Legal cases take years to unfold and develop. If triggering the Bridge Trust into a FAPT is the right strategic move to make, the inherent delays in the U.S. legal system provide more than enough time. The idea that the average plaintiff can run into court and convince a judge to freeze all your assets before a trial is unfounded. We have never witnessed any cases in which that has occurred or a request for such has even been made. I advise clients that if this is a real risk, then they may be the rare case where beginning with a fully foreign APT should be considered.
Outside liability or personal liability is the liability that comes form outside the business from your personal life. Hitting somebody with your car. If set up correctly, your business entities or LLCs can protect your from both.

Now just remember, you can never protect your assets 100%. Because you always have the capacity for one of those assets to self explode. And if that asset explodes you can’t protect that asset anymore. But you can protect the rest of them from that asset.

Yes. It is possible for a court in the U.S. to do almost anything you can imagine, including invalidate any trust. This includes an FAPT or a DAPT and yes the Bridge Trust. There is simply no way to ensure what a U.S. court is going to do.

The more important question is, what would be the impact?

If good strategy has triggered the Bridge Trust into a FAPT, then a U.S. court invalidating it would make virtually no difference to the effectiveness of the trust. For all the same reasons that the full foreign APT is going to withstand a U.S. court challenge, so will a triggered Bridge Trust.Outside liability or personal liability is the liability that comes form outside the business from your personal life. Hitting somebody with your car. If set up correctly, your business entities or LLCs can protect your from both.

(AMLP) are like LLC, and they have same charging order protection. I like the AMLP better because they have a very distinct delineation between the managing partner called the general partner and the minority partner who does not. We like having both a general partner interest and a majority limited partner interest. We use a AZ Asset Management Limited Partnership as the starting point for clients as the holding company, and then add the Bridge Trust to it for the actual asset protection component. It’s really the combination of the two together that you want to capitalize on. An AMLP is a Family Limited Partnership, but when drafted for asset protection purposes they’re called AMLPs. It acts as your holding company.

And the way an AMLP works in connection with your Bridge Trust and existing LLCs is that the LLCs are owned by the AMLP, along with cash, stock bonds, whatever safe assets you have. The way ownership and control is set up is that the general partner of the AMLP, which can be you, or a Wyoming LLC if you want privacy, is the managing partner. That gives you control and privacy. The minority-limited partner is the Bridge Trust, the asset protection trust. That is where the asset protection connects to it.

An LLC is an abbreviation for “Limited Liability Company.” An LLC creates an ownership class of ‘members’ instead of shareholders. This means no shares of stocks that could be seized by a court. This makes it more difficult for a creditor to reach the assets in the LLC held by a member. The LLC also has restrictions on them for creditors attempting to reach assets. Basically, a creditor with a judgment against a member of an LLC is entitled to the limited remedy of a charging order. This changes the leverage of the debtor. LLC also solve the double taxation issue of the C-Corp by qualifying as a pass-through tax entity. LLC can be owned by just a single member. This is ideal for individuals who own real estate, business, boat’s and airplanes.

BUT, the LLC has limitations and drawbacks. States have started differentiating themselves to just how serious they are about asset protection. As case law developed, we have seen courts disregard the ‘charging order only’ remedy and directly reach LLC assets to satisfy creditors. Also, the ‘Single Member LLC Exception’ has become a major concern. Some states like California have shown a consistent propensity to disregard the asset protection feature of all types of legal entities and determine that it is the “alter-ego” of the member and pierce the veil.

Used properly, the LLC is a fantastic starting point to hold risky assets. Especially when combined with the missing offshore component. I prefer the Asset Management Limited Partnership.

This is where the loop closes back to the only location in which the clients can have 100% security – themselves. The Settlors (clients) have the power to remove and replace the Protector for any reason they choose to at any time.

The only exception is if a U.S. court is demanding that they do so to appoint the court or a court representative as Protector, in which case that particular order is ignored.

The only other possible loophole that could endanger the money is if both the Trustee and the Protector conspired together to defraud the Trust. This is highly unlikely in and of itself due to the fact that the Trustee is a large Trust Company and has their own internal checks and balances as well as the fiduciary duty and liability to the Trust, and the fact that the Protector is personally chosen directly by the client and has the same fiduciary duty. Nevertheless, the plan has one final check that ensures that the client themselves always have full knowledge of where the money is, and where it is going to.

This final check is called a “client acknowledgment” procedure. The bank, typically a large private Swiss bank, chosen by the client, will have a hold period prior to the execution of any orders to withdraw funds, or move money from the Trust account. This procedure would require the bank to have a personal confirmation that the Beneficiaries (also the clients) have direct knowledge of the proposed transfer.

While the Beneficiaries are not in “control” of the money directly, since the bank must have a direct personal verification that the Beneficiaries are aware of the transfer, if a proposed transfer is not approved, the bank will be so informed, by the clients themselves. The order would then be delayed for a sufficient period of time for the Settlors to appoint a new Protector, who will appoint a new Trustee.

As you might imagine, the net effect is that it is virtually impossible to make any move with Trust assets without the client’s direct knowledge and consent. This combined with the fact that any serious Asset Protection Plan is going to use only the most stable and reputable institutions to fill any fiduciary role makes having your assets offshore safer than the local bank down the street by far.

The difference is that the bank down the street is in the jurisdiction of the court at the other end of the street. And right in the middle is the all-too familiar lawyer.

The role of Trust Protector is to protect the assets for the benefit of the Beneficiaries, and to protect the assets and watch the Trustee. SouthPac Trust was established in the Cook Islands in 1982 and was the first Cook Islands first trust company to be set up there. They worked with leading US asset protection professionals to develop the trust legislation that is still in force today.

Since Asset Protection ultimately relies on removing the assets from both the U.S. jurisdiction, and the control of the clients, a very good question would be: How can a client be sure that the new foreign Trustee doesn’t run away with the money should we ever need to use the Trust? To answer this we need to look at the intricacies of how a well-drafted Asset Protection Trust creates internal and external ‘checks and balances.

To begin, let’s look at how the plan ‘controls’ the money:

We create a legal structure which requires the approval and consent of various parties who act as checks and balances on the assets, and
We create a physical tracking mechanism directly with the independent client chosen bank, which holds the money, so that the client is always aware of where the money is.
The Asset Protection Trust has 4 primary roles:

The Settlors (the clients)
The Trustee
The Protector
The Beneficiaries
The legal control of the assets is done through a 2 party approval mechanism. This is kind of like requiring 2 signatures on a check. The Trustee is responsible for the management of the assets and has legal title. However, unless the Trustee is the client, they do not have physical possession of the money, which is held at an independent and unrelated bank.

In order for the Trustee to actually do anything with the money, they then must also have the consent of The Protector. This would include things like wiring the money to another bank or even to another account with a different name, or making any changes whatsoever in the physical location of the money.

The role of Protector is just that, to protect the assets of the Trust for the benefit of the Beneficiaries. As such the Protector has 2 primary jobs: 1) to approve of the actions of the Trustee, and 2) to remove the Trustee if the Trustee is not acting in the best interests of the Beneficiaries. This is what ensures that the Trustee doesn’t run off with the money.

This is a very good question and a huge issue. Asset Protection works by giving up control. Because at some point in the future, you cannot have control if the judge has control over you. But, you don’t have to not be in control all the time. You can start out in control. So, No, you do not loose control, unless and until it is in your advantage to loose control. At which point, yes, you will loose control. But at that point, and looking down the barrel of the lawsuit, you will be very happy that you are not in control.

You the client serves as the initial trustee. What happens when a client ever needs to use the Bridge Trust is that the trust protector, declares an event of duress, and this then causes the special successor offshore trustee to become an active Co-Trustee.

This is obviously a heavily asked question. If you are already married, unless you can get a postnuptial agreement that clarifies the separate property nature, or you already have a very clear agreement of the separate property, then you really cannot look to asset protection to solve your divorce problem. Each spouse has a legal right to his or her share of community assets. After a marriage, we look to the rights of ownership and state laws regarding the division of property. But, if the asset is your personal separate property, and you maintained the property as your separate property by not co-mingling or mixing it, we generally can protect the separate property assets not the subject of the divorce.

However, if you are not married, and you want to protect your assets from a future possible divorce, then asset protection can be very helpful.

It depends. If you are being sued, we need to know more. We need to understand what the lawsuit is, what the potential upside and downsides are, what are your changes of winning the lawsuit, are any associated suits or counter suits, how much assets do you have, what type of assets, what is your insurance coverage and claim limits. This takes a full analysis. We are more then 50% of the time able to do some form of asset protection. We prefer clients to be proactive and come in with no lawsuits. But we do not pick the moment you call us.

This is a common question because people are generally fearful of the IRS. The answer is NO. Neither me, nor any of my affiliates and all the thousands of clients have ever had a client audited because of their asset protection structure. The reason is that the Asset Protection Structure if done right really does not even pop up on the raider of the IRS and sees it as nothing special. All the IRS sees is an LLC, LP and a grantor trust. Theirs really nothing for the IRS to target. But this is not true if you are using an Offshore tax motivated scream.

No. A foreign bank account is not required unless you actually need to move assets offshore. In most cases, the massive deterrent factor of having the appropriate offshore planning in place is enough to dissuade anyone advancing a frivolous or meritless lawsuits.

This is FALSE. In the rare event that the Bridge Trust is triggered to an offshore account, only the ownership of the money leaves the country, and the individual does not need to leave the U.S. There is no illegal action taking place that would require the client to follow his or her money.

NO! You cannot save taxes with your Offshore Asset Protection Plan. The asset protection trust is a tax neutral grantors trust. It is almost always combined with a LP or AMLP, which is a flow through neutral tax entity. An asset protection plan will NOT save you on income taxes. But you can get secondary tax benefits and integrated tax planning with your CPA and financial advisors on tax mitigation strategies and working with your asset protection attorney.

Domestic AP is any form of protection that relies on the laws of the United States for its ultimate security. This includes Domestic Asset Protection Trust (DAPT), now available by statute in 13 U.S. states such as Delaware, Nevada and Alaska.

If you have been researching offshore asset protection, you’ve likely come across companies that offer various forms or domestic asset protection, often using the most well-known domestic asset protection tool, the Family Limited Partnership, which is both popular and effective. And of course, nowadays you will see plenty about the new domestic asset protection trusts, which are designed to imitate the stronger and more effective offshore jurisdictions and attract business to the states that have enacted asset protection legislation.

And as far as that goes, a good onshore asset protection plan is a great start. They are often simple to set up, easy to implement and sometimes less expensive (although not always) than a full-blown international plan. But, as with most things, that simplicity comes with a cost. Domestic asset protection is, by definition, never going to be as effective as a solid offshore plan based in an asset protection trust. For complete foolproof asset protection, it’s required that your domestic asset protection plan be accompanied by a foreign component, which is set up in a jurisdiction out of the United States.

When your asset protection program comes under the jurisdiction of the United States, any legal action by creditors against you and within U.S. jurisdiction, could apply to your asset protection planning if a judge determines it to be. No purely domestic asset protection plan can avoid the U.S. Constitution “Full Faith and Credit Clause.” In contrast, an asset protection trust in Cook Islands is immune to any court order inside the United States because of their statutory non-recognition of other countries court orders.

A RLT offers zero asset protection. Clients get confused because they are told that their RLT will protect their estate and assets from probate and is going to maximize your estate plan exemptions. So in a clients mind, they are thinking that this RTL is going to protect their assets. So they are thinking that all trust are the same and operating under a false assumption. It’s a very common mistake. All a RLT does is death planning and transferring your assets to the named beneficiary, and maximize death tax exemptions. But RLT offer zero protection to you from your own creditors and lawsuits. RLT are not designed to.

The First Challenge: In many cases, these assets are already well protected. Assets placed in ERISA plans have clear Surpeme Court Protection under In Patterson v. Shumate (1992). Here the highest court in the land confirmed that “anti-alienation” as applied in ERISA creates enforceable restrictions against even the rights of creditors. This is great if your plan assets are in an ERISA plan. However, if you ever have to roll them out, or they are in one of the several other types of plans which are also qualified, but not specifically ERISA, then it’s more complicated.

A rollover IRA, for example, while not strictly an “ERISA” qualified plan, retains it’s ERISA protections if it came directly from an ERISA plan custodian. If your 401K was transferred directly into a rollover IRA, then it retains ERISA creditor protections, as long as do not co-mingle the assets with non-ERISA assets.

The most common Non-ERISA plans are the IRA and the Roth IRA. In many states, courts and legislatures have extended the same type of ERISA protection over these state-regulated retirement assets. In other states, however, there is limited creditor protection. And in yet other states the protection is left to the court’s discretion (which often feels like no protection at all). All of this has created a confusing landscape in which clients and planners both are left uncertain as to where they really stand.

The Second Challenge: The second challenge for planners was to figure out exactly how to protect plan assets without triggering the tax hit of removing the assets from the plan. And to add yet another challenge, how to use the superior offshore jurisdictions to protect U.S. based qualified plan assets. The end result is that most planners simply ignore retirement assets and just hope that it works out okay. But if you have significant assets in a plan where your protection is not clear, then this is just not good enough. The good news is that there is a way to accomplish sophisticated offshore protection for these assets. Here’s how we do it.

The Offshore Retirement Plan Solution

The first step is to qualify your retirement plan to invest in what are deemed “Alternative Investments”. This means changing your plan administrator to one who is qualified to work with investments in LLC’s and other private companies (this is what Alternative Investment means). There are several of these in the United States and using retirement plan assets to invest in alternative investments, such as LLC’s that hold real estate. This also means that your plan should be self-directed so that you can determine what investments to make.

The second step is to choose an investment which itself is inherently asset protected. This is where we can begin to add the offshore advantage by setting up a Manager Managed LLC in a preferred offshore asset protection jurisdiction. We often use the country of Nevis, which has a great statute and significant creditor protections strongly incorporated into it. The plan would then invest in the LLC membership interest and transfer assets to an offshore account set up and managed by the Manager of the LLC. And this is where the real magic happens.

The third step is to use your Bridge Trust® as the Manager of the Manager Managed LLC. If you have already explored the power of the Bridge Trust®, then you know that prior to there being any attack on your assets, you can be the Trustee of your own Trust. This means that, as Trustee, you will also be the Manager on the Manager Managed Nevis LLC. However, if there is ever an attack on your assets, or any threat to your wealth, the protective features of your Bridge Trust® will trigger the trust and the offshore Trustee would then become the full Trustee, and you would be removed from that control position.

The result is that your Nevis LLC, which holds your retirement plan assets, would then also be managed by your offshore Trustee and they would apply the same protective features to the management of the LLC assets, as they would to the Trust assets directly. How this would work is specifically outlined in both the Bridge Trust® and the Nevis LLC operating agreement.

And since the LLC assets are already in an offshore Private Banking center, which is specifically selected because it meets the requirements of what we consider an asset protection qualified bank, then both the control and the assets themselves are out of the reach of a U.S. court, judge and jury.

Yes, the Trust may hold, and protect, the Settlors Primary Residence with no loss of homestead exemption, home mortgage interest deduction, or tax-free capital gain.

The question really is, does waiting until after the threat has materialized to cross the bridge create a fraudulent conveyance?

A conveyance occurs with the change of ownership to the assets. When the Bridge Trust crosses the bridge there is NOT a change in ownership, since the Bridge Trust already owns the assets previously held in the U.S. Therefore, by definition, crossing the bridge does not qualify as a ‘conveyance’ and hence would not be a fraudulent conveyance. Perhaps the more important question is, what would happen if a court did determine that crossing the bridge was a fraudulent conveyance anyway? I would look at what the impact on the trust assets would be, and once the Bridge Trust becomes a FAPT, any challenge to this would have to be heard in the High Court of the Cook Islands. Therefore, the effect would be that even in the case where a judge made such a determination, the Bridge Trust would still be effective.

You have the legal and ethical option to move you assets offshore if that tactical advantage calls for it. But not the obligation to do so.

The Bridge Trust is firmly planted in both the US and solidly planted in the Cook Islands. When you cross the bridge, there is no conveyance or change in ownership. No U.S. Court has ever ruled that the creation of an Offshore Trust is in any way illegal or immoral. But the courts have in fact ruled that the trusts were established “for the legitimate purpose of protecting family assets.” Reichers vs. Reichers, No. 21833-94. There are very few cases where a plaintiff has actually tried to extract assets out from a Cook Island Trust. And in Every Case, they failed to force an extraction. If and when the Bridge is triggered, the Offshore Trust that was pre-established gets triggered, and the Cook Island Trustee, takes over as trustee. Still no conveyance of any assets since it is the Bridge Trust that owns the assets.

Is that $1 MM in assets important to you as the client? In my experience $1 MM in assets is more than enough. Most people with $1 MM in protectable assets will find that worth protecting. It has taken a long time to build that, and one lawsuit can completely wipe you out that you will not be able to recover from. This number probably is a lot lower then you would assume, and thinking that this level of protection is for the super rich with $10 MM or more, but its not true. It is the $1, $2 and $3 MM dollar individuals that worked ten or twenty years to earn it and wont recover from the loss.

The pricing is fixed. The Bridge Trust is $23,000 and the AMLP is $6,000, together they are $29,000. You can choose to pay a 50% retainer and the balance when the documents arrive. It will all happen within 30 days. Or if you choose to pay up front, theirs a 10% discount. Annual fees are $2,100. You are protecting $1 MM in assets or more for a small one time fee that gives you the ease of a domestic plan, with the power of Offshore planning.

Trust Companies in the Cook Islands are solid and reputable, and there are always checks and balances by 3rd parties at all times, in particular the Protector who must approve all significant actions of the Trustee. For the offshore Trustee to do anything with the money, they must also have the consent of The Protector. Southpac was established in the Cook Islands in 1982 and was the first Cook Islands trust company to be set up there. They worked with leading US asset protection professionals to develop the trust legislation that is still in force today. The trust is established and registered in an offshore jurisdiction and the largest and oldest trust company in the Cook Islands, Southpac Trust, has pre-agreed to accept your trust.

Yes, it is 100% legal. Asset Protection is permanently placed as a necessity for modern day estate planning. There is lots of case law and guidance from U.S. Courts, 17 U.S. States have some sort of Self Settled Asset Protection Legislation, the ABA has a committee on Asset Protection, and multiple legal journals exclusively focus on asset protection. It just has to be done correctly. It is using all the laws of the jurisdiction available to us, to create a barrier to protect a clients assets. It is not about tax avoidance or hiding assets.