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High-net-worth individuals often use foreign structures, especially offshore trusts, to protect wealth. Done properly, they are excellent investment and protection tools. However, traps for the unwary can be sprung unwittingly, with disastrous results.
The most common trap lies in the amount of control the individual maintains over the structures. Especially vulnerable are trusts that allow the high-net-worth individual control over the trustee or investment manager. A high-net-worth individual who implements a foreign trust yet maintains control over a trustee or an asset manager creates a lightening rod for U.S. court action. This action leads to the destruction of the trust, even if it is "irrrevocable." Courts may reclassify the trust as an agency relationship or simply treat it as the alter ego (mirror) of the individual. In either case, the court will "bust the trust."
Offshore trusts are no exception to the control issue. U.S. courts have consistently held that if they have jurisdiction over the person, then they have jurisdiction over the assets, regardless of where the assets are located.
This common trap is one of many.
- Are you considering incorporating an offshore strategy for legitimate investment or wealth protection reasons?
- Do you believe that your offshore strategy needs an objective review?
Contact us today to start avoiding the many traps that can cause serious problems.
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