The offshore asset protection trust shares certain characteristics with domestic asset protection trusts. Thus, if you're thinking of setting up such a trust, you must carefully consider the irrevocable and discretionary nature of the trust.

However, the offshore trust has unique characteristics not found in domestic asset protection trusts. Thus, political stability, the financial strength of the foreign trust company, foreign currency gains and losses, and additional drafting costs are other issues that must be considered when examining an offshore trust as an asset protection strategy.

Offshore jurisdictions in which these trusts are commonly established have developed reputations as safe places to invest assets. However, some small business owners may be uncomfortable with the idea of placing investments outside of the U.S.

Legal fees for drafting an offshore trust can be expensive--more expensive than fees incurred for a domestic asset protection trust. The added fees must be weighed against the greater protection that potentially can be achieved with an offshore trust.

Also, ongoing maintenance fees payable to the offshore trust company can be substantial. These fees, combined with the initial setup fees, usually mean it is not cost-effective to establish an offshore trust until you have $1 million or more that you need to shelter.

In summary, each of these strategies involves its own unique risks. These risks, and the cost of setting up the trust, must be weighed against the potential benefits. The best way to do this is through consultation with an attorney who practices in this specialty.