This article introduces an exciting hybrid between the domestic lawsuit trust and the offshore lawsuit trust: the Nevada Offshore Lawsuit Trust (“Nevada Offshore Trust”).
We are introducing this trust to fill a need that exists with the Nevada Lawsuit Trust (“Nevada Trust”) and the Offshore Lawsuit Trust (“Offshore Trusts”). While the Nevada Trust provides theoretical protection, it has yet to be tested in the courts, requires at least two years of “seasoning” before it can take effect (10 years if there is a bankruptcy) and there is concern that non-asset protection trust states will not honor the trust. However, the Nevada Trust is cost effective and doesn’t require offshore trustee fees which are $3,500 the first year and $2,500 annually.
The Offshore Trust provides the highest level of protection and clearly outperforms the Nevada Trust, but then there are those pesky annual trustee fees.
So, in the past a person who is not under a current threat and whose asset level is modest would often choose the Nevada Trust over the Offshore Trust.
In working with our offshore trustees, we have developed a solution: the Nevada Offshore Trust. This new type of trust combines the benefits of the lower annual maintenance fees of a Nevada Trust with the protection of the Offshore Trust.
This is accomplished by forming the trust as a Nevada Trust with domestic trustees.
Then we add provisions to the trust that permit the domestic trustee to transfer the jurisdiction of the trust to a country that provides for better asset protection laws such as Nevis or the Cook Islands. The domestic trustee resigns and the offshore trustee takes over. Under no circumstances can the client be the trustee or the trust protector. When the trust is drafted a copy of the trust is deposited with the offshore trustee so they can act quickly in the event that there is a threat against the trust and its assets.
The trust will then be treated as an Offshore Trust once the “Flight Clauses” have been triggered. Because at this point the trustee is an offshore trustee, the normal trustee fees will be due. If there is no reason to flee US jurisdiction, the trust remains a Nevada Trust indefinitely. It’s only when the domestic trustee foresees a problem that the “Flight Clause” provisions are triggered.
Now, we don’t pretend that the Nevada Offshore Trust is as strong as an Offshore Trust. There are still concerns that a court could interpret these jurisdictional changes as an attempt to hinder, delay or defraud creditors. If so, it will be considered a fraudulent conveyance. There is also the concern that the offshore jurisdiction will frown on such a move if there has already been a judgment rendered against the trust, i.e., the domestic trustee waited too long to trigger the Flight Clause.
The Nevada Offshore Trust may be ideal for those who do not have enough assets to justify the expense of an Offshore Trust and don’t foresee any threats in the near future but don’t want to become the test case for the Nevada Trusts.
This is accomplished by forming the trust as a Nevada Trust with domestic trustees.
Then we add provisions to the trust that permit the domestic trustee to transfer the jurisdiction of the trust to a country that provides for better asset protection laws such as Nevis or the Cook Islands. The domestic trustee resigns and the offshore trustee takes over. Under no circumstances can the client be the trustee or the trust protector. When the trust is drafted a copy of the trust is deposited with the offshore trustee so they can act quickly in the event that there is a threat against the trust and its assets.
The trust will then be treated as an Offshore Trust once the “Flight Clauses” have been triggered. Because at this point the trustee is an offshore trustee, the normal trustee fees will be due. If there is no reason to flee US jurisdiction, the trust remains a Nevada Trust indefinitely. It’s only when the domestic trustee foresees a problem that the “Flight Clause” provisions are triggered.
Now, we don’t pretend that the Nevada Offshore Trust is as strong as an Offshore Trust. There are still concerns that a court could interpret these jurisdictional changes as an attempt to hinder, delay or defraud creditors. If so, it will be considered a fraudulent conveyance. There is also the concern that the offshore jurisdiction will frown on such a move if there has already been a judgment rendered against the trust, i.e., the domestic trustee waited too long to trigger the Flight Clause.
The Nevada Offshore Trust may be ideal for those who do not have enough assets to justify the expense of an Offshore Trust and don’t foresee any threats in the near future but don’t want to become the test case for the Nevada Trusts.