Crypto-Currencies and Asset Protection
A crucial facet to using foreign trusts to protect wealth is ensuring that the trustee and trust assets remain outside of any jurisdiction where the grantor might be sued.
With crypto assets, asset protection may simply involve the transfer of a private key to an offshore trustee (or manager).
Properly selected offshore trustees are unlikely to become subject to the jurisdiction of a court where a defendant may be sued. Absent jurisdictional authority, a court is powerless to compel the trustee to turn over assets. An added benefit is that blockchains are decentralized. This means they are not subject to any central authority (such as bank or other financial institution) that might be legally compelled to provide a court with access or control over assets in its possession. Without the complete private key, no court or legal authority can manipulate ownership of a blockchain asset.
Worries about a rogue trustee or manager can be allayed by requiring multiple keys, such that two (or more) parties are required for access. Those parties could be co-trustees, a trustee and trust protector, co-managers, or a manager and member of a board of directors. A trustee acting alone would have no ability to unilaterally access that portion of trust assets requiring multiple keys.
Cryptocurrency assets could also be divided, such that a small portion of currency remains under a single trustee’s control whereas a larger portion is restricted and remains in cold storage subject to joint-key access. Because cryptocurrency transactions are semi-transparent and are time-stamped on the blockchain, ready proof is available to legitimize the timing and propriety of protective transfers. Transfers made well before assertion of a claim are far less likely to be challenged by creditors and courts. Such proof and transparency may be particularly useful when facing the threat of a contempt order, as mentioned above.