Creditors face a greater challenge when they must pursue assets in foreign trusts. The debt owed may need to be substantial in order for the expensive collection process to be beneficial. The cost of litigation in foreign countries is one of the top deterrents of creditors.
One method that creditors use to access foreign assets is time. This wait-and-see approach allows a creditor to research collection strategies. There is the possibility that during this time a foreign trust holder may not be able to access and benefit from their trust funds. The trust remains protected, but inaccessible. Creditors may use other methods to freeze alternate sources of income in order to pressure the debtor into paying the balance due. Also, creditors may target domestic assets to satisfy the debt owed by foreign assets. Knowing just these few strategies shows why it is important to establish a foreign trust with the guidance of an asset protection attorney.
The vulnerability of foreign trusts is showcased In the April 2013 case of US v. Arline Grant. A foreign trust was not properly set up for Arline Grant’s benefit by her husband, creating a multi-million dollar tax debt to the US government. Three years ago we wrote about a court order directing Grant to repatriate the money so that the US debt could be satisfied. Grant’s documented unsuccessful efforts established her inability to repatriate the assets. However, the government waited a few years and monitored Grant’s finances and discovered over $200,000 from the foreign trust was deposited in her children’s US-based accounts. This was viewed as a violation of the Repatriation Order and the US government was able to place an injunction on all future foreign trust funds that both Grant and her beneficiaries were to receive. Instead, all future foreign trust distributions will be given to the government to pay down the debt and interest that is accumulating on the debt.
Foreign trusts still provide a level of confidentiality that is not possible in domestic accounts and they can be properly structured to build an effective shield from creditors. Review offshore and domestic trust options with a North Carolina asset protection attorney and read more about why you may want to consider a foreign trust.