Offshore Asset Protection Trusts are becoming the rage of the nineties. The setting up of an Asset Protection Trusts involves the initial structure of a trust in an offshore jurisdiction. Properly drafted this gives one protection against creditors and eliminates the creditors abilities to attach assets.
For those of you who are a bit skeptical on the usage of offshore trusts and entities, please be aware that recently reported in the Business & Economics Section of the European, a European-based weekly newspaper, that London-based, Price Waterhouse and Ernst & Young have been consulting with the Island of Jersey to promote new laws allowing limited liability partnerships to become part of the Jersey legal systems. This would limit the partners from those UK firms that have set up limited partnerships on the Island of Jersey to only be liable for the amount of their interest in the firm. Current United Kingdom law indicates partners that they are personally liable for any claims against the partnership.
The Island of Jersey’s finance and economics committee is putting forward the draft of a new law for debate by Parliament early in 1996. If approved, it will go up for vote by the United Kingdom Privy Council. Jersey, which has strong ties with the United Kingdom, and is the largest Island in the Channel Islands, which is located twenty-two kilometers off the coast of France. Jersey is attempting to promote itself as an offshore entity for all of the world, rather than simply as an entity for offshore Britain. Its proposals currently are aimed at attracting accounting firms from the United Kingdom to protect partners’ assets from litigation. Jersey also has passed, and has in effect, varying laws that attempt to aid Europeans as well as Americans in the establishment of offshore asset protection trusts, International business corporations and other structures.
An offshore asset protection trust is an irrevocable trust, that is taxed as a grantor trust within the United States, and combines the ease of income taxation upon the grantor with protection from creditors worldwide. The author, however, utilizes and favors a different jurisdiction for an APT.
Richard M. Colombik, JD, CPA, is an award-winning attorney and CPA with a doctorate in jurisprudence with distinction and was formerly on the tax staff of one of the world’s wealthiest families.
Mr. Colombik has also been a tax manager at a Big Four accounting firm, the State Bar’s liaison to the Internal Revenue Service (IRS), vice president of the American Association of Attorney-CPAs, and vice chairman of the American Bar Association’s Tax Section of the General Practice Council, as well as the past chair of the Illinois State Bar Association’s Federal Tax Committee. Mr. Colombik has also served on the liaison committee to the Washington, DC, National Office of the IRS. Mr. Colombik is also a member of the Asset Protection Committee, American Bar Association, and a member of its captive insurance subcommittee.
Mr. Colombik has appeared on numerous television shows, hosted a weekly radio show on tax and business planning, and authored more than 100 articles on income taxation, asset protection planning, IRS defense, and estate planning. He has also instructed more than 100 seminars to professional groups, business groups, bar associations, CPA societies, and insurance groups. This is in addition to authoring a published work on business entity structures offered by the Illinois Institute of Continuing Legal Education, as well as writing a chapter for The Estate Planning Short Course and Asset Protection Planning.