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Sollertis_BlogFeatureImage_19MAR2021

Protect Your Wealth and Learn About the Best Offshore Countries for Your American Investment – The Cook Islands, The Cayman Islands, Malta, and More

Foreign asset protection trusts for Americans became popular in the 1990’s. Since then, foreign investing and asset protection has exploded with an increasing number of foreign countries competing for American investment dollars. Here, we discuss the options, benefits, and advantages to various counties.

Offshore trusts can shield your wealth from litigation and creditors. Finding the right foreign country for you to invest in depends upon your specific needs and the trust legislation in a country.

Many Americans take advantage of secure and confidential trust laws from other countries. Litigation and creditors present a serious risk to your wealth.  One of the most common methods used to protect wealth is opening an offshore trust.  There are many options for Americans looking to protect their wealth from danger.

Considerations to Protecting Your Wealth Offshore

Ensuring the security of your wealth requires careful and diligent consideration. There are several factors to consider when choosing the country for your foreign asset protection trust.  Each country has its specialties and advantages. Depending on your needs, one country is likely more beneficial for you than another.

Before deciding which country is right, ponder the following questions:

  • What are your investment objectives? The goals you hope to achieve by opening an offshore account will determine what benefits your chosen country needs to have.
  • What is the value of your trust? Some locations have minimum value requirements for trusts, while others have no capital requirements. Take into account the size of your estate.
  • How high is your risk tolerance? Some countries protect your assets from litigation better than others.
  • What assets will you place in the trust? Depending on the type of assets put into the trust, the classification of the trust can change. The trust laws and regulations for each country can vary slightly depending on the assets it holds.
  • Which bank do you prefer? The bank you choose will impact the access you have. If you are familiar or comfortable with a particular international bank, you may want to consider that when choosing a foreign country.

Communication & English Common Law

Vital factors to consider when choosing an offshore country is the primary languages spoken in a country. Clear communication is much easier when all parties speak the same language.  For most Americans, that means that finding an English-speaking country is essential. However, if your native language is Chinese, Russian, or Spanish, it may be more confortable for you to speak in your native language.

Similarly, nations that base their legal system on English common law are best.  Typically, stronger protection will come from countries whose legislation has the same basis as America. For both of these reasons, many excellent offshore jurisdictions are former British colonies.

Specific regulations will offer stronger financial privacy and protection from country to country. Your information will not be available to the public. One of the most vital protections to look for is a creditors’ inability to access or seize your assets.

Fraudulent Transfer Protection Laws

When considering a potential investment country, it’s essential to examine fraudulent transfer protection laws. In some jurisdictions, a successful fraudulent transfer claim is the only way that Creditors can gain access to your assets.

Most claims must be made in the country the assets are located in, which is expensive and time consuming for Claimants and Creditors. The jurisdiction you choose should favor Settlors over Creditors.

Legal Duress

You want to have the ability to access your assets while under legal duress.  The ‘Impossibility to Act’ defense allows a Trustee to refuse to release assets because the Settlor is under legal duress. With protections such as this, you can ensure that your wealth is safeguarded, even during uncertain situations.

It’s important to remember that the risks are in your home country.  If you are diligent with your asset protection efforts in the US, your assets will remain safe. However, if you do not keep your protection plan current, your assets can become vulnerable as laws change from time to time.

This is why you need a qualified attorney to help you establish your offshore trust and international asset protection plan. Once your offshore asset protection trust has been implemented you will need to help maintaining the trust to avoid falling victim to changes within the law. The team at Sollertis helps clients with these questions each day.

Once you understand what to look for in a jurisdiction, you can begin reviewing the countries that offer those protections.  There are many options out there.  Here are six nations that many Americans trust to protect their wealth.

The Cook Islands

The Cook Islands is a self-governing island in the South Pacific Ocean in free association with New Zealand. New Zealand is responsible for the Cook Islands’ defense and foreign affairs, but these responsibilities are exercised in consultation with the Cook Islands. Cook Islanders are citizens of New Zealand, but they also have the status of Cook Islands nationals.

Until the 1980s, hardly anyone had even heard of the Cook Islands. Then, in an effort to boost their economy, they engaged some of America’s best trust attorneys to help them revise their trust law to attract American citizens, making them the first country to enact an explicit asset protection trust permitting, for the first time, a self-settled asset protection trust.

The trust laws of the Cook Islands strongly favor property rights over creditors and the courts of the Cook Islands are vigilant in the enforcement of their laws, in one instance denying a creditor so mighty as the United States Federal Trade Commission who attempted to recover assets from a Cook Islands trust. Not only was the FTC unsuccessful, but they were ordered to pay the legal fees of the Cook Islands Trustee.

The Cook Islands asset protection trust law changed everything. Soon after, Belize, Nevis, and other countries followed in the footsteps of the Cook Islands by enacting their own asset protection trust laws to compete for the American asset protection trust business.

Malta

The Republic of Malta is a group of three islands located just south of Sicily and above the North African coast. The islands have been controlled by a wide variety of rulers over the centuries, including the Roman and Greek Empires, France, and Britain. As the last nation to control Malta, Britain has greatly influenced the country’s legal and political systems. As such, trusts are an area with which the Maltese are familiar.

While they have always recognized trusts, there was no official legislation for Maltan trusts until 2004, when the Trust and Trustees Act was implemented. It was the first written law regulating domestic trusts in Malta.

This Act has created a haven for American estates. Settlors can establish a trust with little hurdles. The Settlor must intend to create a trust, assets must exist, and a beneficiary must be named. Additionally, Americans can establish and completely control trusts in Malta.

Other benefits that entice Americans to open trusts in Malta include their tax laws, asset protection laws, confidentiality, and trust lifespans. Malta’s tax laws often result in complete neutrality or a low effective tax rate for trusts set up by non-residents. Assets are shielded from third-party access, including Creditors, and no government registration is required. Trusts can have a lifetime of up to 125 years. This last feature is why Malta is a popular option for multi-generational trusts.

Luxembourg

Often considered the ‘Gateway to Europe,’ the small nation of Luxembourg offers many protections for Americans. The Trust Law of 2003 established international trusts just for foreigners. Settlors are exempt from all Luxembourg taxes and can benefit from a reliable and transparent culture of business. Trusts do not have to be registered with the government, and if they are, that information is not shared with the public.

Belize

The Caribbean’s are home to many countries that serve as havens for American trusts. Belize was one of the first to begin tailoring its legislation to coordinate with U.S. laws, after the Cook Islands. As a member of the British Commonwealth, Belize offers a legal system that is familiar with trusts together with a population fluent in English.

Trusts are governed by Belize law, mainly the Belize Trusts Act of 1992. They based much of their trust legislation on the Guernsey Trusts Law of 1989.

The country has some of the best protections for Americans with a high risk of litigation.

Sole Trustee ownership is an option for those that wish to establish that type of account. With strong asset protection legislation in Belize, Creditors have no access.

While America taxes all international income, Settlors do not have to pay any taxes to Belize. They have catered their laws to work with the American IRS Code for easy tax compliance and reporting.

While Belize is one of the top jurisdictions for international trusts, it’s essential to remember that the trust property, the Settlor, and any of the Beneficiaries cannot reside in Belize.  Belize trust regulations favor Settlors over Creditors and provide excellent layers of asset protection.

Nevis

Nevis is another former British colony in the Caribbean’s that is a popular choice for offshore investment. The two-island federation based much of its political and legal systems on Westminster, and English is one of the main languages spoken in the country.  Many Americans also appreciate that it is in the eastern standard time zone. The main reasons Americans choose Nevis as their country of choice involve the jurisdiction’s relations with other countries.

Nevis has not signed tax treaties with other countries, and they do not recognize foreign judgments. Very few taxes are levied on trusts, with no annual income, capital gains, inheritance, or estate taxes. Creditors cannot seize assets without pursuing a claim in Nevis, which is costly and time-consuming. Most legal proceedings in Nevis are not publishable without court approval.

There is an easiness to trust establishment and maintenance in Nevis. They allow self-settled trusts, and trusts of all kinds can last indefinitely. The Confidential Relationships Act does not require the corporate registry to include ownership records, meaning Settlors can maintain their privacy.

The Cayman Islands

The Cayman Islands are located in the Caribbean, situated just above Jamaica. While made up of only three small islands, the Caymans are the fifth largest financial center in the world. As a British Overseas Territory, their legal system is rooted in English common law, giving them familiarity with trusts and their protections.

The Cayman Islands are a tax-free jurisdiction, with no gift, estate, income, or capital taxes for individuals or companies. Additionally, Cayman tax laws comply with U.S. IRS Code, making for easy tax management.

Settlors can establish a revocable or irrevocable trust, depending on their needs. Irrevocable trusts are often advantageous for taxes, affording Settlors even more tax incentives.

Assets are protected from Creditors. Trusts, except for exempted trusts, are not registered with the Cayman government. Private trust companies, which can act as the Trustee for multiple family trusts, are established locally in the Caymans.

Ordinary trusts governed by Cayman law may exist for up to 150 years, while trusts under the STAR legislation can exist in perpetuity.

Now You Know

With the information you now have about different nations’ trust legislation, you can make the careful and informed decision about where you will go offshore. Each country has its own benefits and specialties. Regardless of where you choose to establish a trust, it’s essential that you have an experienced asset protection law firm to help you along with the process.

Our Chief Counsel, William R. Simon, Jr., leads the team of attorneys at Sollertis.  Together, we help California business owners to organize, protect and grow their wealth.  Let your focus remain on your business, while we work to protect your assets. Contact our office today and take the first step to safeguarding your estate.

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