What is the difference between a domestic trust and an offshore trust?

A domestic trust and an offshore trust are two types of asset protection trusts common in New York. Though they both are used to protect assets and reduce taxable income, they have some significant differences. A domestic trust is a trust created under the laws of a particular U.S. state, based in the U.S. An offshore trust is a trust created under the laws of a foreign country, typically located offshore. The main difference between a domestic trust and an offshore trust in New York is the amount of asset protection they provide. Generally, an offshore trust provides more asset protection because assets held in an offshore trust are legally removed from a settlor’s control and are overseen by a trustee outside of the settlor’s jurisdiction. Domestic trusts provide a lesser amount of asset protection because they are creates under the laws of a particular U.S. state which means the settlor’s assets remain subject to the local court rulings of that state. In addition, violating the laws of a foreign country can lead to serious civil and criminal penalties if an offshore trust is used improperly. On the other hand, domestic trusts are subject to the laws of the particular US state, which may not offer as much asset protection. Lastly, the cost and complexity associated with setting up and maintaining these trusts vary widely. Generally, offshore trusts can be more expensive because they require more sophisticated legal guidance to help structure them correctly and adhere to foreign law. Domestic trusts are typically less expensive because they are easier to set up and manage.

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What is the difference between a domestic trust and an offshore trust?

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