creditors have been especially successful in pursuing OAPT debtor-settlors under the U.S.
In situations in which a domestic debtor-settlor has employed a large international bank as the trustee of an OAPT, there is less and less of a need to resort to bringing a foreign action.
(32) Consequently, proceeding against domestic settlors and beneficiaries of the OAPT or the domestic subsidiaries and affiliates of foreign financial institutions is the most prudent method available at present for a creditor to enforce a domestic court's judgments and orders.
If, after a thoughtful consideration of the foregoing, the settlor or beneficiaries of an OAPT desire to repatriate their offshore trust, there are three specific methods of domestication.
By way of example, the penalty for failing to file a "notice of transfer in trust" or a "receipt of trust distribution" is the greater of $10,000 or 35 [percent] of the gross value of the property received or transferred to the OAPT.
Even though both DAPTs and OAPTs are considered grantor trusts under the code, their respective treatment by the Internal Revenue Service is substantially different, particularly in regard to the taxation of the trust's income and capital gains.
In addition to these substantive tax consequences, the reporting and compliance requirements are significantly higher for OAPTs. Prior to the enactment of the Small Business Job Protection Act of 1996 (SBA), (11) reporting was relatively nonexistent, as the penalties for failing to file the required returns amounted to approximately $1,000 per missed return, without regard to the size of the trust.
Although OAPTs have become subject to increasingly negative tax treatment and substantial, costly compliance and reporting requirements, domestic settlors still often prefer OAPTs over DAPTs largely due to historic predilections.
Indeed, the Ninth Circuit in affirming the district court's civil contempt order in Affordable Media expressed tremendous "skepticism" that a "rational person would send millions of dollars overseas and retain absolutely no control over the assets." (28) Affordable Media serves as a paradigmatic illustration of the distaste that domestic courts have for OAPTs. (29) Following Affordable Media, the Eighth and 11th circuits have likewise held that impossibility due to a debtor-settlor's artifice is not a defense to civil contempt.
Beyond the negative consequences of OAPTs discussed above, including heightened tax and reporting requirements and the tenacious pursuit of the trusts by domestic courts, there are two additional, independent benefits offered by many U.S.