The modern world is highly litigious and creditors are receiving disproportionate judgments from the courts. People who have worked hard for their entire life are in danger of having their savings wiped out by spurious litigation. Making things even more difficult, liability insurance for professionals is becoming prohibitively expensive.

There are two levels of personal asset protection available offshore: 1) An offshore company (such as Nevis Limited Liability Company) and 2) A Cook Island Asset Protection Trust combined with an offshore company.

With a Nevis offshore company, you move your assets out of the reach of creditors. They are transferred to the Limited Liability Company in exchange for shares in that company. The LLC may open accounts at banks and securities dealers around the world.

Issue: You own shares of a Nevis LLC and thus, indirectly, the assets of the LLC. It is possible for a US court to demand that you transfer your LLC interest to a US creditor. This is avoided with the Cook Island Trust.

A Cook Islands Offshore Asset Protection Trust provides the highest level of security for personal assets. Should your Nevis LLC come under fire, the Cook Islands Asset Protection Trust steps in and blocks the creditor. Those who benefit most from a Cook Islands Asset Protection Trust include persons in high-risk occupations (such as physicians and lawyers), business vendors (particularly those close to retirement), those with a high wealth profile, directors of public companies, and almost anyone who has saved a significant nest egg for their retirement.

With the Nevis LLC held by a Cook Islands Asset Protection Trust, assets can be held by the LLC with all of the membership interest given to the foreign trust. A U.S. resident can then manage the Nevis LLC. Thus, it is possible for a U.S. person to control the assets and own none of them for liability purposes.

Assets moved to a Cook Island Offshore Asset Protection Trust are kept out of reach of future creditors. US Judges cannot compel the foreign trustee to release funds to your creditor and can not compel you to release the assets to a future creditor.

The offshore trust is best suited for brokerage and overseas bank accounts (liquid assets). U.S. courts have jurisdiction over U.S. real estate and might demand seizure of such assets. Accounts can be opened with as little as $50,000, but A Cook Island Asset Protection Trust is generally recommended for liquid assets exceeding $125,000.

Some of the features that make the Cook Islands and Nevis the pre-eminent jurisdictions in the world for Asset Protection Trusts include:
  • There are firm time limits for actions against trust assets.
  • Intent to defraud must be proven to a criminal standard in allegations of fraud.
  • Foreign judgments relating to transfers of property to a trust will not be recognized in the Cook Islands if they proceed on law conflicting with laws of the Cook Islands.
  • There is no bankruptcy law in the Cook Islands, and therefore no claw back provisions. A creditor must rely on common law fraud to void a disposition to a trust.
  • Impediments to litigation in Nevis: To file a case in Nevis, the plaintiff must put up a $25,000 cash deposit and hire a local attorney.
  • Assets may be moved between the Cook Islands and Nevis.

International Investments

Diversification using foreign investments can reduce portfolio volatility while maintaining returns. Effective diversification requires investing in non-correlated assets. At any given time, various regions of the world are experiencing unique economic, political, and environmental factors. Accordingly, markets in those countries will reflect local conditions and will not be highly correlated with the markets in the investor's home country. This important concept is essential to estate planning and wealth management.

In addition to providing portfolio diversification, offshore investments provide a high degree of choice and flexibility. A large percentage of the over 80,000 funds traded worldwide are located offshore. Investing in these funds must often be accomplished through an offshore entity due to regulations in the investor's home country. The removal of domestic restrictions allows fund managers to alter positions quickly and easily thereby increasing the ability to accumulate substantially greater gains for fund investors. Moreover, international funds may be denominated in any major currency.

Not only does international investing provide additional choice and flexibility, it provides an excellent level of privacy to financial transactions thereby removing an investor's potential exposure to frivolous litigation. Offshore investments are safer not only because of the asset protection and privacy they offer, but also because fund managers can use risk hedging techniques which are not available in some domestic markets.

Chris Rusch provides expert advice on creating business structures to best facilitate investment in international markets. We work with clients to form business and estate plans which effectively provide the most tax efficient access to international diversification. Our plans are tailored to each client's individual financial situation and time horizon.

The rules applicable to international investing are complex - particularly for U.S. citizens and residents. The IRS has extensive rules concerning passive foreign investing companies, controlled foreign corporations, and other entities designed to function in the global marketplace. Chris Rusch has the experience necessary to provide the most efficacious operational framework that minimizes the tax treatment while complementing the client's domestic wealth management plan.

US Tax & Other Considerations
  • Offshore asset protection trusts and LLCs are disregarded for US tax purposes. In other words, asset protection can not be used to reduce US taxes. US citizens and residents are taxed on worldwide income, including capital gains in offshore trusts and companies, in the year earned.
    • Offshore trusts and companies will not result in "double tax" because the US tax code allows a dollar for dollar tax credit of any foreign taxes paid. However, most structures are not taxed outside of the US.

  • Offshore asset protection entities and bank accounts require the filing of various tax and informational forms with the US IRS and US Treasury. A CPA or Tax Attorney familiar with offshore planning should be used to prepare these returns.
  • It is a crime to use offshore entities to hide money from the US IRS or other US government agency. Click here for sample prosecutions.
  • Offshore trusts should not be used to protect you or your assets from US government agencies or creditors claiming and proving fraud.
  • Offshore accounts should be funded with "after tax income."
  • Offshore asset protection is intended to protect your assets from future creditors.
    • A US attorney can not assist you to transfer assets out of the reach of an existing or eminent creditor. If your US attorney is aware of an existing or pending legal claim against you, he or she must ensure that you leave sufficient assets onshore to satisfy that creditor.
  • Offshore asset protection is intended for liquid assets, such as bank and brokerage accounts. It is not meant to hold US real estate.


 Click here to schedule a confidential appointment by email or call my direct line at (619) 557-0587. I will personally answer your call and advise you on the requirements of offshore asset protection.


Note: Chris Rusch is the author of The Expat Tax Bible 2010, published by International Living. For additional information click here to be taken to IL's website.