Asset Protection Trusts - Jurisdiction Selection

Many factors must be considered before selecting a jurisdiction in which to establish an asset protection trust. The decision must be based upon a review of the relevant statutory law, the case law if any, the availability of trustworthy co- counsel and the existence of an acceptable trust company. Great care should be taken to choose a jurisdiction which allows the settlor to best achieve his or her goals. The specific laws of the jurisdiction should be checked with respect to the following factors:

1. Common Law heritage: Does the jurisdiction have a common law heritage with a specific history of recognizing trusts? Civil law jurisdictions which recognize trusts (i.e. Liechtenstein) create their trust law by statute and do not deal with them in the manner in which we are accustomed in the United States. In addition, certain United States tax provisions regarding the classification of trusts may require that the jurisdiction apply the principles of chancery courts.

2. Creditor protection: Does the statute provide adequate insulation against creditors? Each jurisdiction has different Statute of Elizabeth override provisions and has different procedures and standards of proof to enforce judgments within its jurisdiction.

3. Tax consequences: The tax consequences of settlement in a specific jurisdiction should be verified. Normally there is not a tax treaty. Most jurisdictions have little or no tax initially but some jurisdictions impose higher taxes once a tax holiday is over.

4. Transfer Statute: The transfer statute of the host jurisdiction must be checked to verify that the domicile can be quickly and automatically transferred in the event of an event of Duress.

In addition, other factors such as cost and availability of international communication links and the jurisdiction's history of political stability should be considered.

 


 

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