Nov 1, 2005 12:00 PM, By J. Richard Duke, shareholder, Duke Law Firm, P.C., Birmingham, Ala.

By: By J. Richard Duke, shareholder, Duke Law Firm, P.C., Birmingham, Ala.

Offshore trusts are popular estate-planning tools for a various reasons, especially legal impunity. Some offshore jurisdictions don't recognize foreign judgments, and creditors have limited time to make claims on trusts established there.¹ No wonder these jurisdictions appeal to U.S. settlors, especially as they also provide the advantage of access to worldwide investments. But before your clients run to these jurisdictions, consider the extensive filing requirements involved in establishing offshore trusts — and the stiff penalties for failing to do all the paperwork properly.

U.S. law subjects offshore trusts to numerous tax compliance and reporting requirements — imposing severe civil and even criminal penalties, if one or more of these returns aren't filed (See “Penalties,” p. 50). Implementing an offshore trust requires detailed knowledge about these required returns, including their due dates and extensions. That's why it's critical to have on hand a listing of these forms and the penalties clients face for not filing them correctly and in a timely fashion.

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