What Can Be Transferred
To a Model Offshore Trust

A Model Offshore Trust is usually begins with a small Initial Grant of money to the Trustee. Thereafter you can transfer additional assets to your Trust (or to its LLC) at any time — either personally or through your will or through domestic trusts you established for estate planning. The Trust can accept gifts and bequests from any other persons as well.

The Trust can accept virtually any type of investment property — including marketable stocks and bonds, mutual fund shares, stock in privately held companies, precious metals, foreign currencies and rare coins and stamps. None of these present any tax problems or administrative difficulties.

Protecting Assets Not Transferred to Your Offshore Trust

Transferring just part of your wealth to a Model Offshore Trust can give you the peace of mind that no matter what might happen to your U.S. assets, you still will have something to fall back on.

In addition, there are many ways by which the Trust can protect real estate and other assets you don’t directly transfer to it. Generally, such strategies use the Trust to make your remaining assets unattractive or difficult to reach for anyone contemplating a lawsuit against you.

Limited Liability Company

For example, you might transfer real estate, a business or other assets to a limited liability company (LLC) and appoint yourself as the LLC’s Manager. (As Manager, you would make all decisions about how the transferred assets are managed or invested.). Then transfer ownership of the LLC to the Trust.

Just by itself, a properly structured and properly managed LLC can be a powerful device for protecting assets. But a Model Offshore Trust adds to its power and completes the protection. If you ever become concerned that your personal creditors might succeed in breaking into the LLC, the LLC could liquidate its assets and distribute the proceeds to its owner — with the money flowing to your Trust.

There are other strategies for using a Model Offshore Trust to protect the value of real estate.

For example, you can borrow money from your Trust and secure the loan with a mortgage on the real estate that you own. Then contribute the borrowed funds to the Trust. The mortgage will turn the real estate into an unattractive prize, and you will always have the option of selling the property — in which case the proceeds will go to pay off the mortgage, i.e., the proceeds will go to your Trust.

Care Required

Using a Model Offshore Trust to tie up real estate or other assets that have not been transferred directly to the Trust is a complex topic. Numerous strategies are possible, with or without an LLC — but each must be considered carefully, with the aid of your lawyer. And each should be executed properly to accord with U.S. law, especially the laws of your own state.

You may never need any of these strategies, but it can be comforting to know they are available.

Protection for Other Beneficiaries

Any member of the Beneficiary Class of a Model Offshore Trust, not just the Grantor, can use the Trust indirectly to safeguard his personal assets. In appropriate circumstances, the Protector may instruct the Trustee to establish a separate Trust, which can be a tool for protecting a particular member’s assets, and name the particular member as Protector of the separate Trust.

NEXT: Solvency Test for Valid Transfers

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