Advertisement
retirement

There is No Place Like Home: Mature Foreign Asset Protection Trusts Are Coming Home

The 10-year time limit is expiring for a raft of foreign asset trusts, and those who hold them could benefit in several ways now by redomiciling them to the United States.

Do you have a foreign asset protection trust (FAPT)? Has it been established for more than 10 years? Are you interested in ways you can save on the costs of maintaining your FAPT? You may now bring your trust home to a qualifying state and still maintain the firewall protections your FAPT provided.

In recent years many FAPTs that have reached their 10-year anniversary are being migrated back to the United States. Why is the 10-year period so critical? Under a federal law pertaining to bankruptcy proceedings, the U.S. bankruptcy trustee is allowed to challenge transfers to a domestic asset protection trust or other similar devices for up to 10 years from the date assets were transferred to the trust. Once the 10-year term has expired, the trust is no longer at risk of being challenged as a fraudulent transfer in a bankruptcy proceeding.

Advertisement - Article continues below

The long statutory period to challenge transfers to asset protection trusts caused many people to establish these trusts in an overseas country where Federal Bankruptcy Code Section 548 would not apply.

The benefits of bringing a trust home

Once the statute of limitations under Section 548 has expired, a creditor is no longer able to pursue the assets held in the trust. This is great news, considering the FAPT can now return home! The many benefits of converting the FAPT to a domestic trust include:

Advertisement
Advertisement - Article continues below
  • lower administration fees
  • more flexibility in banking and investment custodians
  • convenience
  • less IRS tax compliance, i.e., less costs to maintain the trust

A real-life story

Here is a client example: Dr. Veronica G. developed a specific medical procedure to fix an ongoing condition and for several years she had successfully helped more than 75 patients overcome their medical issue. One day while watching the news, Dr. G. saw a commercial in which a law firm advertised that it would sue doctors who injured patients who had the procedure performed and who may have sustained injuries.

Dr. G. began to realize that although this procedure was successful, there could be some larger liability than her malpractice policy would cover. This prompted her to consult with a lawyer who specialized in comprehensive estate planning with asset protection and resulted in her establishing foreign asset protection trusts.

Dr. G.’s trust is now more than 10 years old, and after meeting with her attorney, she decided to redomicile her trust to Nevada, a state that year after year ranks in the top five of asset protection trust states. This strategy will maintain the protections of the trust while reducing Dr. G’s overall costs to maintain the trust. She won’t be required to file the IRS tax compliance forms required for trusts established overseas, and her choice of banks and brokerage firms will increase significantly, because many U.S. banks and brokerage firms will not open accountants under a FAPT.

Overall, the key concept is that if your FAPT is now more than 10 years old, you may now bring it back to the U.S. and still maintain the protections of the trust.

About the Author

Jeffrey M. Verdon, Esq.

Managing Partner, Jeffrey M. Verdon Law Group, LLP

Jeffrey M. Verdon, Esq. is the managing partner of the Jeffrey M. Verdon Law Group, LLP, a Trusts & Estates boutique law firm located in Newport Beach, Calif. With more than 30 years of experience in designing and implementing comprehensive estate planning and asset protection structures, the law firm serves affluent families and successful business owners in solving their most complex and vexing estate tax, income tax, and asset protection goals and objectives.

Advertisement

Most Popular

65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020
8 Ways You Might Be Cheating on Your Taxes
taxes

8 Ways You Might Be Cheating on Your Taxes

Don't fall into these common traps that can get you in hot water with the IRS.
July 8, 2020
Find a Great Place to Retire
happy retirement

Find a Great Place to Retire

Our cities provide plenty of space to spread out without skimping on health care or other amenities.
July 2, 2020

Recommended

Saver's Credit: A Retirement Tax Break for the Middle Class
Tax Breaks

Saver's Credit: A Retirement Tax Break for the Middle Class

Your retirement contributions could be the key to a lower tax bill.
July 9, 2020
8 Ways You Might Be Cheating on Your Taxes
taxes

8 Ways You Might Be Cheating on Your Taxes

Don't fall into these common traps that can get you in hot water with the IRS.
July 8, 2020
2020 Tax Deadline: When Are Tax Returns Due This Year?
tax deadline

2020 Tax Deadline: When Are Tax Returns Due This Year?

The April 15 deadline for filing your 2019 federal income tax return (and paying taxes) has been moved back...but the new due date is approaching fast…
July 8, 2020
How to Get an Extension for Filing Your Tax Return
tax deadline

How to Get an Extension for Filing Your Tax Return

If you can't wrap up your tax return by the July 15 deadline, it's easy to buy yourself more time.
July 7, 2020