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Trusts

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A trust, offshore or onshore is a relationship between a person called the trustee and another called the beneficiary. This relationship exists when a person called settler entrusts the trustee with assets whereby the assets are to be kept for the benefit of the beneficiary. The trustee becomes the legal owner and is responsible for managing the assets and distributing them to the beneficiaries of the HUoffshore trustUH (which could include the person or corporation which transferred the assets to the trustees) in accordance with the terms of the trust deed. The terms on which the Trustees administer the trust assets are detailed in a trust deed and trust legislation to govern trusts has been enacted in many common law jurisdictions.

Whilst a company is a legal entity capable of existing on its own, a trust as a relation exists for as long as the object, the intention and the subject matters of the trust are certain.

By far the most unique feature of a trust is the ability of an owner of asset to fully divest his legal ownership in the asset to a trustee but at the same time retaining the beneficial ownership in the assets either for the benefit of others or for his benefit or the combination of both as beneficiaries. It is this unique separation of ownership offered by a trust that has made trust being used extensively in tax planning and assets protection scheme. In most cases, and provided the divesting is complete and the settler is still solvent after divesting his assets and the divesting is not to defraud his creditors, he may be able to safe guard his assets from creditors

In other instance where a settler wishes to set aside assets to his love ones but does not wish to distribute the assets immediately for tax reason, the divesting of such assets to a trustee will ensure that distribution is made to his love ones when it is fiscally wise to do so. In addition, the fact that the trust assets are kept or in the hand of offshore trustee in tax efficient jurisdictions can offer significant opportunity for growth. In most cases and in conjunction with your own adviser, we can help you to establish offshore trust for tax planning or asset protection purpose in a few offshore centres.

What assets can be held by an offshore trust?

  1. Shares in both listed and unlisted companies
  2. Real estate
  3. Work of art
  4. Investment portfolios.
  5. Real and intellectual property.
  6. Bank deposits.
  7. Life assurance policies issued on the life of the Settlor.
  8. Most other types of asset

Why establish an trust offshore?

There are many reasons why a settlor may wish to create an offshore trust but some of the principal ones include those listed below.

Tax Mitigation: Offshore trusts have traditionally been a very important tax planning device and even today a very high proportion of tax saving schemes involve trusts. When an offshore trust is established , then there will be no taxes applicable to the assets and income of the trust.

Preservation of Family Wealth: Offshore trust may be used to own specific assets, for example land or interest in family company which it would be appropriate or practical for a settlor to divide between individuals. The use of the trust will allow relevant individuals to benefit from the assets without being directly interested in the assets or having personal ownership and so preserve the assets intact for future generations.

Avoidance of Probate: Avoidance of probate can be of significant benefit to settlor, both in terms of tax saving and in preservation of confidentiality. As the legal title to the assets concerned passes from the settlor to the trustee of the offshore trust at the time the settlement is made, there is no change of ownership when the settlor dies, and this neither will nor probate is required at the time of his death.

Emigration: When a person and or his family moves from one country to another this is often an ideal time and perhaps the only time to set up a trust to take advantage of the tax, exchange control and other laws of the countries concerned in order to preserve family wealth and flexibility to manage it, and allow the members of the family to enjoy the capital and income in the most advantageous ways.

Protection of Assets: Since the legal ownership of assets within a trust is vested in the trustee of the trust and not the in the beneficiaries, the settlor and the beneficiaries have no legal control over the assets. As a result, benefits can accrue where the declaration of wealth are required to be provided by individuals in their own countries. In addition the offshore trust will also protect at least a portion of a person’s wealth from legal attacks by third persons, as for example in the case of suits based on professional negligence or malpractice.

Most offshore trusts fall into four broad categories:

  • Private: Including discretionary, accumulation and maintenance, life interest and fixed interest trusts.
  • Corporate: Including pension and employee benefit trusts.
  • Charitable: Solely for the benefit of charitable organizations.
  • Purpose: Trusts with no beneficiaries that are established for purposes that are certain, reasonable and possible.

Modern offshore trust deeds can be tailored to meet your specific requirements. Generally they are worded in the widest possible terms to allow a trustee scope to respond to changing circumstances and requirements.

Discretionary Trusts

The most flexible form of offshore trust and used in wealth protection and tax planning. A discretionary offshore trust will normally allow the Trustees to appoint additional beneficiaries or to remove existing beneficiaries, and will usually also allow the Trustees to distribute the income and capital of the trust to the beneficiaries in varying amounts and at various times. When a Settlor establishes a discretionary offshore trust he will generally provide the Trustees with a Letter of Wishes, which provides guidance to the Trustees on how he would like them to administer the trust and manage the assets.

Interest in Possession Trusts

These differ from discretionary trusts in that the beneficiaries will be entitled to receive income and capital from the trust as detailed in the trust deed.

Accumulation and Maintenance Trusts

Almost always established for the benefit of children. The offshore trust deed will specify that the trust fund be used for the education and maintenance of the children up to a certain age with surplus income being accumulated by the offshore trust. Once a predetermined age has been reached the beneficiaries will be entitled to receive income and capital from the offshore trust as detailed in the trust deed.

The Advantages of Offshore Trusts

  1. Private relationship, for example, in most offshore jurisdictions trust deeds are not publicly registered.
  2. Wealth protection.
  3. Tailored to specific family requirements.
  4. Recognized in all common law jurisdictions.
  5. Increasing recognition in important civil law jurisdictions.
  6. An important tool in international income, capital gains and estate tax planning.
  7. Used by corporations for employee benefit plans, retirement and stock option schemes, insurance plans and special financing arrangements.

Offshore Trust Solutions for Individuals

A trust provides many useful solutions to individuals, some of which are:

  1. Preserving their wealth against uncertainty, political, economic or family.
  2. Transferring wealth to their heirs in a tax-efficient manner. They want to plan their estate to maximize the benefits of their wealth for family members and others.
  3. Transferring wealth to their heirs in accordance with their wishes and not in accordance with the laws of the country where they live.
  4. Consolidate the ownership of assets owned throughout the world in one location.
  5. Centralizing reporting of business and assets
  6. Minimizing or eliminating estate taxes arising on the death of the Settlor.
 
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