Solvency Test for Valid Transfers

To achieve the protection you want, it is essential that you be solvent when you transfer assets to your Model Offshore Trust. “Solvent” means that even after making a transfer, you have sufficient assets to pay all your existing and reasonably foreseeable debts (including an allowance for any contingent debts) and to pay them on time.

An existing debt is something you owe now, such as money you have borrowed from a bank. Your liability for an accident that has already occurred also is an existing debt — even if no one has yet made a claim against you.

A reasonably foreseeable debt is one that does not yet clearly exist, but which you know is likely to arise in connection with events that you should expect to occur. For example, if you plan to damage your neighbor’s property, the eventual cost of compensating your neighbor is a reasonably foreseeable debt.

A contingent debt is a liability you will have to pay only if certain events occur. A guarantee that you have given for another person’s loan, for example, is a contingent liability for you.

You should transfer assets to a Model Offshore Trust only if your net worth is positive. As a strict and inflexible rule, you must not transfer more than your net worth, conservatively estimated.

If you are uncertain how to make these calculations, or if your debts are substantial in relation to your assets, consult your accountant or attorney before transferring assets.

The following worksheet will help you test your solvency by estimating your net worth. If your net worth is negative, you are insolvent and you cannot properly transfer anything to a Model Offshore Trust.

Unprotected Assets $_________
Existing debts $_________
Reasonably foreseeable debts $_________
Allowance for contingent debts $_________
Total Debt $_________
Net worth (Unprotected Assets minus Total Debt) $_________


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