Worldwide: Facing The New Reality In Offshore Asset Protection Strategies – Re-Evaluating Traditional Trusts And Foundations

Article by J. Hersch

Recent Changes In Economic Climate And Effects On Conventional Asset Protection Strategies

Since the implementation of the Patriot Act and other applicable legislation, such as the OECD mandate, which hold the intermediary responsible or culpable, the concept that it will be forensically difficult to see through nominees is extremely outdated and unrealistic. This risk of culpability has made many traditional nominees, who craft trust and foundation structures in far off jurisdictions, loathsome to continue to act in this manner and take on the liability of their clients. Sadly though, many do, and some members of the legal community seek refuge in these few dinosaur fiscal providers, in second-rate offshore jurisdictions, still willing to take on client risk.

Sophisticated forensics and cooperation by global regulators are such that it's simply a matter of time before illegal structures are found. The fact that many are still not uncovered has more to do with the; "too many fish in the sea concept" than anything - but time is running out. If you can't defend the structure because it's illegal, or it exists because of a complex system of nominees obscuring ownership, or if the jurisdiction is so exotic or foreign that normalized relations with other countries do not exist, then the structure will not be effective for any duration of time in the post-911 world.

Need For A Strong Long-Term Asset Protection Strategy

The bottom line is that the asset protection structures must be as defendable and as easy to access as domestic ones, yet provide all the benefits of an offshore solution. You should not have to accept less and should know that the protection will be there for generations to follow. In sum, it's time for professionals to wake up and realize that there is a huge difference between giving advice as to asset protection versus tax-assisted offshore planning. If you want to protect a client's assets, you can no longer hide them in antiquated "secret" formats. You need the law to serve and protect the structure. It's time to espouse irrevocable, declared, and regulated, legal asset protection planning, if only because it works.

New Alternative To Traditional Trusts And Foundations – Asset Protection Insurance ("APITM")

Today's latest variation in structures for asset protection is Asset Protection Insurance, currently offered by a limited amount of providers and referred to as APITM. The insurance product can easily replace the use of offshore or domestic trust and foundations in application, but its role is limited primarily to asset protection and estate/accession planning, not taxation specifically. With APITM most of the issues regarding the legitimacy of the structure and control of the assets themselves are avoided as all aspects are fully disclosed. There is complete transparency and a failure to report any liability (including taxation) would probably constitute an event invalidating the policy as the insurance can only protect fully disclosed assets and liabilities. The APITM policy application specifically asks and requires a full delineation of all assets and liabilities, real or contingent. The APITM application form and due diligence process are, in fact, far more detailed than the current anti-money laundering standards.

Guarding Against The Sham Structure APITM Uses A 3-Tiered Approach

Within an APITM structure, unlike the trust or foundation, the Protector's powers (or in the case of a foundation, those of the board of directors powers) are severely limited as there are three separate parties involved in the governing process: 1) the Financial Advisor (whose role is limited to investment advice), 2) the Protector, and 3) the Policy Trustee. Because in the case of an APITM, there is always an irrevocable disposition of the assets, an independent role exists for all three parties. These clearly defined independent roles refute the concept or hint of a sham structure. This factor can always be used to tear down trust or foundations. In fact, many trusts and foundations employ the nominee layer, with the issue of continued control over the assets being the key factor rendering it potentially a sham or, in fact, fraudulent. In the case of trusts this is accomplished through nominee trustees, or sham Protectors that have the will of the trustee. In the case of foundations the technique varies between a straw board, and the use of power of attorneys from board members held by nominees, or the client beneficiary himself in some manner. The APITM policy with its three-tiered structure is clearly deigned to refute this.

Building An Impenetrable And Defendable Structure The Strength Of Alternatives Like APITM

This also leads to complete cooperation and disclosure by the third party service providers to the policy, based upon the arms length nature and more importantly complete disclosure (the APITM is an asset protection proposition first). There is an inability to deal in a deceitful manner with an APITM policy, as it could invalidate the policy. The APITM format derives all of its strength from the fact that the assets are irrevocably transferred and declared, and thus the policy is defendable in a court of law. This is not to imply that foundations or trusts cannot go to court to defend their assets. Theoretically they can, unfortunately, a court will not uphold an illegal contract or sham proposition against creditors.

Domestic vs. Offshore – Why You Still Need To Take The Assets Offshore For Better Protection

A domestic asset planning scenario using a trust (or equally in civil jurisdictions involving a domestic foundation) is always a viable option to an offshore one, however, domestic solutions only work on a limited basis. In the case of a domestic foundation as well as a trust the reach of local law, courts, and creditors minimize some of the asset protection effectiveness. There is always the issue as to the number of years for which a trust can exist usually this limitation period is no greater than 21 years depending on the regional laws of perpetuity. An APITM policy has no statutory limitation period technically, which becomes critical for long-term asset protection planning. Also, in most cases, assets domestically are still subject to negative deemed taxable dispositions and are assailable if they remain in the same domestic jurisdiction as the owner of those assets. This can encourage and increase the likelihood of provoking litigation and discovery, allowing a plaintiff the ability to easily discover the assets, amend pleadings, and obtain leverage in a proceeding, even if spurious.

Business Applications Of APITM - Protect Offshore But Remain Onshore For Accounting Purposes

APITM is a viable domestic choice to the domestic trust/foundation structure or even an offshore version, especially for business applications or for intellectual properties. This insurance format will protect assets inside a business while remaining on the company's balance sheets since there is complete disclosure and taxes have been paid. In the case of a properly formed trust or an APITM policy, a domestic judge will have difficulty attaching assets if they have been irrevocably ceded, fully disclosed, with taxes paid. Under this scenario, the ownership of the assets has changed - end of story. The most critical aspect of any asset protection structure is that it must be an irrevocable declared structure, for only then can you use the law to defend it.

APITM Is Effective Protection Against Future Uncertainties

With the litigious nature of society presenting one of the greatest risks to the preservation of wealth, an APITM policy will provide the ability to legally creditor proof and pass on these assets, ensuring smooth intergenerational transfers with the security of an insurance backing should unforeseen issues arise at a later date. Simply put, the APITM policy is like a property casualty policy for protecting any type of asset, versus a simple structure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions