However, the courts disagreed with this reasoning holding that the settlors still retained some control of the assets. When the foreign trustee refused to return the assets, the settlors of the trust were thrown in jail and fined for every day the funds were not returned. In one of the cases, the trust funds still remain in the offshore asset protection trust but the settlors may not retain any rights to the funds because they had to appoint the United States governmental agency as trustee to get out of jail.
Domestic asset protection trusts now exist but are relatively untested in legal theory, and were weakened by the 2005 Bankruptcy Reform Act, and also have the disadvantage that the trust companies are within US jurisdictions.
The 2005 Bankruptcy Reform Act weakened several techniques of asset protection, to the point that good asset protection now prefers to avoid bankruptcy whereas previously it was frequently advantageous to declare it.
US Citizens and Corporations must be income tax on ALL earned money, even if it is earned overseas. "Offshore" does not mean no taxes... you must pay your taxes.