Trusts?

[D]

HB interviewed Terry Coxon in one of his shows and he talked extensively about offshore trusts and assets protection. Does anyone know any good resources on this topic? What happened to his business of that time passport financials or something?

[MediumTex]

It was Terry Coxon's shenanigans along these lines that caused him to have to quit PRPFX as part of a settlement with the SEC. 

I read Coxon's book.  I didn't think it was very good.

In any case, basically all of his offshore strategies are now obsolete with all of the new laws and regulations targeting offshore assets.

[Wonk]

I would think the only "safe" offshore assets at this point would be found in physical goods, not in legalities.  In other words, precious metals, fine wine, art, real estate, etc.  You would still have to worry about the powers that be in whatever jurisdiction your assets are domiciled in.

[craigr]

I think most offshore trust plans are riddled with problems. The risks far outweigh the benefits from what I've seen.

If you want liability protection, buy an umbrella insurance policy or other insurance. If you want tax protection, invest fully in your tax-deferred vehicles.

I ran into an attorney one time that specialized in offshore trusts. Naturally I was curious because you hear about them all the time. So I asked him some questions. The idea is that you sign over your assets to the trust and the trust is managed by a third party. You would get your money by asking the trust manager to send you what you wanted. He claimed that this would allow them avoid lawsuits, etc. because the trust manager would refuse to pay court settlements. Now of course I think this is really skating on thin ice because a judge could lock your sorry rear end in prison until you repatriate assets if I recall. But let's just go with it that it's legit (which again I don't think it is).

So then I asked:

Me: "So I'm assigning full legal authority over the assets to this third party in another country with financial privacy laws that make getting to the assets difficult for US residents?"

Lawyer: "Yes, they will control the money and send out payments to you as requested."

Me: "So, what if they decide they don't want to send me the money I ask for or use it for other things?"

Lawyer: "WELL, then they'll have to deal with ME!"

At this point I stopped because it was obvious this guy was just either an idiot or a liar. If you have sent your assets out to some island nation and then signed over those assets to a third party that lives in that jurisdiction what recourse do you really have? Yeah I know the attorney could make some phone calls, threats, etc. There may even be some supposed protections in the local jurisdiction. But really this is a precarious situation that is just inviting abuse.

I really think that offshore schemes are way more hassle than they are worth. I wouldn't touch them.

[craigr]

In any case, basically all of his offshore strategies are now obsolete with all of the new laws and regulations targeting offshore assets.

This is another problem with offshore trusts as well. They paint a big fat bright orange target on your forehead for the IRS. Life is too short to get tangled up with the IRS on tax evasion allegations.

[MediumTex]

Trusts can be useful. 

I think their usefulness is more toward higher net worth individuals, and only a subset of that group.

For most people, maxing out retirement acccounts is the best approach to asset protection out there (notwithstanding all the noise in the media about retirement accounts being unsafe).  Retirement accounts are basically protected from everything except the IRS and a narrow group of other creditors and pass automatically at death with no immediate tax consequences.

[craigr]

Please keep in mind that I'm not saying trusts are not useful. They are very useful for estate planning purposes, protection against divorce for heirs, etc. I'd just be very cautious about these offshore trusts being sold as the end-all tax-avoidance and liability protection mechanism.

Domestic trusts can be very powerful and an estate planning attorney can give you details on how they can be a benefit for your situation. I just would avoid anything promising to harbor money offshore as a magic elixir.

[Storm]

I do think trusts can be useful for asset protection, but there is a huge difference between establishing a trust that is solely under you or your families control, and signing complete control over to an unknown (to you anyway) third party.

Another thing that scares the bejeezes out of me are these IRA custodian accounts that claim to allow you to buy gold coins, baseball cards, comic books, or any collectible you want.  Basically, you are signing over your entire retirement account to an unknown custodian who you just hope won't invest it all in his brother's fake business and split to the Cayman islands.

Be very careful in signing things like power of attorney, etc.  There are a lot of fraudsters out there, even more than usual because the mortgage and real estate markets are down and they had to find something else to do 

[ahhrunforthehills]

-