There are three types of Asset Protection Trusts: Foreign, Domestic, and The Bridge Trust®. The Foreign and Domestic Asset Protection Trusts each have their pros and cons, which are discussed below. The Bridge Trust®, however, is a blended trust that brings you the benefits of the foreign and domestic trusts and leaves the negatives of both behind.
Foreign Asset Protection Trusts
In 1984, when the Cook Islands passed their Trust Act, Asset Protection first became a tool for protecting wealth. Since then, several other countries have enacted similar Trust Acts, however, the Cook Islands remains the best jurisdiction in the world for Asset Protection.Some benefits of using a Foreign Asset Protection Trust based in the Cook Islands include…
1. U.S. Judicial Proceedings are not recognized.
2. Contingency fees are strictly prohibited.
3. The plaintiff must pay all costs (including flying judges in from New Zealand).
4. Over 30 years of case law reinforcing the protection of a Cook Islands Trust.
However, there are two main drawbacks to establishing a Foreign Asset Protection Trust. The first is that you must hire a foreign trustee. The second is that there are several IRS reporting requirements that must be completed annually for any Foreign Trust.
Domestic Asset Protection Trusts
In 1998 Alaska passed their Trust Act, allowing for the first ever U.S. based Asset Protection Trust. Since then, 15 other states have passed legislation allowing for some form of Asset Protection Trust. These Domestic Asset Protection Trusts have gained popularity among U.S. attorneys and their clients mainly because they use familiar jurisdictions and they don’t have the same IRS reporting requirements as a Foreign Trust. Unfortunately, there is a problem with the Domestic Asset Protection Trusts. The problem is that under Article 4 Section 1 of the U.S. Constitution, every state is required to honor the Judicial Proceedings of every other state, leaving the Domestic Asset Protection Trusts vulnerable to attack. As such, we don’t believe a pure-Domestic Asset Protection Trust should ever be used as stand alone asset protection tool.
The Bridge Trust®
The Bridge Trust® truly combines the best of both worlds. With The Bridge Trust®, you receive the protection of a Cook Islands Trust and the simplicity, and lack of IRS reporting requirements, of a Domestic Asset Protection Trust. Under The Bridge Trust® your assets remain in the United States, then if you are ever truly threatened, your property crosses the “bridge” and you are protected by a Cook Islands Trust.
Call us today to learn more about The Bridge Trust® at 720-924-6171.