Sunday, April 28, 2013
Generally, the goal of asset protection is to shield assets from creditors while ensuring that the owner can make use of those assets legally. The Foreign Asset Protection Trust (FAPT) may not be the best way to reach that goal. Recently, the Arline Grant case shed some light on this form of asset protection. Arline Grant's husband, Raymond Grant, created two FAPT's before his death. One of those trust's was created to benefit Arline under Raymond's management. Arline had very little to do with the trusts. Raymond's poor management of the couples taxes, led to a $36 million dollar judgment for the United States.The U.S. employed different techniques including trying to hold Arline in contempt to pay the judgment using the trusts located offshore. This attempt was unsuccessful. The court reasoned that the evidence indicated Arline sufficiently showed that she could not send back the funds.
Then in 2011, the U.S. noticed Arline's children had received $221,000 dollars from the trust account. In 2012, the U.S. filed a motion claiming Arline violated the Repatriation order. The judge agreed and ruled in favor of the U.S. Additionally, the U.S. was also granted a permanent injunction against Arline and her children from being paid any funds from the trusts. Moreover, if they did receive funds they would be compelled to turn them over to the U.S. As a result, the offshore assets are protected, but Arline cannot lawfully access them, which is the general goal of asset protection.
Adkisson, The One Foreign Asset Protection Trust 'Win' Turns Out To Be A
Dud, Forbes, Apr. 25, 2013.