International Asset Protection Strategies - How Hungary Offers Unique Solutions

• Published date: 09 May 2023
• Subject Matter: Wealth Management, Tax, Family and Matrimonial, Wealth & Asset Management, Income Tax, Wills/ Intestacy/ Estate Planning, Withholding Tax
• Law Firm: Aliant
• Author: Dr. 'kos Menyhei

Asset protection is an essential consideration within the overall process of estate planning. Estate planning involves the management and distribution of one's assets during their lifetime and after death. But while many people focus on the distribution of assets after they have passed on, it is also necessary to consider strategies for protecting those assets during their lifetime, for the benefit of their heirs or beneficiaries. Without adequate asset protection, one's assets could be at risk of being lost, eroded, or mismanaged, which could then result in significant financial losses or legal disputes. Consequently, incorporating asset protection strategies into estate planning is crucial to achieving one's financial and personal goals while minimizing potential risks and liabilities.

When considering international asset protection, the goal is to create a legal barrier between the individual and their assets, making it difficult for creditors or other claimants to access the assets. Some common legal structures used in this context include offshore trusts, international business corporations (IBCs), and limited liability companies (LLCs), which may be established in countries with favorable tax and asset protection laws. However, these asset protection structures, particularly those established in offshore jurisdictions, are subject to various legislative challenges that can limit their effectiveness.

Most of these legislative challenges have been raised by governments around the world that have grown increasingly concerned over the transparency of large sums of money that are transferred internationally. For example, governments have been increasingly cracking down on tax evasion and aggressive tax planning, particularly involving offshore entities. Some countries have enacted legislation to limit the use of offshore trusts, IBCs, and LLCs for such tax avoidance purposes. These entities have also been used to conceal the ownership and movement of illicit funds. Thus, legislation to combat money laundering and other financial crimes could also impact the use of these entities.

As a corollary, many countries have also implemented legislation that requires the disclosure of beneficial ownership information for offshore trusts, IBCs, and LLCs, which can affect the level of privacy and confidentiality associated with these entities. International agreements and regulations that govern the use of offshore entities, and compliance with these regulations can...