OFFSHORE TRUSTS FOR ASSET PROTECTION

Introduction To Privacy Issues Personal privacy is valued by all, but attacks on it are unobtrusive, and people usually do not know who has personal information about them. When you obtain a new credit card, buy a major appliance on credit, make a catalog purchase, and so on, a remarkable amount of your personal information is made available in computer databases. Records of martial status, income, age, credit ratings, academic qualifications, place of employment, and many others are available to commercial firms, the government, and pretty much anyone else who has the tenacity to find it. Personal privacy includes the concept of keeping information about our financial affairs private. Business firms, especially if they are privately owned, feel the same way; they are particularly resentful when financial and other confidential information is made available to competitors. Most people consider their financial affairs to be no one's business but their own, and no one wants strangers rummaging around in their bank accounts finding out where they spend money or where money is being put toward retirement. This is especially so if there is no knowledge of who is looking at the records of their purpose for doing so. Privacy, including that of financial matters, continues to erode in the United States. Many believe that Internal Revenue Service income tax statements have been made available to strangers even though confidentiality is claimed. Applications can be made to courts who can compel that books and records be made available to lawyers and government departments. They can then be used as evidence against a person in lawsuits. In the Boyd case of 1885, the Supreme Court said that a person's private books and papers used in a business cannot be used against that person. However, in 1984, the Doe decision said that a court can now compel a person to turn over private books and papers used in a business. Consequently, the Boyd decision was rendered worthless, which would appear contrary to the position that a person cannot be compelled to provide evidence that might be used against him. These privacy rights that many have fought to protect should attach to all people, not just criminals, to protect the innocent as well as the guilty. A Solution to Protecting Assets Anyone who has property, money, or investments of, perhaps, $350,000 should consider planning protection against possible attacks on privacy. (Schneider, 1995). Litigation, or "lawsuit lotto," has become a national pastime and a popular means for the accumulation of wealth. Today, if a person believes there is a possibility of obtaining money by means of a lawsuit, he or she may approach a lawyer. The converse is often true: a lawyer may approach a possible client and suggest bringing suit. In either case, the lawyer is likely to take the case on a contingency basis. When a lawyer and prospective client discuss the advisability of bringing a suit against someone, the lawyer will look at the probability of success. If probability is low, he or she will not take the case; if the probability is high, the prospective defendant's assets will be examined to ascertain if they are large enough to justify bringing suit. If the assets are small, the fee would be small, and the lawyer would not take the case. Let us assume that a prospective defendant has money in a bank account and other assets and that the danger of losing them from a lawsuit exists. The assets can be protected by placing them, before a suit is brought, into an asset protection trust. Asset protection planning means adopting advanced planning techniques by placing one's assets, whether inherited, earned, or won, beyond the reach of potential creditors. The trust is a legal and ethical way of protecting assets that does not involve hiding them or fraudulent transfers. (Donlevy-Rosen, 1997). As with any potential legal problems, advanced planning is of paramount importance. While few people ever plan to be sued and have their assets taken away from them by creditors, litigants, or through divorce settlements, these situations unfortunately occur too often for people to ignore them. They need to be part of a sound financial plan.Increasingly, individuals are looking offshore for protection and are setting up offshore asset protection trusts. Potentially, both creditors and the IRS can be held at bay, although the IRS has imposed stricter reporting requirements and penalties on deferred income for those who abuse the privileges that trusts provide.
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