and Tax Aduanta

THf O f f S H O R L I S S E T P A O T L C T I O H T R U S T 73Providing the offshore role of a trust protector forbetter trust administration. A second trust may act as atrust protector instead of using an individual. Sometrusts use corporate trust protectors.Use in lieu of a prenuptial agreement.instances where a party transfersproperty-into an offshore blindThe trust manages the assetstransferor. This prevents the separate property frombecoming marital property subject to a divorcesettlement.The trustee, as a fiduciary to the beneficiaries, has certain dutiesof professional competence:The trustee must validly settle (create) the trust.The trustee must act as a reasonable, prudentbusinessperson under any circumstances. He or sheshould know the nature and consequences of any trusttransaction. The trustee must be properly equipped, andqualified. If not, the trustee could be deemed negligentand held liable for losses to the trust.The trustee must take control over the trust assets fromthe settlor. Failure to do so could result in the trustbeing deemed a sham transaction. (How could there bea functional trust if the trustee does not have title tothe trust assets?)The offshore trust may not have been created for the primarypurpose of hindering, delaying, or frustrating existing creditors orclaimants of the settlor, but it may be implemented to achieve estateplanning. You can't legally relocate your assets offshore to dodgecollection on a judgment or avoid a lawsuit. Many trustees requirean affidavit or declaration of solvency of the settlor to that effect (seeFigure 7.1).Where there is more than one trustee, such as one U.S. and oneforeign trustee, certain tax issues may arise upon the resignation of thelJ.S. trustee. The IRC says a domestic trust, upon the resignation of theIJ.S. trustee, converts into a foreign trust, and that is a taxable event.