NEW FOR 2010: New Zealand Offshore Asset Protection Trusts Report - click here

The Q Wealth Report brings you regular updates and information on International and Offshore Asset Protection strategies, from Panama Foundations through Cook Islands Trusts, Offshore Reinsurance and much more!

Anyone with a moderate to high net worth may benefit from offshore asset protection - but this strategy will be of particular interest to those working in professions where there is a high risk of litigation - for example doctors, dentists, chiropractors, veterinarians, lawyers, business owners, and investment managers, to name but a few!

There are increasing numbers of lawsuits being brought (particularly in the USA, UK and Canada), in which the defendant is targeted not because of his culpability, but because of his ability to pay. Individuals in this 'deep pocket' category risk losing everything if they haven't put proper protection measures in place.

A concrete example: A patient was prescribed drugs which could cause drowsiness, was warned not to drive, but did so anyway and crashed the car, causing serious injury to another party. Guess who gets sued? That's right, the doctor. Despite having warned the patient of the dangers, he should have known that he might have driven while under the influence and cause serious injury, and therefore should not have prescribed the drugs.

It isn't about who is to blame, but who can pay the most! If your assets are obvious and easily visible, you are a sitting duck.

And it's not just doctors who are at risk from this type of thing. Anyone in the professions mentioned above, or simply anyone with substantial net worth, could find themselves liable in a frivolous lawsuit.

Will liability insurance protect you? Possibly, at a cost. But it may not cover the full size of an award, particularly in the USA.

Asset protection strategies basically work by making the assets of an individual unavailable, or difficult to recover, (and hence unattractive) in the event of legal proceedings being taken against them by employees, clients, patients, litigious family members or other malfeants.

Protection of assets can take a number of forms, and while there are many domestic alternatives, including living trusts, limited liability partnerships and companies, and family limited partnerships, offshore vehicles are usually more effective for this purpose. The trust is the lynch-pin of offshore asset protection; although offshore bank accounts on their own can provide enhanced private banking and confidentiality, they are usually an integral part of an asset protection strategy. Banking secrecy laws in offshore jurisdictions are usually significantly stricter than domestic laws, unless criminal activity or money laundering is suspected.

Offshore trusts and companies can be used separately or together for asset protection purposes (usually in conjunction with the offshore bank account). In a trust arrangement, the settlor (the person who transfers assets to the trust) legally gives over control of his assets to a trustee (or trustees), who manages and controls them for the benefit of a beneficiary or beneficiaries (of which the settlor can be one). Although the settlor will usually provide a letter of wishes, detailing how he would like the money to be managed, and distributed, the trustee/s have legal control over the assets.

Recent legislative developments in certain offshore jurisdictions have significantly improved on the original common law trust, providing effective defenses against forced heirship provisions and imposing time limits on creditors' claims.

In order to ensure effective offshore asset protection, then, you need to establish the structure in a jurisdiction with effective IBC privacy legislation, strong banking secrecy laws, and modern trust legislation.

Important note: Asset protection is not something you can put in place when legal proceedings are imminent, or already underway. Any attempt to transfer assets under these circumstances would be considered fraudulent. However, a well-designed asset protection structure, put in place ahead of time, can prove a very effective tool in protecting both wealth and privacy.

In the pages of every issue of The Q Wealth Report you can learn more about international asset protection strategies. Sign up today!