What is an offshore trust ?
These details include deciding whether the trust is revocable or not, whether the trust will be discretionary or not and to specify the rights duties obligations and expectations of the trustee.
With respect to the revocable or irrevocable trusts much as their names imply they can either be revoked at any time with the terms for this outlined by the settlor or they can have a pre-determined lifespan with no provisions for revocability and only concluding when the terms of its creation as specified in the trust deed are met.
By contrast, a discretionary trust can fall under either category and is defined as a trust with much built-in flexibility with respect to how the trustee handles distributions to beneficiaries and even provides in some instances the trustee with rights to appoint or add beneficiaries
This relinquishes a lot of authority over the offshore trust to a trustee however and highlights the importance of the careful selection of a competent well-reputed trustee or trust holding company with good references a worthy reputation and the experience necessary to successfully and faithfully fulfill and honor the terms of the trust.
The Benefits of the Offshore Trust
The placing of assets and title to property in the trust is where the lion’s share of the confidentiality and protection from liability benefits of the offshore trust are garnered.
While the legal title passes to the trustee which must fulfill obligations set out in the trust the intent of the trust is to provide for the beneficiaries of which the settlor may be and often is a listed participant.
These beneficiaries hold very strong rights with respect to the interests in the trust and most jurisdictions recognize that the intent is to provide the defined benefits for these beneficiaries and rule favorably in their direction when questions as to the management of the trust arise.
Because these offshore trusts are almost always found in tax havens or low regulation jurisdictions with a reputation for the safeguarding of assets and superb confidentiality, the offshore trust also benefits from these features. Assets managed within offshore trusts are for the most part free from the sometimes suffocating legal burdens applicable in a settlor’s home country or jurisdiction.
If the trust is formed to arrange for the benefit of the one who formed the trust and/or spouses children or other heirs of the settlor, for example the offshore trust may provide a haven from intense inheritance scrutiny and taxation.
Further based on their formation in low-regulation havens, offshore trusts offer unparalleled confidentiality, increased protection from the perils ofcivil litigation and liability and even from such things as divorce or business dissolutions.
They are also used by many for protection of assets in the event of home jurisdiction political or economic turmoil. It is extremely difficult save in situations of accusations of a severe criminal offense for an outside entity to pierce the confidentiality shield inherent to an offshore trust in most jurisdictions.
Where to form an Offshore Trust
Offshore trusts are often formed in low-taxation or low-regulation havens that have a proven reputation for the successful management and execution of trusts and trust funds. However it is not absolutely necessary for a suitable location to be a tax haven or have lax regulations–many of the successful trust formation jurisdictions and countries simply offer renown experienced trust companies coupled with superb confidentiality and with substantial asset shields.
One common denominator is that these jurisdictions base their trust regulations and statutes on the English common law–this because the very idea of trust formation is an old English idea dating back to the time of the Crusades. Other European jurisdictions that offer successful trust administration such as Luxembourg, Malta Switzerland, etc. have adapted their statutes and regulations to conform with the proper trust administration models set forth by those based on the English common law.
The formation of an offshore trust requires a realistic assessment of the goals and intent of a potential settlor and will usurp some resources in its establishment and maintenance.
Thus serious committed research and advice and assistance from experience and knowledgeable agents is a must.
Forming an offshore trust provides for substantial protection for assets from untoward scrutiny litigation and civil strife.
It should be apparent that while the cost of formation and maintenance may be considered substantial the establishment of an offshore trust will provide for sound peace of mind for those looking to protect their substantial assets or provide for their children in the long term.
Why establish a Trust? In the simplest terms a Trust is a structure which allows you to relinquish your assets to benefit the person of your choosing, your children, or yourself.
There are five essential benefits to a Trust:
1. Confidentiality – A trust carries its own name which is not made public. The Trust may be formed for business purposes. When used for companies it adds an additional level of confidentiality.
2. Estate Planning – The Trust avoids probate (particularly if the assets are distributed in several countries). The effect of an offshore Trust is to delegate the management of assets to an administrator while retaining ownership of the property. The Trust will guarantee the maintenance of family assets and protects it from subsequent creditors.
3. Divorce – In the event that you inherited property which has been in your family for generations, and in the event of a conflict with your spouse you want to avoid relinquishing your family’s patrimony. The Trust enables you to legally place these assets away from the reach of an ex spouse.
4. Children – it allows children to own property.
5. Taxes – The trust provides protection from inheritance tax. Protection from tax on capital and tax on capital gains (in an offshore Trust).