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Foreign Trust

A Foreign Trust is a trust formed in a foreign jurisdiction. The Internal Revenue Code defines it as a trust that is governed by the laws of a foreign nation (or not governed by the laws of the United State, one of its State’s or territories). 

Trusts are contracts between the Settlor and the Trustee. While trusts all have certain similarities, they are as varied as there are contracts as no two trusts are the same. This is also true of Foreign Trusts. Notwithstanding, there are a number of provisions that are common to find in Foreign Trusts: (1) they usually do not recognize foreign judgments, (3) there is usually a short statute of limitations on fraudulent transfers, (3) the trusts and/or the jurisdictions that establish them often require that a creditor establish the debtor's (specifically a Settlor’s) intent was to hinder, delay or defraud beyond a reasonable doubt; (4) settlors are entitled to protection under the jurisdiction’s spendthrift provisions (this is usually not available under US law). 

These jurisdictions and trusts are not subject to the U.S. constitution, they do not contain limitations on the length the trust may exist, and they do not allow children or spouses to invade the trust for support. However, the benefits of the Foreign Trusts can be substantially curtailed depending on how and when they are funded. It is best to establish these types of trust before you have a creditor or lawsuit pending or threatened.