ASSET PROTECTION AND CONFIDENTIALITY

What is Asset Protection?
The idea behind asset protection is that if someone makes a claim against you, then your assets are not available to meet that claim. We are all at risk of claims - entrepreneurs who set up in business, anyone who is going through a divorce, professional people and directors of companies. Any of us in this position would like to be able to protect our assets as much as possible.

What can you do to protect against claims?
Most countries have laws which mean that if you become bankrupt within a certain amount of time of giving property away, then the gift will be set aside and the property will have to be paid to your creditors. If assets are given away early enough, then the gift would be valid (depending on local law). You might therefore be able to give property to a trust for the benefit of your family at a time when there is no risk of a claim to ensure that there will always be a nest egg available for them. Although this cannot be guaranteed, the effect of setting up a trust a long time before insolvency in an offshore jurisdiction may make it so difficult and expensive for creditors to chase assets that they take the commercial decision not to do so.

How confidential is a trust?
There is no need to register trusts. Most trusts set up in an offshore jurisdiction do not need to pay tax there, although they will be subject to any taxes on dividends, investment income etc, in the usual way. Generally speaking, trustees will not be under any duty to give information about the trust to any person or any tax authorities. If you are the person setting up the trust, then you may have a duty to tell local tax authorities about any tax liability you have because of the trust and you might have to disclose the trust if there are claims against you on divorce or insolvency.

One of the attractions of a trust is that you will not appear as the registered owner of property or shares held by the trustees. You could therefore reduce the risk of extortion claims (which is particularly relevant if you are doing business in high risk countries).