Offshore trusts enjoy numerous benefits. Such trusts are: Private. They avoid early and easy detection of assets by those "fishing" for litigation targets. Difficult to Attach. The best trust jurisdictions do not enforce judgments from outside the jurisdiction, forcing plaintiffs or judgment creditors to come to that jurisdiction to try the case de novo. They cannot simply domesticate a judgment from the United States. They must start over. They require employing attorneys from the haven jurisdiction and they apply local law. Often the final blow to an opportunist plaintiff is delivered by the mechanics of a foreign court systems. The trailing court docket may be so long or so slowly moving that it takes years to get a case to trial. During those years a creative trustee can move, transfer, or distribute trust assets.
Costly to Pursue. The costs of pursuing a foreign judgment can be substantial. American attorneys cannot practice in most foreign jurisdictions. A creditor must hire a local attorney to pursue his or her claim. Unlike their U.S. counterparts, most foreign attorneys will not work on a contingent fee basis. In some countries they are prohibited from doing so. The overwhelming wave of litigation in the United States can in many ways be attributed to the contingent fee. American attorneys will often take a chance on a case if they know that they will get a third or a half of the award if they win. They know that in many cases a confused jury will give them an award even if none is warranted. They also know that a defendant will often settle for nuisance value, which in this day and age can be substantial. Many U.S. companies have a floor under which they automatically settle, which amounts to free money for predators willing to file $10,000 lawsuits. A creditor or opportunist litigant has nothing to lose in the United States, as he simply gets a percentage of the award if the lawyer he selects wins. That same litigant in a foreign jurisdiction must pony up hard cash in the forms of retainers and hourly fees. He also incurs the costs of travel, transporting witnesses, court costs, and other costs associated with distance. An opportunist litigant can't merely roll the dice on a potential windfall; he must take a substantial risk himself. Subject to Favorable Law. In most other countries, they have not yet reached the absurd conclusion that life should be perfect and that all deviations from perfection can be compensated for in monetary payments. Hence, the operative law is often more favorable to a targeted defendant. Many jurisdictions embrace common law rules regarding transfers. These require proof of actual intent to defraud, unlike the more common U.S. laws that assume fraudulent intent from surrounding circumstances. Moreover, many jurisdictions require that the fraudulent intent be proved beyond a reasonable doubt. This burden of proof is similar to that of a criminal case. The United States uses the much easier standard that requires only a preponderance of the evidence.
The laws of many haven jurisdictions are contrary to the U.S. law that allows dissolution and attachment of assets for trusts in which the grantor is also a beneficiary or retains significant powers over the distributions.
Interpreted by Sympathetic Judges and Juries. In the United States, judges and juries have over the years become accustomed to thinking that every accident, every imperfection of life, and every injustice can somehow be valued in terms of money and compensated accordingly. U.S. juries have been studied, psychoanalyzed, and conditioned. Selecting a jury and wringing the largest judgment from them has become a science. A growing cadre of professionals makes a living from profiling jurors. Often the outcome of litigation is decided by the time a jury is seated. It is considered foolish in most countries to grant million dollar awards for things that naturally occur in an imperfect life.
CREATION OF A FOREIGN TRUST
The creation of a foreign trust involves essentially the same mechanics as that of a domestic trust. Once a suitable jurisdiction is selected and competent professional assistance in that jurisdiction is consulted, a written trust declaration is executed. In the declaration, the grantor names a trustee, designates the beneficiaries, defines priorities, and transfers the designated assets to the trustee to be held in trust. One significant difference from a domestic trust is that the grantor also designates a trust protector.
Participants. Participants in a foreign trust are the same as a domestic trust, with slight differences. The grantor and beneficiaries are, of course, the same. The trustee is similar in responsibility and function. Foreign trustees are often more professional than domestic ones. Furthermore, they are generally engaged in only that line of endeavor. In the United States, most trustees are attorneys (who do other legal work), banks (which certainly have other lines of business), and family members. In foreign trusts it is usually required that the trustee be a professional trustee from that jurisdiction. Trustees from such locales generally are imbued with a long and revered history of acting in perfect fiduciary capacity. That requires putting the trust beneficiaries and the grantors wishes above all other concerns. They consider it an honorable calling. U.S. banks are to my mind the worst possible trustees, as they long ago became pawns of the U.S. Justice Department and routinely report transactions and turn in suspicious clients.
The trust protector is a unique participant in many jurisdictions and does not exist in domestic trusts. The protector's job is to oversee the trustee and protect the grantor's wishes. It is an added check on the power of the trustee. The grantor names the protector. Often the grantor retains the protector position. The protector oversees the trustee's performance and advises the trustee regarding the beneficiaries' conditions and needs. The protector may have the power to replace the trustee with another acceptable trustee under certain circumstances. Thus, a foreign trust has the added advantage of a participant to monitor the trustee.
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