December 17, 2023
The United States—Trust Haven To The World

by Denis Kleinfeld

For those around the world with travel money readily at hand, the United States is a popular destination. Well, not the whole US but certainly New York, Florida, and California. Some visit for a holiday vacation and then return home. Others with more money can afford to visit regularly. A smaller group owns multiple residences around the world and find it convenient to have one also in the United States. Of course, where they go, so goes some of their money.

Categorising people as globals, mobiles, and locals is one way of descriptively grouping people by combining their financial capability and their concomitant lifestyle. For those in the financial service businesses, this sort of classification also conceptionally implies which group can afford to pay what level of fees.

Globals, the multi-nationalists with extreme wealth, see the entire world as a menu. They have the freedom to choose where to live, when, and how luxurious it should be for the time spent. They live big and understand they need to spend big as a result.

The mobiles, the so-called working-rich, have enough money to travel away from their home country frequently, generally in business-class, and can afford a comfortable lifestyle. Not having an excessive amount of wealth, they have to be careful about what they spend and where they invest.

The rest, the locals, are the vast masses of people who will live in one local area, never travel far from their place of birth, and die, leaving not much more of an inheritance than they received when born. Even those who are considered economically middle-class are generally just making ends meet after the government takes its share of their earnings as taxes.

The globals and mobiles of every country know that maintaining control of a constant cash flow and accumulating more capital while protecting it all against the risk of loss are the prerequisites for both a secure lifestyle during life and the ability to pass on a legacy to future generations. To meet this need, the globals and mobiles of every age have always sought a reliably safe legal structure to organise and manage financial assets efficiently and effectively.

The legal organisational structure of choice for most global wealth planning uses a common-law trust or an equivalent arrangement under civil law or other law systems. Typically, the trust arrangement uses a subsidiary or underlying company of some kind to hold various assets under management; most often, a form of limited liability company. Life insurance or annuities are also popular as part of a wealth planning structure. The question is, given a world full of choices, what is the best country for globals and mobiles to consider when establishing their legal structure to hold, invest, and protect assets now and for the future?

In my opinion, the United States at the top of the list. Without question, the United States is the most successful country in attracting foreign capital and encouraging US capital previously held offshore back home. The federal tax policy to actively encourage in-bound and aggressively discourage out-bound money effectively enables the US to dominant competing centres.

Within the United States, the establishment of a trust or a limited liability company is determined by state law, not federal law. In the last decade or two, a large number of states began to update their legal environment to attract wealth planning service providers and their clients. They started by more or less copying the best of the offshore wealth protection law and structures. And now a few states are innovating new wealth protection law even further.

While New York, California, and Florida are the most popular states, none of them are aggressively competing for trust and estate business. But many states which do not have their glamour realised that offshore jurisdictions generate a goodly amount of additional revenue by providing a welcoming legal and financial environment for globals and mobiles. Moving offshore business to the onshore of the US became a good idea, but in which state?

Not many people around the world are familiar with the states of the United States. Take, for example, South Dakota, which is located in the middle of fly-over America. South Dakota is the 17th in land area but the 5th smallest in population. Culturally, it is more like the West than the Mid-West, and a far cry from the East Coast or West Coast. The Missouri River, the longest in the US, runs through the middle.

A CNBC piece once referred to South Dakota as a mini-Switzerland. That commentary noted:
“Analysts and local politicians estimate that US$250 billion to US$900 billion is now stashed in South Dakota trusts by the likes of Chinese billionaires looking to keep their fortunes out of reach of the government, Europeans looking to avoid taxes, and Americans looking to shield wealth from spouses”,

An investigative journalist looking at a multi-million divorce proceeding in South Dakota found that South Dakota trusts controlled US$3.2 trillion.

The Guardian ( reported on “The great American Tax haven: why the super-rich love South Dakota” perhaps over emphasizing tax while overlooking the wealth protection benefits. The article, by Oliver Bullough, noted that the money of the world’s mega-wealthy is heading to South Dakota in ever-larger volumes.

“In the past decade, hundreds of billions of dollars have poured out of traditional offshore jurisdictions such as Switzerland and Jersey, and into a small number of American states: Delaware, Nevada, Wyoming—and above all South Dakota”

Then again there are a growing number of states getting into the race.

How do so many states more or less reinvent themselves to compete with the traditional offshore jurisdictions in offering an array of wealth services to the globals and mobiles?

Bullough explains: “At the heart of South Dakota’s business success is a crucial but overlooked fact: globalisation is incomplete. In our modern financial system, money travels where its owners like, but laws are still made at a local level. So money inevitably flows to the places where governments offer the lowest taxes and the highest security”.

He further ventures the opinion,” In recent years, countries outside the US have been cracking down on offshore wealth. But according to an official in a traditional tax haven, who has watched as wealth has fled that country’s coffers for the US, the protections offered by states such as South Dakota are undermining global attempts to control tax dodging, kleptocracy, and money-laundering”. Then again, perhaps this comment is merely acknowledgment of the hypocrisy of European tax and economic policy combined with jealousy at seeing the United States taking over even more of the market?

The state laws in the United States vary significantly. It is not an easy task to pick one state as better than some of its competitors on balance after considering all the possible combinations and permutations of law impacting wealth protection planning.

Asset protection laws, which were highly criticised by US politicians and courts when used by nationals moving money offshore, is now the law in 19 —nearly 40 per cent–of the states. The rule against perpetuities, for example, runs the gamut from the traditional English rule, through terms of years as 360 or 1,000 years, and into perpetuity. State taxes, income, inheritance, and premium also vary considerably, with the states with lower taxes having an edge just the same as the offshore jurisdictions Nearly all states have modernised their basic trust laws to provide flexibility in the formation, operation, protection, and migration of trust arrangements. New Hampshire is the first state to allow the establishment and domestication of foundations, opening it up to the European and South American- based clientele. Even fraudulent conveyance law is undergoing a long-needed philosophical revision with the establishment of the proposed Uniform Voidable Transfer Act.

The United States is about to leave the competition even further behind. The formerly offshore world of wealth planning services that came physically onshore in the US will be more fully accessible through the cloud.

States are starting to adopt the various uniform laws on using technology such as the Electronic Transactions Act, the Law on Notarial Acts (allowing electronic notarial), the Fiduciary Access to Digital Assets Act, Probate Code Amendments (allowing electronic signatures and records), the Real Property Electronic Recording Act, and the Electronic Wills Act. Using video conferencing accelerated because of the isolation policy of Covid-19 and becoming mainstream in professional practice. This is just the beginning of technological innovation in the United States.

In the future, documents will be created, signed, witnessed, notarised, and validated electronically with any necessary persons being virtually present. In the not too distant future, anyone with wealth, whether great or small, anywhere in the world will be able to access via a computer and internet connection the benefits of having a US -based legal structure in the state of their choosing.

Providing advice and counsel on the best situs for the needs of the high net worth client, the globals and mobiles of the world, is the bread and butter (metaphorically speaking) of the professional wealth service provider industry. The traditional European countries including England, and their former colonies are in fierce competition with the United States for the trust business of the wealthy. As it stands now, in this race to be first in the world as the best trust haven jurisdiction, the United States is solidly ahead of its competition.