With offshore asset protection, entities are formed in a foreign jurisdiction that has favorable debtor laws, effectively preventing a creditor from bringing a lawsuit as debtor's assets are supposedly beyond the reach of creditors. The concept of offshore asset protection is to place assets outside the reach of U.S. creditors and the U.S. court system.
There has recently been significant media attention with respect to so-called "offshore trusts." Such trusts are created under the laws of foreign states and nations, and generally provide a degree of protection against the claims of creditors and claimants in litigation. As a general proposition, such "safe havens" are provided by foreign governments as a means by which to generate business through the management of significant amounts of wealth. In assessing whether an offshore trust is suitable to the needs of a physician, two concerns must be considered. First, the laws of the foreign location, as well as the stability of the government, must be considered. Second, the Internal Revenue Service has increased its scrutiny of offshore trusts in order to ensure compliance with the tax laws and regulations of the United States.
A foreign bank account is a useful addition to many offshore asset protection plans;
although, protected funds often remain in the United States . The creator of the account must recognize that there are two ways any judgment creditor can discover an offshore account (and remember, an account must be discovered before it can be attacked). The main two ways are review of the client's financial statement and the client's tax returns (both of which are often open to discovery in litigation).
Normally, a well connected facilitator is required to open a secret offshore bank account for asset protection. This person, (who basically functions on behalf of major law firms and banks), will thoroughly vet the client. The primary concern is to make sure that the money is clean and that all taxes due the United States will be properly paid (sensible offshore banks do not want to take on the U.S. Treasury and neither should you). The facilitator will require a non-disclosure letter as well as suitable comfort from either an attorney or CPA that the money is clean and that all taxes have been and will be paid. Once these preliminary hurdles are cleared, the facilitator will proceed to open the account.
Invariably, offshore asset protection plans are dismissed by U.S. courts as shams and offer the debtor no real legal protection.
A secret bank account must not be utilized to hide money from the IRS. It is simply a good and effective tool to keep assets out of the hands of creditors.
