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

[Riser Adkisson LLP]

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.