example, IAPTs have a grantor who sets up and funds the trust. Then, appoints the trustees and protector and names all beneficiaries. Then the trustee administers the trust, and beneficiaries receive the trust’s income, property, or assets.
Key differences are that with an IAPT, the trustee is usually a foreign trustee firm, and there is a designated “protector” who oversees the trustee. The protector’s powers include the approval of all major actions taken by the trustee and the ability to replace them. The grantor appoints the protector, who we recommend not be a U.S. resident.
How do you appoint the Trust Grantor?
We will help guide you as you designate each role and responsibility associated with the IAPT. Choose a legal entity or adult that can serve as the trust grantor. This individual or organization will create and fund the trust.
Families have created IAPTs to protect and secure generational wealth for decades. Spouses can serve as the co-grantors to combine their families’ wealth into one trust or establish separate trusts administered by the same foreign entity or individual. Final choices and designation of roles often depends on the business, estate planning, tax planning, asset protection, and personal goals. A foreign LLC or international corporation may be named the trust’s grantor to protect a client’s identity and safeguard their family’s privacy.
To learn more about Offshore Asset Protection strategies, contact our office to set up a confidential consultation.
