Ch. 14: The Foreign Asset Protection Trust (FAPT)

• FAPTs Described

Synopsis: Discusses the basic operation of FAPTs, and the development by the Cook Islands of specific anti-creditor trust legislation.

Definition: Foreign Asset Protection Trust (FAPT) – A self-settled spendthrift trust formed in a foreign debtor haven jurisdiction.

A more detailed discussion of Foreign Asset Protection Trusts, including a list of the cases involving FAPTs and the major offshore trust statutes, is found at http://www.assetprotectionbook.com/fapt.htm

• FAPT/FLP Structures

Synopsis: Discusses how FAPTs and FLPs have been routinely combined to form “Family Fortresses”.

Definition: Combo Platter – A widely-marketed cookie-cutter asset protection structure involving an FLP with the limited partnership interests owned by a FAPT. The strategy is that if a creditor attacks the FLP, the FLP is liquidated into the FAPT and all assets moved offshore.

• The Offshore Trust Boom

Synopsis: Discusses the planning boom for offshore trusts occurring from the mid-1990s until the Anderson and Lawrence cases were decided in 1999 and 2000.

• Advantages of FAPTs

Synopsis: Discusses the actual advantages of FAPTs.

• Control Issues with FAPTs

Synopsis: Discusses the problem of the settlor giving up control to a foreign trustee, and some of the disingenuous schemes created by offshore planners to attempt to circumvent this problem.

• Disadvantages of FAPTs

Synopsis: Discusses the downsides of FAPTs, their marketing excesses, the Doctrine of Disbelief, and why FAPTs are unlikely to ever find acceptance with U.S. judges.

Definition: Doctrine of Disbelief – This doctrine holds that since no sane person would transfer all of their assets to a foreign trustee and risk the assets disappearing, it then stands to reason that they still retain some hidden control over the assets whether they admit to such control or not.

• Planning Uses of FAPTs

  Synopsis: Discusses the situations and with what limitations FAPTs might still be used in asset protection planning post-Anderson.