With the economy on troubling grounds, there is a greater desire to protect assets. But, there is a difference between hiding and protecting assets. Hiding assets is a form of protection, but done for illicit purposes to keep away from current creditors. Assets can also be hidden, but not fully protected, which means when found they are vulnerable to recovery by creditors. The popular tactics discussed below being used for financial privacy and protection are those that not only keep ownership confidential but also ensure that assets remain safe and secure if found by creditors.
Offshore Asset Protection Trusts (APTs)
APTs that are properly structured in the right jurisdiction can provide superior levels of financial privacy and protection. These are irrevocable trusts that allow one to be the settlor and beneficiary at the same time. Assets are transferred to the trust and managed by a third party trustee and as a result, assets are no longer legally owned by the settlor. This vehicle allows the settlor to enjoy the benefits of the assets and manage and control them. Ofttimes, the assets are located in a jurisdiction different from where the trust is organized. This creates more barriers for locating assets. Some of the jurisdictions in which APTs are popular are Cook Islands, Belize, and Nevis.
Limited Liability Companies (LLCs)
Offshore LLCs provide high levels of confidentiality for their owners and offer limited liability protection. In more favorable jurisdictions such as the British Virgin Islands, Belize, Nevis, and Panama, the names of the beneficial owners are not publicly available. It is also possible to appoint nominee shareholders and directors for even greater privacy.
Offshore Bank Accounts
One of the simplest ways to create financial privacy is to open an offshore bank account. Some jurisdictions such as Switzerland and Lichtenstein are known for their high degree of confidentiality. But, gone are the days of complete anonymity. In these times, unless a party has great comfort in highly volatile jurisdictions, countries with more safe and stable banking environments are generally used.
Those jurisdictions are concerned about money laundering and more receptive to creditors’ recovery efforts. The increasing trend is for offshore accounts to be opened by the LLC and be paired with an APT. This structure provides a higher degree of privacy and thereby protection.
There are different strategies being used with multi-pronged approaches. The reason to diversify is to make discovery more difficult and onerous. Creditors should be aware of the tactics being employed so that a structured recovery effort can be effective.