Episode Transcript
[00:00:00] Speaker A: The us court could put a domestic trustee in jail for failing to comply with a us court order. Now, if you send a us court order to the Cook Islands, that court order is going to end up in the trust and by law, the foreign trustee. The Cook Islands trustee is not allowed to honor a us court order. So with enough pressure, you can get assets out of a domestic trust. That is not the situation with an offshore trust. It is much, much harder to break into an offshore trust. It's much more expensive. Most plaintiffs are just quite frankly, not interested in going through that burden. Some cumbersome process of attempting to get assets out of an offshore trust, especially when they learn about case law, they see how small their chances of success actually all are. And what it means for the client is that they get a much better settlement. And that's the name of the game. 99% of all cases settle. And by having an offshore trust, you are buying yourself a very powerful tool to help you negotiate and leverage a settlement.
[00:01:09] Speaker B: Hello everybody, and welcome back to trust this, the podcast for real estate entrepreneurs and professionals all over the United States. But especially if you're in Florida today, we're going to talk about tips and tactics, and especially tips and tactics related to offshore trust. A lot of people know us. We do Florida real estate land trusts, where we keep your name off the public record when we act as your trustee. But offshore trust, that's a whole other thing, as I put it. And we're fortunate enough today to have Blake Harris of Miami and Denver on the line with us today. And Blake, I want to welcome you.
[00:01:50] Speaker A: Joe, thanks so much for having me. Nice to be on your show.
[00:01:53] Speaker B: Great to have you. Why don't you fill us in a little bit about your background, what you do?
[00:01:58] Speaker A: Sure. Well, I'm an asset protection attorney. I utilize offshore trust to help keep my clients assets protected from lawsuits and divorce.
[00:02:05] Speaker B: Okay, well, what is an offshore protection trust anyway? What do those do?
[00:02:09] Speaker A: So an offshore trust is simply a trust which is registered in a jurisdiction outside of the United States. And the advantage of using this type of structure as compared to a domestic trust is the trustee is not going to fold under pressure from the us courts. The trustee that we use most of the time is based in the Cook Islands. And by law, the Cook Islands do not allow their trustees to honor the court orders from any country in the world other than the Cook Islands. So if you've got an offshore trust, it makes it extremely hard for a plaintiff who's coming after your assets to influence the trustee, enforce the distribution.
[00:02:45] Speaker B: Okay. Now, I've heard there's Cook Islands, there's Nevis, there's the Caymans. Everybody knows about the Caymans. There used to be Bahamas, Bermuda. Why the Cook Islands for you? What makes them better than the others?
[00:02:55] Speaker A: So I have visited dozens of different jurisdictions throughout the world. I probably met with more trust companies, bankers, investment advisors and attorneys than anybody else in this particular niche area. I have read the laws of many different countries. I've even proposed legislation and lobbied governments about how they should draft their asset protection law. In terms of countries that have good codified asset protection laws, there's actually just three or three that are the best in my opinion. The Cook Islands, Nevis and Belize, Bahamas. I'm not sure why anybody would use the Bahamas. Unless you want to have some tax write off for taking your family boat to the. For going to on trip to the Bahamas.
Cayman Islands, it's a great place if you're forming a hedge fund, but I wouldn't use the Cayman Islands for an asset protection trust. It takes at least six years before you get any protection. It's not a jurisdiction that really has the mindset to keep your assets protected. Belize has a very good law in place, but it's not a very stable place to do business. When I'm down there, I'm very careful where I go. In Belize City, the trust companies, they are protected by very thick steel wall doors and security because they need it. It's a place where you have to worry about corruption. It's a place where you have to worry about instability in the government, instability with the banks and the regulators down there are very unpredictable with what they ask and it's just not the premier place to set up an asset protection trust. Nevis is a safer place to do business. However, the government in Nevis has grown hostile to the asset protection business over the past decade or so. And because of that, we have focused more on the Cook Islands. Nevis is making a lot of money selling passports. They're nothing as committed to the asset protection business as the Cook island two has never, and probably never will sell a passport. Asset protection is vital to the economy of the Cook Islands. Cook Islands have been in this business longer than anyone else of modern times has been in the asset protection business. They've got good case law to back up their trust industry and they have excellent trust companies and it's just overall a very safe and transparent place to do business. So that's the reason why for 99% of our clients, we utilize the Cook Islands.
[00:05:05] Speaker B: Now I've heard some lawyers, some of my friends who do estate planning, they're real big on setting up domestic assets. Self settled asset protection trust. I know some of the states in the United States now have that self settled trust rule that allows that. Can you explain what that is and why that's not as good as maybe offshore in the Cook Islands?
[00:05:28] Speaker A: Sure. So the Cook Islands has had their asset protection trust laws since around the mid 1980s. And then Alaska was the first domestic state to allow for the use of an asset protection trust back in around 1998. And since then, more than a dozen other us jurisdictions have passed legislation which allow for some type of domestic self settled asset protection trust law. Common states include Nevada, Wyoming, South Dakota, still Alaska, Delaware. However, any us based trust could be compromised by a us court under article four, section three of the US Constitution. Every state has to honor the court orders of another state. And there have been several instances where us courts have disregarded domestic trust. If you are defending a case and your assets are protected by a domestic trust, you're going to still have a plaintiff attorney who's very aggressive in going after your assets. But if a plaintiff attorney learns that your assets are shielded by an offshore trust, you may see the plaintiff just immediately drop their case and decide they don't want to bring it at all, or they're going to be much more willing to talk settlement. Domestic trusts are nicer from an attorney's perspective because it's easier to convince someone to set something up domestically. And generally, a domestic trust is going to cost a little bit less than an offshore trust initially. However, in the long run, when you actually have to use the trust, you're going to find that you get a much better value by utilizing an offshore trust, which a us court cannot touch.
[00:06:53] Speaker B: So what are the mechanics of that? How do they provide that protection for offshore trust? Exactly what are the steps? What happens whenever maybe you have a large judgment hit you here in the United States, or divorce or whatever's happening, what exactly happens in that case?
[00:07:11] Speaker A: Well, if the trustee goes to the client and says, request a distribution, a domestic trustee, a foreign trustee could receive a request from the client, from the grantor, from the beneficiary of the trust, and then the trustee can just disregard that request. It's coming from the client. Now, if the court goes directly after the trustee and it's a domestic trustee, that trustee is going to comply because they don't want to be put in jail. The us court could put a domestic trustee in jail for failing to comply with a us court order. Now, if you send a us court order to the Cook Islands, that court order is going to end up in the trash. And by law, the foreign trustee, the Cook Islands trustee is not allowed to honor a us court order. So with enough pressure, you can get assets out of a domestic trust. That is not the situation with an offshore trust. It is much, much harder to break into an offshore trust. It's much more expensive. And most plaintiffs are just quite frankly, not interested in going through that burden. Some cumbersome process of attempting to get assets out of an offshore trust, especially when they learn about case law, they see how small their chance of success actually are. And what it means for the client is that they get a much better settlement. And that's the name of the game. 99% of all cases settle. And by having an offshore trust, you are buying yourself a very powerful tool to help you negotiate and leverage a settlement.
[00:08:33] Speaker B: Well, now, I've heard of people. They've actually, I just got the 8th edition of Asset Protection in Florida, the treatise from the Florida bar today. And one of the things they always put in there is they always say, well, offshore trusts don't work because the judge, if you don't get the money from the offshore trust, the judge will just throw you in jail.
What is all that about? Does that really happen?
[00:08:55] Speaker A: I guarantee you, you cannot find a case law where an individual created a trust before a lawsuit, complied with the court order, was honest with the court, and was put in jail. That is absolutely not the case. That does not exist. We always have our clients. We always encourage our clients to set up the trust while in advance of any litigation, fund the trust in advance of litigation. And then if a court orders our clients to disclose, we always have our clients disclose their assets. And if the court orders the client to request a distribution or to do anything, we 100% of the time, have clients comply with the court order. As long as the client is complying with a court order, you cannot be held in contempt. Contempt is not a means of punishing someone for doing something the court doesn't like. It's a means of compelling. As long as somebody's compelling, as long as somebody is acting in compliance with whatever they've been ordered to do by the court, they will not be held in jail, they will not be held in contempt.
[00:09:52] Speaker B: So as long as the judge has told you, hey, tell your trustee to send this money back to you so you can pay the plaintiff. And as long as you say, yes, I did that. I sent it to the trustee, and the trustee said, no, you're fine.
[00:10:07] Speaker A: Correct. It's the trustee who may not comply with the court order, but our clients always will comply with us court orders.
[00:10:13] Speaker B: Now.
And what you said, there was a very, very big point. Do this well in advance of a lawsuit. Somebody comes to you and the lawsuits already been filed. That's probably not going to, anything that they do at that point for asset protection is probably not going to help them very much, is it?
[00:10:31] Speaker A: So it depends on the situation. If there is some heat on a case, but the clients have some assets they could leave out of the trust, even if those are maybe illiquid assets, harder assets for a plaintiff to take, or less desirable assets, there's still maybe some opportunity. So I'd say if you are in a situation where there's already a pending matter, contact an asset protection attorney, someone who's deeply involved in this industry and knows how to navigate those complex, time sensitive issues, there may still be an opportunity. It's definitely worthwhile to have the conversation. It might be too late, but at least look into it and examine whether there might be an opportunity to so do some planning. You're not going to get as good of a result, you're not going to get as good of a value or a settlement as you would if you did the planning in advance. But often late stage protection can do something to mitigate damages.
[00:11:23] Speaker B: So what are the mechanics of funding the trust? What exactly do some of your clients put into their offshore trust?
[00:11:31] Speaker A: Sure. So the first thing that we generally recommend clients do is open a bank account, typically in Switzerland or Liechtenstein or the Cook Islands or Panama. Those are the most common places where we have clients open a bank account, preferably Switzerland. If they have at least a million dollars in assets that they can put into a bank and brokerage account offshore, then we will usually recommend Switzerland. It's a very safe place to hold your money, safer than the United States, substantially, if we can't get them a swiss bank account because they don't have a million dollars. Now, we do have relationships where in some cases, banks will make exceptions for our clients and open accounts for as little as 500,000. But generally it's about a million dollar threshold. We can get accounts opened in other jurisdictions, Cook Islands or Panama, for under $500,000.
Once the money's in that account, the clients still have options and the ability to invest in just about anything that they want. Various different traditional currencies, euro, swiss franc, the us dollar. They can also invest in stocks, bonds, cryptocurrency, gold, silver, pretty much anything they can invest in directly, they can invest in through the trust as well. Also, clients have real estate. That real estate, if it's a primary home and it's not already protected like a home in Florida or Texas, is that home, can go directly into the trust. Other real estate should first be held by an LLC, and that LLC should be owned by the trust. Now, real estate, because it's still based here in the United States, states, does not get the same level of protection that you get with an asset that you can move offshore like a bank account. So we would advise clients, once the trust is established and you've moved the property into the trust or into an LLC that the trust owns, to take a farther step and equity strip that property. And by equity strip that property, I mean either mortgaging it, so putting a lien on it and putting those proceeds into an offshore account, or even selling the property, and then putting the proceeds from the sale of the property into an offshore account. Those are the main assets that clients are protecting. Stocks, bonds, cash, cryptocurrency, real estate. You can also put other assets into a trust as well, such as a business or an IP. But it may be better to equity strip the business as well. Take any cash out of the business and put that into an offshore account.
[00:13:42] Speaker B: So mostly you mentioned llcs, putting property in llcs. I know in other states that fortunately they don't have the land trust, but like in Illinois and Indiana and Florida, you could probably also use a land trust and the beneficial interest and those be held by the offshore trust as well. Exactly.
[00:13:58] Speaker A: So set up the land trust, have the land trust owned by the LLC, then the LLC owned by the Cook Islands Trust. Exactly.
[00:14:04] Speaker B: Yeah, I agree. I think that would be a way. Yeah, that's a wonderful way to protect that. What about, do you see many yachts, planes, anything like that held in the trusts?
[00:14:15] Speaker A: We do. We do have clients with yachts and planes. It's a smaller portion of the business. The majority of people who are setting up these trusts are not super wealthy individuals. Most of our clients have between about one and $10 million in assets. We do have quite a few who have under a little bit under a million dollars in assets, and I do have more than one client whose net worth is in excess of $1 billion. But the majority of our clients have somewhere between about one and $10 million in assets. So they're not typically owning mega yachts or planes. But we do have clients with those assets, and typically we'd hold those through an LLC that hold the LLC into the trust, and we either recommend that they park those outside of the United States or that they equity strip them as well, just as they could do with real estate.
[00:15:01] Speaker B: I like that. I like that. Yeah. That's one of the things that we often preach to our clients as well. Just go ahead and put a big old mortgage on the real estate. Take the cash, put it somewhere else. Nobody's going to. No. Plaintiff wants to take a property that's subject to a massive mortgage. They don't want to bother with that. What's what. So what is your typical client? What kind of, are they mostly entrepreneurs? Are they, are they business owners? What kind of. Are they professionals? What do you see?
[00:15:27] Speaker A: A lot of entrepreneurs, a lot of business owners. A lot of people who've invested heavily in real estate or in cryptocurrency. They're usually married. They're often worried about how their marriage is going to pan out in the coming years, typically somewhere between the ages of 30 and 60. Those are the people who are most actively engaged in business, though I do have clients their twenties, and I do have a couple of clients who are even into their eighties as well. Most are people who are pretty active in business. They're usually people who are pretty savvy as well, not necessarily with trust planning. They may have very little knowledge about how a trust works, but they're willing to investigate and learn, and they've got a mind that's open to looking globally for solutions. The majority of Americans have never been outside the United States. Those that have have not gone anywhere. Majority of them have not traveled beyond Mexico and Canada. So finding people who have an open minded to global solutions is a good fit with my client base.
[00:16:26] Speaker B: So you've got your account in Switzerland, and it's doing the investing, and it's making money, it's making returns, it's making interest, whatever it's making.
What are the tax implications of that? How does that work back here in the United States?
[00:16:41] Speaker A: Very good, Joe. So it is a tax neutral structure. It does not increase your taxes, it does not decrease your taxes, it does not increase your chance of an audit, but it does need to be reported to the IR's, and we provide our clients a detailed memorandum on how to complete those reporting requirements.
[00:16:57] Speaker B: Good, good.
What about cryptocurrency? I know some of your clients you mentioned are cryptocurrency folks.
Can they hold maybe their digital wallet or their cryptocurrency somehow in the trust as well?
[00:17:14] Speaker A: Absolutely. And there's a few different options for how crypto can be held under the trust. You can assign the crypto to the trust, and the trust, you can turn around and hire the client as a custodian of their keys, provided that there's no pending litigation or no active collection efforts taking place. The other option is to use a third party vault where clients keep their crypto in a cold storage ledger, which is owned by a vault which the trustee owns. Or you can use one of our banking relationships out of Switzerland or Liechtenstein that allows clients to hold crypto.
[00:17:43] Speaker B: Okay, what about when? Well, okay, so day to day, I heard you say, and hold the keys. Managing. So how is the day to day management of the assets handled? You have to go to the trustee. The trustee then tells the investment banker to do whatever they need to do with the account or whether it's an investment account or whatever. How is that day to day logistics handled for a person who has their money in one of these offshore trusts?
[00:18:12] Speaker A: So the trust allows for the appointment of an investment manager. And if it doesn't look like it would compromise protection, which typically wouldn't, the trustee will actually hire the client, the seller beneficiary, the one who created the trust as the investment manager, and they can work directly with their swiss investment advisor to allocate their portfolio, pick what stocks and bonds they want to invest in, and then from there, they'll have pretty much direct control over how the assets are invested. So even though the trust is not, even though the assets are not directly in your name, you can still invest the assets however you wish.
[00:18:45] Speaker B: Okay, now what happens when the grantor beneficiary of the trust dies? How is that handled?
[00:18:53] Speaker A: Well, the trust can live on forever, but if the client passes away, there are provisions in the trust that state who the successor beneficiary is. Typically, it's the children or the spouse of the individual who created the trust. They would just need to provide the trustee with a copy of a death certificate, and then they can step into place. The successful beneficiary can step into place as the new beneficiary. And at that time, they can decide if they want to keep the trust or if they want to dissolve the trust.
[00:19:20] Speaker B: Because they would have the same protection as well.
[00:19:23] Speaker A: Exactly. They would have the same protection as well. So if dad was a high risk brain surgeon and the children are not in risky profession, they may decide they don't want to keep the protection. But I find that even if someone creates a trust because they're concerned about a particular issue and that issue passes, they will often keep the trust in place, or at least the swiss banking portion of it, because they find out how good the service is, how safe the banks are, that they like that planning, that they like those banking options. They'll keep the trust in place even if they're threat of litigation, maybe very, very minimal.
[00:19:59] Speaker B: I had some clients back in the late nineties that they would use offshore trusts with the foreign bank account because they could use it to invest in things that they just simply couldn't invest in from the United States because those investments weren't available to us residents. Is that still possible to be able to do that?
[00:20:20] Speaker A: The trust gives you options, access to some investment options that you would not have directly yourself. So it's very popular to set up for asset protection purposes, but it also is an estate planning tool. It allows you to avoid forced airship laws, it can allow you to avoid the elective share, and it gives you access to more investment options. It also just makes you really cool to have an offshore trust.
[00:20:41] Speaker B: You're with the cool kids now.
So do you find that it's a lot of times it's maybe spouses, married spouses, who do it? Or is it one spouse does one trust once another spouse does the other trust to keep them separate? What's your advice there?
[00:20:56] Speaker A: It depends on the situation. Sometimes we'll have each spouse set up their own trust. Usually, if it's a married couple and neither party is concerned about divorce, the married couple will set up one trust for the two of them jointly.
[00:21:08] Speaker B: Okay. Okay. Well, what are the downsides of an offshore trust?
We always hear the great sides of whatever we're talking about. But are there any downsides to it?
[00:21:19] Speaker A: Well, for one, you don't get to stay up all night worrying that you're going to lose your assets.
You also have to report the trust to the IR's, as I mentioned, and FinCEN. And as I mentioned, we provide our clients a detailed memorandum on how to complete all those reporting requirements. The fees to set up the trust are generally greater than the fees to set up a domestic trust. But as I also mentioned, in the long run, it is a better value than you're going to get with the domestic trust. So there are increased setup fees, there is additional filing requirements. But for the price of the peace of mind that you get and the ability to sleep well at night, if you've got over a million dollars, it generally is going to be a very good investment. A few hours of asset protection can do more to protect your wealth than decades of working. In some circumstances, yeah.
[00:22:05] Speaker B: And a lot of people come to me and they go, yeah, but I can just buy insurance. And why do I need to worry about all this liability? I can get an umbrella policy. I can do this, I can do that. Why would, why do I need to worry so much about asset protection if I have insurance that's going to cover everything anyway?
[00:22:22] Speaker A: And I 100% agree with the notion that you should buy insurance, certainly car insurance, buy as much as possible, buy an umbrella policy. It's only going to cost you a few hundred dollars and can get you a few hundred thousand dollars in coverage. However, every insurance policy has a long list of exclusions which your agent probably did not go over with you at the time they sold you the policy. But when it comes time to make a claim, certainly a larger claim, there's a good chance they may try to hide behind one of those exclusions. Insurance companies are generally pretty good about paying out the smaller claims, $3,000, $5,000 claim. They'd rather just maintain a nice reputation and pay that out. But for the more catastrophic claims, the insurance companies will often try to escape liability. Claim that although this covers you for negligence, they're going to argue that you actually committed gross negligence and pretty much joined the side, the plaintiff. Some cases will go beyond policy limits. It's possible that a payment to the insurance company could get missed and some, and as I mentioned, some, some claims will go beyond, some claims will not be covered. It's just much safer to get much more peace of mind if your assets are protected regardless of the reason for the claim. Because asset protection is not based on a particular reason for being sued, it's based on the asset. Insurance is based on a particular reason for being sued. So as opposed to trying to cover this, cover this, cover this, and possibly have holes in your protection, with asset protection, you're protecting yourself. Regardless, I do still encourage insurance. It's nice to have those attorneys that show up when you first get sued. It's a nice little buffer, but for real protection, you really should look at creating an offshore asset protection trust.
[00:23:57] Speaker B: Well, and one of the things I also point out is you can't insure against a contract breach. And if you're in business, you're gonna, you may have an employee who sues you. And if you don't have an employment discrimination liability policy that's not going to cover that. You may enter into a contract, into a business deal on a large contract, just, you just breach it, you break it, and you owe a lot of money to somebody, and there's no insurance for that either. That's going to cover you. So I'm always careful about that with clients as well.
[00:24:28] Speaker A: There's quite a few things you can't insure against. Intentional acts. You can't insure against divorce. There's quite a few things that you cannot insure it against.
[00:24:37] Speaker B: Yeah, yeah. No, we. When I first started practicing, we had a case. You talk about intentional acts, and it was a gentleman.
Some kids were swimming across the lake. They were tired. They grabbed hold of his dock. He was a little old. They think he had a little dementia. And he pulls out a gun on him and says, get off my dock. And they're like, wait, we just need to rest. He said, get off my dock right now. So he forced him away from his dock. They swam a little bit farther back toward their home across the lake, and drowned. They couldn't make it. So, you know, the. Everybody came against him. And his homeowners insurance said, we're not covering that. That was an intentional act. He committed a crime at that point. And so, yeah, the intentional acts is another thing I always forget about out there that's not covered by your insurance. And a lot of people just don't think about that. They always think, I'm covered, I'm covered.
So I'm just fine. Is there anything else that we should know about offshore protection trusts that I may have not covered today?
[00:25:33] Speaker A: We've really covered the important points. I think what we want to impress upon is the difference between a domestic and offshore trust, that you have a structure which a us court cannot break. With an offshore trust, it has all the flexibilities and benefits. Quite frankly, with a revocable trust that you can amend it, you can add and move property. The trust can even be dissolved. You don't lose access to any of the banking options. And when working with somebody, you want to make sure that you work with a law firm, that all communication remains privileged and protected, which is very important. I have been told by south, by one of the leading trust companies out at the Cook Islands that my law firm registered more of these trusts than any other law firm in the world. At least we have for the past couple years. If you or any of the listeners are interested in learning more about asset protection planning, is it all right if I share my socials?
[00:26:24] Speaker B: Yeah, but share everything. We're also going to put it down in the show notes, too. So if somebody doesn't write fast enough, it'll be in the show notes, too.
[00:26:31] Speaker A: Pretty easy to remember. It's Blake Harris Law and that's my Instagram, that's my Facebook, that's my Twitter, my ex, that's my TikTok, where I have over a quarter million followers. That's all of my social media platforms, LinkedIn as well. Blake Harris Law I post usually more than one video a day talking about asset protection, talking about something else that's of interest to me. So it's some entertainment, it's some education, some humor in there. It's a very important subject. Freedom does not exist without protection. So it's your money. Act like it.
[00:27:03] Speaker B: Blake Harris Law very easy to remember. One quick question before you leave. We're aspire legal services solutions. One of our biggest things is helping people aspire to a better life. You're definitely, you fall into that same toolbox there. Who has helped you aspire to a better life?
[00:27:21] Speaker A: You know, Joe, it's hard for me to say because there are a lot of people who helped me. I mean, when I was in school, there were some older people in college that I very much looked up to. I've had other mentors along the way, other, other attorneys who have been positive influences on me. I do muay thai training. I think my trainers really push me to work harder. And when you work out harder, you want to work harder in your own, your own business.
I have my own children who I think very much motivate me to stay focused and work hard and make sure that they have a good, good, comfortable life. But I really can't thank anybody more than my own parents. My father is an attorney as well, and was very, he was very tough on me and my siblings growing up. And although Saturday mornings I wanted to sleep in more often, I didn't really like going out to some of the fancy events we were taken to on Friday night. As an adult, I very much appreciate this. I also have to thank my mother, who is always there to be very gentle and soft on us as well. So I really think that I'm very happy. I'm very happy with who I am, and I wouldn't be who I am without the toughness and encouragement that I got from my father and the support and love that I got from my mother. So I have to say, I thank very much my parents for where I am today.
[00:28:45] Speaker B: You're a good son. I'm sure they're very proud of you. I want to thank you for coming on today. I'm sure a lot of people are going to be contacting you again. Blake Harris Law everybody go follow and go to his website. It's a really great website. I'm extremely impressed with his website, but you'll learn a lot about offshore trust. And until later, trust this.
[00:29:07] Speaker A: Thanks, Joe.
[00:29:09] Speaker B: Thanks for listening to this edition of trust this. If you got something out of it, please press like and subscribe and give us a five star review to help us reach others who can benefit from this series. Until next time, keep aspiring to a better life.
