Do Asset Protection Trusts Carry a Mandatory “Go to Jail” Card? Should They?
GO DIRECTLY TO JAIL, DO NOT COLLECT $200!
By Alexander A. Bove Jr.
S
omeone once said, “Believe none of what you read and half of what you see,” or something like that. I guess the message is to be cautious and rely only on what you can prove to your satisfaction. A recent article that caught my attention in a popular professional journal (name withheld) is an excellent example of the need to be cautious. The article’s premise, in no uncertain terms, warns practitioners that “self-settled offshore trusts are increasingly ineffective (emphasis added) in protecting assets from creditors of US citizens, residents, and those settlors with US connections.” The article suggests that in many, if not most, cases, unless the settlor is willing to transfer the trust funds over to the court, establishing such trusts is likely to result in the settlor of the trust being jailed. In my opinion, this information is quite misleading, if not downright false, and does a considerable disservice to practitioners who may not have more than a bit of experience with “offshore trusts.”
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Who Goes to Jail? The gist of the article is that more and more US courts are punishing US settlors of offshore trusts through a combination of contempt charges and actual imprisonment when the trust funds are not readily available to the court. Unfortunately, the few occasions where this has occurred have all dealt with settlors who have either committed criminal acts or openly defied court orders that they could otherwise have obeyed to avoid incarceration. None of them was your typical doctor, dentist, contractor, or other person simply trying to protect assets from future creditors. One case of criminally liable settlors who thought they could lie to the court and get away with it was Fed. Trade Commission v. Affordable Media, 179 F.3d 1228 (9th Cir. 1999). It is a rare US trust and estate lawyer who hasn’t Alexander A. Bove Jr. is a partner at Bove & Langa, PC, in Boston, Massachusetts.
Published in Probate & Property, Volume 37, No 5 © 2023 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
September/OctOber 2023
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