Avoid Fatal Errors
For your international trust to be effective, it must be correctly structured
and administered. Several celebrated cases have illustrated that international
trusts can fail. Those few cases highlighted fatal planning errors that
you must avoid.
- Don't retain control. If a U.S. court determines that your trust is
only a sham, you'll lose your protection. Your trustee must control
your trust both in form and in practice.
- Keep your trust assets international, not within the United States. Trust
assets located within or tied to the U.S. can be seized by a U.S. court
if your transfer to the trust is fraudulent.
- Your trust must include every protective safeguard. A trust that is improperly
drafted can be technically defective. You need a trust prepared by an
In those few cases of failed trusts, one or more of these basic rules were
not followed. The debtor-grantor was then ordered by a U.S. court to repatriate
the trust assets for the benefit of the creditor. Several grantors who
failed or refused to do so were jailed for contempt. This court ruled
correctly when the grantor had
defacto control over their trust. One defendant set up his trust only days before
his trial. But ordinarily a court won't hold you in contempt if you
can't repatriate your trust funds because you truly lack the power
or authority to comply with the court order. That's why you need a
properly structured and administrated trust, not a last-minute effort
to place your assets beyond the court's reach.
Timing and relinquishing control over your assets are both vital to international
success. Don't wait until the last moment to protect yourself. Set
up your international entities before you incur liability, and certainly
before you are sued. Nor should you control your trust, or the court may
conclude that you can repatriate your money and force you to turn over
the money to your creditor.
YES, YOU CAN LOSE EVERYTHING!
You may think that your wealth is safe and that you don't need protection.
But don't delude yourself and accept reality —
for every 60 minutes you spend making money, spend 60 seconds thinking
about how to protect it!