Is the international asset protection trust (IAPT) the best entity for international assets?
The international asset protection trust (IAPT) is the traditional protective
entity. It became popular in the 1980s because of the escalating need
and demand for lawsuit protection. But international trusts can be used
for other purposes: To avoid forced heirship laws, for premarital planning,
estate planning or international business planning. The international
trust compares to domestic irrevocable trusts, though for many reasons,
the international trust is considerably more protective. The primary reason
is that the international trust is
foreign. That one difference is critical. U.S. trusts are
always vulnerable to creditors and creditor friendly U.S. courts. The IAPT is
immune. Debtor friendly international financial centers govern their enforcement.
U.S. court orders to repatriate the trust assets are ignored by international
trustees. Your trust funds
won’t be returned for the benefit of your creditor. Moreover, the trustee can
relocate your trust and its assets to another jurisdiction if your trust
becomes endangered. The trustee can also withhold distributions to beneficiaries
with creditors. Aside from these enormously protective features, the IAPT
compares to the U.S. irrevocable trust. The international trust has a
grantor (or settlor, donor or trustor) who creates and funds the trust, appoints
the trustees and protector, and names the beneficiaries. The
trustee manages the trust for the beneficiaries. The
beneficiaries receive the trust’s income and/or assets. The IAPT’s
protector oversees and can replace the trustee, and approves major trustee actions.
Finally, you can create self-settled trusts internationally and be a beneficiary
of your own trust. Except for domestic asset protection trusts –
available in only a few states, self-settled trusts provide no creditor
protection. This final point is important. Only DAPT states provide creditor
protection for self-settled trusts – or a trust where the grantor
is also a beneficiary.