Anyone with more than $300,000 worth of property or assets should consider protecting them from potential lawsuits. Litigation, or “Who can I sue today?”, has become a popular means of wealth accumulation. We see it on television every day; people “recover” excessive amounts of money for whatever reason. Today, if someone believed there was a possibility of getting money through a lawsuit, they would file a lawsuit. Defendants in a lawsuit settle without ever committing a crime because defense attorneys usually charge an hourly fee. Resolving is cheaper than trying and defending yourself against the claim. Plaintiffs’ attorneys, on the other hand, tend to take the case on a contingency basis. Claims were filed many times because the plaintiff did not lose anything.
When an attorney discusses a possible lawsuit with a prospective client, the attorney will look at the likelihood of success. If the probability was low, he would not take the case; if the probability is high, the next thing the attorney does is investigate whether the defendant’s assets are large enough to justify investing his time in the lawsuit. If the asset is small, the amount recovered may be small. As a result, the lawyer may reject the case.
One way to protect your assets is through an offshore trust. The belief dates back to the Middle Ages when English aristocrats entrusted their lands and wealth to friends and other close relatives before they went to war to ensure that their families were provided for during their absence. Over time the Trust has developed into the legal entity we know today. In recent decades, offshore trusts have become popular. However, its improper and illegal use by some has earned it a bad reputation as an asset protection tool.
There are many reasons why an offshore Trust can be an effective asset protection vehicle. The main reason for going overseas is that countries that serve asset protection do not enforce US valuations or liens. As a result, creditors must file their claims in a foreign jurisdiction. For practical and economic reasons, it is unlikely that a creditor will file a claim outside the United States.
Misconceptions about offshore trusts arise because many mistakenly believe that offshore trusts will avoid having to pay income taxes. They have tried to evade US income taxes illegally by using “secret” offshore accounts. Recent IRS actions have made it even more difficult to keep these accounts confidential. There is nothing wrong with an offshore account. However, they cannot be used for tax evasion. Failing to report income and pay appropriate taxes can have devastating consequences.
When an offshore trust is part of a follow-up plan, it can legally and ethically protect your assets. Let’s assume that a potential defendant has a high net worth and that there is a danger of losing him in a lawsuit. Assets can be protected by placing them in an offshore trust before a lawsuit is filed. As with any legal matter, advanced planning is essential. While some people have imagined they would be sued and lose their assets in a lawsuit, however, in today’s legal society, advanced planning is required. An offshore trust is one of the many alternatives that exist to protect your wealth.
