Edwin Brown: Is Jail Time the Nuclear Attack that Creditors have Against Offshore Asset Protection Trusts?

Edwin Brown, Greenspoon Marder, compares the risks to grantors of offshore asset protection trusts versus domestic asset protection trusts, focusing on FDIC v. Lewis, 2016 WL 589666.

His article begins as follows:

There has been a recent rash of discussions on whether foreign trusts are truly better for asset protection purposes than DAPTS (domestic asset protection trusts), especially DAPTs created by someone who does not reside in one of the states that has enacted DAPT law.

The popular press on DAPTs (again especially for those living outside of a DAPT state) has been covering cases that may lead readers to feel that these trusts are “not as advertised” with respect to being the formidable barrier to creditors seeking a debtor’s assets. The proponents of the offshore asset protection trusts point out that the foreign nature of the offshore trusts avoids many of the arguments used to invade the DAPTS (such as offshore trusts not being vulnerable to arguments of (1) federal law trumping state law (2) one state court having to give full faith and credit to another state’s rulings and (3) fraudulent transfer analysis being applied under the non-DAPT state law instead of the law selected under the DAPT agreement).

The proponents for the DAPTS may in turn point out that it seems to only be in the offshore trust context that the courts are finding the debtor to be in contempt of court, and therefore subject to some jail time until the debtor figures out how he or she can get the creditor paid.

Click here to see full article. 

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.

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