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An offshore trust works as an agreement to safeguard assets from future potential creditors. The agreement is between a person with assets (the Settlor) and a person or company to look after the assets (the Trustee) for the benefit of another person or people (the Beneficiaries).

It’s an “offshore” trust because you are selecting the laws and jurisdiction of another country other than the one you live in. If you were using your home country laws, for example in the USA, the trust would be “onshore” or “domestic.”

Thinking of setting up an asset protection plan? Or just wanting to be sure your hard-earned assets are safe? You’re not alone. Being successful in America makes you a target for bogus lawsuits from shameless lawyers.

Putting some effort into making yourself less of a target just makes sense. 

Here are five tips for building up the barriers between you and a potential creditor. 

1) Start with insurance. Insurance is typically the cheapest form of protection. Buy the right types of insurance for the risks you face and buy the right amount of coverage. We’ve seen so many people sued because they only carried a $25,000 car insurance policy (looking at YOU single dudes). Short of a minor fender-bender, a $25k limit on your policy isn’t going to cover much if you injure someone else. You should raise your limits at least high enough to where you can also purchase an Umbrella Policy. Buy the umbrella policy to supplement your auto policy if you end up facing a large claim.

2) Utilize your state protections. Every state offers some sort of asset protection with its local laws. Some states are more generous than others. Many states protect retirement accounts and life insurance. A few states will protect the full value of your primary residence. Use these state protections to your advantage! Just be warned…if you try to convert unprotected assets into protected assets (put a bunch of cash into an insurance policy for example) after you have been threatened with a lawsuit, that conversion can be voided. Your protected asset can be converted back to an unprotected asset as a “fraudulent conveyance.”    

3) Set up business entities. If you are running a business, treat it like a business. Set up business entities like an LLC to limit your liability from the risky activity of being in business. More than half of business owners will be sued at some point. Hopefully you won’t be sued personally. 

4) Set up an asset protection trust. An offshore asset protection trust is the gold standard in asset protection. It creates a legal separation between you and your assets. These types of trusts are not just for the ultra wealthy. We have worked with clients with a net worth around $250,000. Most have a net worth between $1,000,000-$4,000,000. 

5) Be nice. This can be the easiest part of an asset protection plan. You can avoid a lawsuit all together by being a nice person. There are studies that show doctors are far less likely to be sued if they just spend an extra 30 seconds listening to their patients. I’ve also seen numerous stories of people who would not have sued had someone just said they were sorry or showed some sort of empathy toward an injury they received (for example this woman who lost an eye on a golf course).

Be sure to start your asset protection planning early! If you wait until you have a pending lawsuit, your planning options will be more limited. 

Colin Ley is an asset protection attorney and the creator of the PREP Trust® and Better LLC™. He is also the co-founder of LayRoots (along with with partner in life & business – Shreya Ley)

Being successful in America makes you a target for bogus lawsuits from shameless lawyers. We created an effective, asset protection solution, so you don’t have to worry anymore, happily knowing your family’s future is protected. Get started now by scheduling a free, 30-minute call at livemorecarefree.com.

“It depends” is the stereotypical answer to receive from a lawyer. I’d give that answer when asked about the cost of a Cook Island trust. What if you called a car dealership and asked “how much is a car?” That would depend on what type of car you’re looking for. You could spend $100k+ on a sports car. Or you could spend less than $10k on a tiny little subcompact car.