{"id":9582,"date":"2017-02-17T09:00:04","date_gmt":"2017-02-17T14:00:04","guid":{"rendered":"http:\/\/www.escapeartist.com\/?p=9582"},"modified":"2020-06-08T03:06:50","modified_gmt":"2020-06-08T07:06:50","slug":"jones-clause-offshore-trusts","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/jones-clause-offshore-trusts\/","title":{"rendered":"Jones Clause for Offshore Trusts"},"content":{"rendered":"
A Jones clause is placed in an offshore trust to protect you, the settlor, from a creditor or court claiming you made a fraudulent conveyance. In its most basic form, it tells the trustee to pay any claim that comes in from a certain creditor.<\/span><\/p>\n A Jones clause is a provision which allows trustee to pay specific existing claims, despite the fact that the creditor would not be able to sue the trust and win a judgement. It\u2019s is sometimes also referred to as a \u201ccontingent payment clause.\u201d<\/span> The intent of the typical Jones clause is to allow payment from the trust for money judgments obtained by <\/span>specified creditors <\/b>(such as the IRS) or <\/span>claims in existence at the time you funded the trust.<\/b><\/p>\n For example, just about any transfer, regardless of timing, that prevents the Internal Revenue Service from collecting a tax debt, is going to be considered a fraudulent conveyance. Thus, offshore trusts settled by US persons often include a Jones Clause instructing the trustee to pay the IRS. This protects the drafter (me), the trustee, and the settlor (you) for going to battle with the IRS. <\/span><\/p>\n Civil creditors are another matter. <\/span>In most cases, a fraudulent conveyance is a transfer made to prevent a current or reasonably anticipated creditor from collecting on a debt<\/b>. If you hit someone with your car today and transfer funds into an offshore trust tomorrow, you have probably made a fraudulent conveyance. <\/span><\/p>\n Let\u2019s say you\u2019ve have been working on an offshore asset protection strategy for a while. You\u2019re ready to file a trust and you injure someone with your car before funding the trust. You might continue on with the trust but add a Jones Clause naming the injured party. If they can prove a case and secure a judgement, the trust will pay them. <\/span><\/p>\n By including a Jones clause, you ensure a US court won\u2019t invalidate the entire trust on the grounds that it\u2019s funding was a fraudulent conveyance. You <\/span>protect the assets from future creditors while recognizing the current liability<\/b>. <\/span><\/p>\n A reasonably anticipated creditor is one who you believe, or should realize, has a claim against you but has not yet filed a case. This is someone who has been harmed but has yet to take action. <\/span><\/p>\n Because the harm occurred prior to the trust being created, sending money offshore to prevent him or her from collecting is likely a fraudulent conveyance. Writing them into the Jones clause protects your trust from an attack by an aggressive US judge. <\/span><\/p>\n
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