Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Apr 19, 2012

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For those with substantial means, and thus, larger potential creditor exposure, the best advice is to have a protection plan that is diversified. The use of a variety of protections for a person’s wealth will ensure that at least some of it will be safeguarded from creditors.

The Foreign Trustee – Stopping Creditors from Accessing Funds

One tool commonly used to provide a high degree of asset protection is the offshore foreign trust. Many foreign locations have laws that insulate and protect the grantors who set up such trusts. Basically, when establishing a foreign trust, ownership of the assets is transferred and placed into the trust, and the trust is then managed by a foreign trustee. Common destinations for these trusts are the Bahamas, Bermuda, the Turks and Caicos Islands, the Cayman Islands, the Cook Islands, Gibraltar, and the Isle of Man.

Should creditors come after a person’s assets, even if they were to discover the offshore trust, they will still have to deal with foreign trustees in order to access them. If the trustees are uncooperative, the creditors may find that they have no remedy. The United States courts have no jurisdiction over foreign trustees, as long as they have no offices or agents in the United States. In addition, the physical distance between creditor and foreign trustee may also be a barrier to the creditors.

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History of Offshore Trusts

In the 1990’s, foreign trusts were some of the hottest asset protection devices and law firms earned a lot of money setting up these trusts to help millionaires sleep easier. When some debtors were exposed for establishing the trusts with the specific intention to defraud creditors, offshore trusts fell out of favor for a short time. Currently, such trusts are widely used, but more care is taken prior to setting them up and funding them to not give the appearance of a fraudulent scheme. The grantor generally executes a statement of solvency with a balance sheet or other appropriate financial statement showing a positive net worth.


It is wise to not place all property into a foreign trust. People of wealth should keep assets sufficient to sustain their lifestyle in the United States, and then transfer the remaining bulk of their estate to the offshore foreign trust for protection. Word to the wise: It may be nearly as difficult for the trust holder to recover money from a foreign trust as it would be for creditors to do so, so be careful. It is essential to get expert advice from an attorney well versed in asset protection before considering an offshore trust.