Asset protection has become such an important part of offshore structures in 2022. However, there is quite a bit of misconception that simply going offshore with a standard IBC is enough to protect your assets. This is dead wrong given the current legal and tax environment so if you are looking for the absolute skinny on how to protect your assets through an Offshore Trust and International LLC then read on.
The quick answer, for those of you who like it all upfront, is that an International LLC acts as the operating company for your business and is wholly owned by the Offshore Trust. This means that all profits filter back to the trust, and eventually the beneficiaries (you). This is a very secure and private asset protection structure that you can easily create in 2022 and will shield you from almost any sort of legal threat.
If you would like some more detail on how to set up your offshore presence…then read on.
- Why You Should Want to Shield Your Assets
- What is an International LLC and How Does it Work
- What is an Offshore Trust
- What are the Best Offshore Jurisdictions for Asset Protection
- What Are the Costs for an Offshore Trust and International LLC
- Conclusions and Moving Forward
- Other Offshore Trust Related Articles
Why You Should Want to Shield Your Assets
Unfortunately, the world is now full of people who think nothing of accumulating wealth, or indeed coveting anything that isn’t theirs, and feel justified in stooping to any level to take what you have earned. Sure, legal risk has been around for decades, but it feels like lately that entrepreneurs and capitalists are under threat from every angle.
Governments looking to tax you for your hard work and success, litigious individuals seeking to sue you for financial gain, financial shakedowns, and, ultimately, settlements seem to be the order of the day. The Western nations used to celebrate hard work and success but now most individuals believe you are simply not paying them enough to support their leisure time. Subsequently, there is a strong movement underway to add the “wealthy” to the financial hit list and by “wealthy” I mean anyone that has more than they do.
Subsequently, I am regularly hearing horror stories from subscribers and clients about vexatious lawsuits that require them to pay out and settle despite having done nothing wrong. In short, the shakedowns seem to be increasing for anyone that is successful and has even a modicum of a public profile.
Therefore, many of my clients have started insisting on moving their assets outside the reach of growing taxation and the increasingly common lawsuit. Subsequently, if you have something worth protecting then you should seriously consider placing that asset into an offshore asset protection structure. In that way, you become less of a target for the “pitchforks” as you effectively have no domestic assets that can be grabbed in a lawsuit.
What is an International LLC and How Does it Work
An international LLC, or Limited Liability Company, is a hybrid entity that has some of the features of a corporation and a partnership. Instead of a director, they have LLC Managers and shareholders are replaced with members. Additionally, they don’t have a formal constitution like a standard company and instead have an operating agreement.
In some ways, they are still quite close to a company in the sense that they retain limited liability but where they depart is how profits/retained earnings are handled. An LLC is effectively a look-through entity and what this means in practice is that tax is normally not levied or accounted for at the LLC level but instead passes through to the members (shareholders).
Onshore companies use this to great effect in that it allows the profit to be split amongst the various members and taxed at their individual marginal rates. In effect, you are receiving all the legal benefits of having a company, with the tax advantages of a partnership.
Now the international LLC is normally formed offshore in a low or no-tax jurisdiction and, therefore, the tax benefits are less interesting, especially when an offshore trust is the only member of the LLC, and all profits are diverted straight to it. However, the offshore LLC also brings with it significant privacy and legal protections, depending on where it is formed, as they can be exceedingly hard to sue when attached to a trust.
What is an Offshore Trust
This has been explained elsewhere among my online guides so I will attempt to keep it brief!
In contrast to a company, which normally has a legal constitution and is an actual entity, the Offshore Trust is simply a legal agreement or obligation. This obligation is agreed upon between the person who forms the trust and adds assets to it (The Settlor) and the individual who will manage the assets on behalf of the Beneficiaries (The Trustee).
Without getting too far into the legal mumbo jumbo, setting up a trust creates an agreement between you and a trustee for them to take over ownership of the settled assets and manage them to the benefit of beneficiaries according to the trust deed. They have a fiduciary obligation to manage those affairs appropriately and can be sued if they breach those duties.
In short, when you create an offshore trust, you give up control and ownership of your assets and no longer have a claim to them except as the trust deed, and trustee allow. In spite of sounding dangerous, this can actually be a great option because you effectively no longer own those assets, and any future lawsuits (with some exceptions) will have nothing to grab in the event of a settlement.
Additionally, if you are also a beneficiary of the trust, you can also receive distributions from the trustee and also, potentially, even live in a house owned by the trust for free. Subsequently, by giving up your assets you become judgment proof whilst also retaining access to them in most cases.
One of the other big benefits of an offshore trust is the fact that they are difficult to impossible to sue. In the case of Cook Island’s Asset Protection Trust, no foreign court judgments are accepted, and suing one of these trusts requires doing so in the Cook Islands and is incredibly difficult to undertake. They are also zero-rated for tax and, therefore, are very tax-efficient when coupled with an LLC structure.
What are the Best Offshore Jurisdictions for Asset Protection
This is always a difficult question because it really depends on where you are presently living. Clearly, there are some tax implications to consider when putting together an asset protection plan. However, as a rule the following jurisdictions are particularly good for keeping privacy in place whilst protecting your assets.
The Cook Islands – The Preferred Option for an Offshore Trust and International LLC
The Cooks are probably the gold standard for asset protection and have been for some time. That whole country’s laws were largely set up as a tax haven and, therefore, have incredibly strong protections for offshore trusts and LLCs.
The benefits are really too many to list but the following are major advantages for the Cook Islands:
- Stable government and close to New Zealand
- No foreign legal judgments will be entered or considered
- Good body of case law for trust protection
- Western run and lots of NZ trained professionals
- No forced heirship
- Rules in place for handling legal risk for trustees
- Good reputation
Nevis – My Second Choice for an Asset Protection Set Up
Nevis is another offshore jurisdiction that has great offshore asset protection trusts and the very mention of their name is often enough to get a party to either settle for less or even not progress any legal action. However, with this reputation is the downside that they are under a constant barrage of U.S. lawsuits and many domestic companies will no longer work with Nevis formed trusts.
Some of the benefits:
- Zero tax location
- Strong legal protections
- Close to the U.S
- Protectorships available
- No Elizabeth Laws Statute
Liechtenstein also gets an honorable mention given that their private foundation also provides excellent asset protection. However, they are slightly more complicated than an offshore trust and the costs are quite astounding as you can expect to pay in excess of €30,000 for the average formation.
What Are the Costs for an Offshore Trust and International LLC
The table of basic costs below certainly don’t cover everything and you can expect to have to tack on a few thousand for the LLC incorporation. However, they should give you a fairly decent idea of what you will need to pay to secure an offshore trust.
Also, my advice is to never skimp on something so critical to your asset protection plan. A few thousand here or there is really nothing in the scheme of things. So don’t cheap out!
|Cook Island||Trust||Too many benefits to list. The most complete creditor and foreign judgment provisions of any jurisdiction.||US$10,000 depending on trustee requirements and including professional fees|
|Nevis||Trust||Strong protections and good reputation for body of local laws.||US$9,000 depending on requirements|
|Liechtenstein||Foundation||Similar in the scope of protection to Cook Islands Trust. However, is a non-profit organization and is complicated by the foundation council.||€30,000 and upwards depending on which service provider that you use|
Conclusions and Moving Forward
Ultimately, as inflation continues to soar and citizens and governments look for people to blame, it would be wise to have a plan in place that protects your hard-earned assets. 2022 is really the year where you should be putting together your plan “B” as things could change fairly rapidly on both the social and tax fronts. Subsequently, an Offshore Trust and International LLC structure is likely to offer you the sort of protection you are going to need if the SHTF.
Feel free to reach out to us if you have any questions or want to run something past our consulting arm:
Can You Have an Offshore Trust Owning UK Property
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