How A Nevis Trust is Protected from Creditor Lawsuits

How A Nevis Trust is Protected from Creditor Lawsuits

One of the main reasons why a US person would open a foreign trust in a country such as Nevis is the protection that an offshore asset protection trust can provide. In addition to protecting the assets of the trust from foreign judgments – foreign judgments are not applicable in Nevis — Nevis law also makes it difficult for outside creditors to file a lawsuit against the trust. Not only is the creditor required to prove their civil case by meeting the beyond a reasonable doubt standard (which is the criminal standard in the U.S.), but in order to even file a lawsuit against the trust in Nevis, the creditor must post a bond in the sum of $270,000 from a financial institution in Nevis. Let’s take a look at some of the key takeaways from Nevis civil trust law:

Avoidance of Fraud

• • • Where it is proven beyond reasonable doubt by a creditor that a trust settled or established, or property disposed or transferred to a trust—

      • was so settled, established or disposed by or on behalf of the settlor with principal intent to defraud that creditor by the settlor; and

      • did at the time such settlement, establishment or disposition took place render the settlor insolvent or without property which that creditor’s claim had been successful could have been satisfied, then such settlement, establishment or disposition shall not be void or voidable and the international trust shall be liable to satisfy the creditor’s claim and the trust’s liability shall only be to the extent of the interest the settlor had in the property prior to settlement, establishment or disposition of any accumulation to the property (if any) subsequent thereto.

Foreign Judgments Not Enforceable

• • • Notwithstanding the provisions of any treaty or convention; the provisions of any statute; any rule of law or equity, to the contrary, no proceedings for or in relation to the enforcement or recognition of a judgement obtained in a jurisdiction other than St. Christopher and Nevis against—

      • • (a) an international trust;

        • (b) a settlor of an international trust;

        • (c) a trustee of an international trust;

        • (d) a protector of an international trust;

        • (e) a beneficiary of an international trust;

        • (f) a person appointed or instructed in accordance with the express or implied provisions of an instrument or disposition to exercise a function or undertake any act, matter or thing in connection with an international trust; or

        • (g) property of either an international trust or of a trustee or a beneficiary thereof, shall be entertained by the Court if—

          • (i) that judgment is based upon the application of any law inconsistent with the provisions of this Ordinance;

            • (ii) that judgment relates to a matter or particular aspect that is governed by the laws of St. Christopher and Nevis. (Amended by Ordinance 2 of 2015)

Bond

• • • Every creditor before bringing any action or proceeding against any trust property governed by this Ordinance shall first deposit with the Permanent Secretary in the Ministry of Finance a bond in the sum of $270,000.00 from a financial institution in Nevis, for securing the payment of all costs as may become payable by the creditor in the event of his not succeeding in such action or proceeding against the trust property.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.

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Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

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