The Entrepreneur DNA: Offshore Trusts Explained with Blake Harris (EP 41)

Release Date: October 14, 2024
Host: Justin Colby, Bleav
Guest: Blake Harris, Managing Attorney of Blake Harris Law Firm

1. Introduction

In Episode 41 of The Entrepreneur DNA, host Justin Colby delves into the intricacies of offshore trusts with Blake Harris, a seasoned attorney specializing in asset protection. This episode provides entrepreneurs with valuable insights into legally safeguarding their assets from lawsuits, divorces, and other potential threats.

2. Understanding Offshore Trusts: Legal and Ethical Perspectives

Blake Harris begins by addressing common misconceptions surrounding offshore trusts, often associated with illicit activities depicted in popular media.

Blake Harris [02:03]:
"Offshore trusts have been allowed for centuries. Most commonly since the 1980s, the Cook Islands passed their asset protection trust law. Offshore trusts are perfectly legal. It is perfectly legal for a US person to set up a Swiss bank."

Harris emphasizes that offshore trusts are a legitimate means of asset protection, debunking the myth that they are solely used for hiding money or evading taxes.

Blake Harris [01:09]:
"Freedom, Justin, does not exist without protection. If your assets are not protected, you are not free, your family's vulnerable. It is absolutely legal and very ethical to set up an offshore trust."

3. The Ideal Client: Who Benefits from Offshore Trusts?

Harris outlines the typical profiles of individuals who can benefit from offshore trusts, dispelling the notion that only the ultra-wealthy require such structures.

Blake Harris [03:20]:
"The majority of my clients have somewhere between about 1 and $10 million in assets. They're typically engaged in some business. They typically own some real estate. They may own some crypto, often business owners, some single, some married, some concerned about the future of their marriage."

He highlights that entrepreneurs, especially those operating in high-risk environments like the United States—a notably litigious society—can greatly benefit from the protection offshore trusts offer.

4. Advantages of Offshore Trusts in Legal Disputes

One of the core discussions revolves around how offshore trusts can serve as a shield against frivolous lawsuits and legal extortion.

Blake Harris [06:17]:
"An offshore trust gives you settlement leverage. If someone sues you, the trust backs your settlement offer, ensuring that you aren’t forced into unfavorable agreements."

Harris shares a personal anecdote from Justin's experience to illustrate the practical benefits:

Justin Colby [05:33]:
"I've been sued with a BS claim and ended up settling because I didn't have an offshore trust. How would that have played into that lawsuit?"

Blake Harris [06:17]:
"The trust gives you leverage to push back and say, we're giving you a little bit of money to settle this case. If you don't take this money, you're not going to get anything."

This strategic positioning can compel plaintiffs to consider settlements more seriously, reducing the emotional and financial toll on entrepreneurs.

5. Types of Assets Suitable for Offshore Trusts

Harris provides a comprehensive overview of the assets that can be protected through offshore trusts, offering practical guidance on asset allocation.

Blake Harris [08:54]:
"We will protect pretty much anything that is not already protected. Cash, stocks, bonds, crypto, real estate, second homes—these are not protected."

Key Asset Categories:

• Cash and Financial Instruments:
  Offshore banks, primarily in Switzerland, can hold various currencies and even allow clients to transfer their stock and bond portfolios without realizing gains.

• Real Estate:
  While real estate within the U.S. offers some homestead protection, placing ownership stakes within an offshore trust extends protection against lawsuits.

• Cryptocurrency:
  Offshore accounts can custody crypto assets securely, offering flexibility in managing digital investments.

• Intellectual Property and Businesses:
  Businesses can be owned by offshore trusts, and hard assets can be shielded by leasing them through separate holding companies.

6. Offshore vs. Domestic Trusts: A Comparative Analysis

A significant portion of the discussion contrasts offshore trusts with their domestic counterparts, highlighting the superior protection offered offshore.

Blake Harris [32:07]:
"A domestic trust can be disregarded by US Courts. An offshore trust, like those in the Cook Islands, cannot be easily overridden by US legal actions."

Key Differences:

• Jurisdictional Strength:
  Domestic trusts, even those established in asset-friendly states like Nevada or Wyoming, remain vulnerable to US court orders due to the "full faith and credit" clause of the US Constitution.

• Legal Robustness:
  Offshore trusts in jurisdictions like the Cook Islands are fortified against foreign court orders, providing a higher degree of asset protection.

• Settlement Leverage:
  Offshore trusts inherently offer better negotiation power in settlements, reducing the likelihood of prolonged legal battles.

7. Selecting the Right Offshore Jurisdiction

Harris elaborates on the importance of choosing the optimal jurisdiction for establishing an offshore trust, prioritizing legal stability and government commitment to asset protection.

Blake Harris [30:25]:
"Cook Islands, Nevis, and Belize are top jurisdictions. Cook Islands remains the preferred choice due to its unwavering commitment to asset protection without resorting to practices like selling passports."

Preferred Jurisdictions:

• Cook Islands:
  Renowned for robust asset protection laws and a judiciary that respects the autonomy of offshore trusts.

• Nevis:
  Similar to the Cook Islands in legal structure but facing challenges due to governmental shifts towards other revenue streams like citizenship by investment.

• Belize:
  Offers solid asset protection laws but lacks the business-friendly environment of the Cook Islands.

Harris mentions the strategic shift of his firm towards the Cook Islands, reflecting its superior reliability.

8. Practical Implementation and Reporting Requirements

Implementing an offshore trust requires meticulous planning and adherence to legal reporting standards to ensure compliance with US tax laws.

Blake Harris [22:56]:
"The trust itself is tax neutral. It does not increase your taxes, does not decrease your taxes. You do have to report to the IRS that you have an offshore trust and offshore bank account."

Key Considerations:

• Reporting Obligations:
  US citizens must file appropriate forms such as the FBAR (Foreign Bank Account Report) and disclose offshore trusts to the IRS to avoid penalties.

• Tax Implications:
  Offshore trusts do not provide tax avoidance but ensure that income is properly reported, maintaining legal compliance.

• Setup Costs:
  Establishing an offshore trust can range from $20,000 to $30,000, considered a worthwhile investment for protecting assets worth upwards of half a million dollars.

9. Debunking Pop Culture Myths

Addressing the portrayal of offshore trusts in media, Harris clarifies their legitimate uses versus the often exaggerated criminal associations.

Justin Colby [25:41]:
"Is it true that you can use an offshore trust to come out of prison filthy rich?"

Blake Harris [25:41]:
"It's the majority of our clients who are business owners, worried about protecting their family, aware of frivolous lawsuits. The criminal misuse is a vast minority."

He underscores that while offshore trusts can technically protect assets even if one faces legal troubles, their primary function is to shield legitimate wealth from undue legal claims.

10. Conclusion and Resources

As the episode wraps up, both Justin and Blake encourage listeners to take proactive steps in asset protection.

Justin Colby [36:29]:
"Everyone watching this, everyone listening this, go to BlakeHarrisLaw.com."

Blake Harris provides multiple channels for interested entrepreneurs to connect and begin the process of establishing an offshore trust, emphasizing the importance of early and strategic asset protection.

Blake Harris [37:14]:
"BlakeHarrisLaw.com, 833AskBlake, Instagram, TikTok, YouTube, Facebook, LinkedIn—reach out through any of these platforms to start safeguarding your assets today."

Key Takeaways

• Legality and Ethics: Offshore trusts are legal and ethically sound methods for protecting assets from lawsuits and other threats.

• Asset Protection: These structures shield a wide range of assets, including cash, stocks, crypto, and real estate, providing peace of mind for entrepreneurs.

• Jurisdiction Selection: Choosing the right offshore jurisdiction, primarily the Cook Islands, is crucial for ensuring robust asset protection.

• Compliance: Proper reporting and adherence to US tax laws are essential when managing offshore trusts to maintain legal compliance.

• Misconceptions: Offshore trusts are often misunderstood due to pop culture portrayals, but they serve as legitimate tools for wealth preservation.

For entrepreneurs looking to fortify their financial standing against potential legal challenges, understanding and implementing offshore trusts can be a game-changer. Blake Harris’s expertise offers a roadmap to secure one’s legacy and financial freedom.