Over the years, offshore jurisdictions earned a reputation for providing privacy and “bulletproof” asset protection through trusts. However, this reputation is tainted due to legal, regulatory, and political systems that have now changed drastically over the last few years. These “offshore tax havens” can, in fact, lead to more significant losses than savings.
The IRS has been paying closer attention to offshore investments and has warned Americans against “abusive foreign trust schemes”- primarily if used to evade taxation payments. The U.S government has warned that people need “to be on the lookout for promoters who peddle false hopes of large tax deductions from abusive arrangements. These deals are generally marketed by unscrupulous promoters who make false claims about their legitimacy and charge high fees to boot. These promoters frequently devise new ways to cheat the system and market them aggressively. Some taxpayers play the audit lottery hoping they don’t get noticed.” However, there are some U.S states, Wyoming in particular, that provide superior asset protection that is both onshore and legal.
Story Stages
Why Wyoming Ranks as the Best Offshore Alternative
Wyoming has consistently ranked in the topmost preferred states to form a Private Trust Company. Wyoming’s popularity as a trust situs has achieved notable growth in the last ten years. As it stands, Wyoming is one of only 16 states in the United States that allow for domestic asset protection trusts. The state has positioned itself to compete directly with offshore providers. Wyoming provides numerous advantages, such as:
- Self-settled trusts
- Immediate asset protection
- Dynasty trusts are permitted
Wyoming is one of a few top-ranking states that also consent to the establishment of regulated and unregulated Private Trust Companies. Wyoming has proven attractive to investors due to a combination of:
- Low taxes
- Advantageous trust statutes
- Asset protection laws
- A state legislature that is favorable to wealth-protection
A Closer Look at Wyoming State Laws
Under Wyoming state law, structuring a trust and Private Trust Company allows the assets that are being held to be significantly protected from the likes of creditors. Asset protection legislation varies widely from each state, and Wyoming’s laws are advantageous for numerous reasons:
- Charging Order Protection– Under this statute, creditors are only constituted to attach a right to the distribution in a trust. Since the voting rights of a debtor will remain unaffected, the creditor has no legal recourse to force a distribution. It is just a matter of out-lasting the creditor and getting them to settle for less.
- Qualified Spendthrift Trust– In Wyoming, this domestic asset protection trust not only provides protection from creditors it also aids in accomplishing various other estate planning purposes—negating the need to go offshore. By statute, Wyoming can provide protection for discretionary and mandatory distributions.
- Self-Settled Trusts– Wyoming state is currently one of just six highly-ranked trust jurisdictions that permit self-settled trusts by statute. These trusts act as a type of spendthrift trust created to afford asset protection and accomplish further estate planning aims.
- Discretionary Trusts– The state statutes provide clear and concise definitional guidance with regard to discretionary trusts. When it comes to creditors claims; the rights of beneficiary’s creditors or assignees are stipulated as “To the extent a beneficiary’s interest in trust income or principal, or both, is not subject to a spendthrift provision or the exercise of the trustee’s discretion, the court may authorize an assignee or a judgment creditor of the beneficiary to attach distributions of trust income or principal, or both, when the distributions are received by the beneficiary or by a third party for the benefit of the beneficiary.”
Wyoming Trust & LLC Attorney is an excellent resource for more information on offshore and onshore trusts; this website will also provide greater insight into asset protection planning.
Final Thoughts
While asset protection is vital in maintaining the distinction between the liabilities of the owner and the business, it can be counterproductive if not done via the correct channels. While offshore investments might look good in theory, there is a lot that can go wrong, resulting in the loss of all of your assets and reputation. Wyoming legislation allows for the state to be a great onshore alternative for superior asset protection.
