The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Offshore Crooks

06/11/2019

Every profession has its crooks and charlatans, even doctors, lawyers and Indian chiefs.  In financial planning, I trust nobody who deals with offshore asset protection trusts.

Originally, they were used to protect assets from ex-wives or creditors or the IRS.  Of course, the way to accomplish this was to transfer title or ownership of those assets to somebody else, who was then free to do whatever they wanted, sometimes even to steal the assets.  Yes, there were more than a few crooks in the business in those days.

But, the asset protection business still remains, albeit chastened.  A few years ago, an innovation was to add a “trust protector,” who was actually obligated to act according to the trust documents and could override any discretionary decisions by the trustee.  He could even fire the trustee, with or without cause.  At first, the person funding the trust could appoint himself as trust protector over the trustee.  It didn’t take long for the courts to recognize the too-cozy nature of this relationship.  Then, friends and relatives were called to be the trust protector, but nobody wanted that responsibility and legal liability, and I don’t blame them.

Now, to fill the void of who can be trust protector, there are independent trust protector companies – always offshore in a different jurisdiction than the trustee.  That’s really great, IF the independent trust company remains both honest and independent, despite being largely unsupervised and unregulated.  It is just a matter of time before somebody puts a fortune into a trust with an offshore corporate independent trust protector, who accepts some sort of bribe to be less than independent.

While some asset protection exists domestically (like “Delaware Trusts”), they pale in comparison to the wild claims of offshore asset protection trusts.  Whenever a financial planner, real or fake, recommends an offshore asset protection trust to you . . . RUN . . . FAST!

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