Speaking from personal experience, the legal action that is the most expensive, the most emotionally difficult, and the most invasive of privacy, is a divorce.
The problem is that your spouse probably knows far more about you than the average litigant—and thus is more likely to disclose or force the disclosure of embarrassing or even incriminating facts.
The best way to avoid divorce, of course, is never to get married. But try telling that to two people in love. (Or, for that matter, to Sarah Palin.)
Pre-nuptial and post-nuptial agreements are worth considering, but they tell your spouse that you don’t trust him or her. Nor are they always legally enforceable.
However, there’s an alternative strategy: to place a portion of your separate assets in an offshore trust, and make your spouse a revocable beneficiary. In the event of a divorce, you have the right to revoke your ex’s beneficiary status.
Until recently, this was a high-risk strategy, because courts in offshore jurisdictions have sometimes upheld the right of a former spouse to half the assets in an offshore trust set up by the other spouse.
But now, a court in Jersey (Channel Islands) has declined to enforce the order of a British court to repatriate millions of dollars to the former spouse of Iqbal Mubarik, the founder of Britain’s Dianoor Jewelry chain. That’s a switch from previous practice, in which courts in Jersey generally complied with British repatriation orders.
Shortly before commencing divorce proceedings, Iqbal Mubarik ended his wife’s status as a beneficiary of a Jersey trust. Under the terms of the trust, Mr. Mubarik had the authority add or revoke beneficiaries. In addition, the trustee of the trust had no right to override this authority. The Jersey court declined to enforce the British court order, because doing so would require an alteration of the trust.
This is an important decision, because it is likely to lead other wealthy individuals to use an offshore trust as a sort of substitute prenuptial agreement. Other English law jurisdictions will likely modify or adapt their trust laws to attract business from wealthy clients concerned about the financial impact of divorce.
Forming an offshore trust is not a do-it-yourself affair. You need professional assistance from a qualified attorney, both in the jurisdiction where you form it and in whatever country you live in.
One reason you need assistance in your own country is the not-so-small matter of contempt. Courts in countries with an English law background have the authority to cite a person with contempt of court if that person refuses to obey an order from that court. You want to make sure not only that your offshore trust survives judicial scrutiny, but also that you don’t go to jail!
Then there’s tax. Revenue authorities in many countries take a very dim view of offshore trusts and have imposed extensive reporting requirements for them. U.S. citizens must be especially careful, because they’re subject to U.S. tax requirements wherever they live.
As in any aspect of offshore asset protection—caveat emptor!
Copyright © 2008 by Mark Nestmann
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