Offshore Trusts

About Offshore Trusts

In today´s increasingly litigious world, creating an asset protection strategy is key in protecting and growing an individual or family´s wealth. One of the best-known legal tools for safeguarding assets is setting up an irrevocable trust. Trusts have become known as the pinnacle of efficient tax and estate planning by high net worth individuals around the world.

While many establish trusts onshore such as in the US or UK, they are legally bound to the framework and laws of said jurisdiction. This, in turn, may diminish the asset protection abilities of the trust, as onshore trusts are often linked to the individual personally and must respond to local court rulings. Offshore trusts, on the other hand, are trusts formed under the law of another jurisdiction which typically offers more favorable legal, financial, and tax laws.

A trust is a fiduciary relationship between 3 to 4 parties – the settlor, trustee, beneficiaries, and some cases, a protector – where a legal agreement is established. This legal agreement is known as the Trust Deed where the settlor transfers assets to the trustee and defines the objectives as well as the terms and conditions for how the assets are to be managed and distributed to the beneficiaries.

An offshore trust is simply a legal agreement formed under a jurisdiction other than the settlor´s home country. Offshore trusts offer a stronger legal framework than onshore trusts providing better asset protection laws to increase the financial security and legacy of the individual or family while offering tax advantages as well.

Offshore trusts offer many benefits that onshore trusts simply cannot match. In today´s increasingly litigious world, creating an asset protection strategy is key in protecting and growing an individual or family´s wealth. Clients set up trusts for various reasons including:

  • Protecting assets in divorce proceedings
  • Protecting assets from any legal disputes
  • Diversifying wealth in multi-jurisdictional strategies
  • Retirement planning
  • Holding life insurance policies
  • Donating to charity
  • Avoiding probate processes in the event of the settlor´s death
  • Reducing inheritance and estate taxes
  • Assisting with minor´s expenses including college tuition

Trusts are a great legal tool for asset protection and estate planning as well as tax and financial planning. Trusts can be complex and expensive to set up and depending on the purpose or objective of the trust, setting one up may or may not be a solution for you or every family. It is best to speak with a financial advisor to determine whether proceeding with trust is the right step for you. However, offshore trusts are advised for high-risk occupations, individuals with a high risk of being targeted by claims, creditors, or legal disputes, or high net worth individuals or families.

Preventative action is better than correction and setting up a legal structure prior to any legal disputes or unplanned events will ensure that the wishes of the settlor are carried out accordingly and diligently.

Many offshore jurisdictions can offer very similar benefits, however, many factors must be weighed and taken into consideration when choosing the right jurisdiction for establishing your trust:

  • Objectives or purpose of the trust
  • Size of the trust
  • Level of risk of litigation
  • Financial feasibility
  • The political and economic stability of the jurisdiction
  • Tax laws win the chosen jurisdiction
  • Court systems and processes for legal disputes
  • Duration of the trust
  • Language and communication
  • Related services such as banking needs
  • Re-domiciliation

Trusts can be complex in nature and it is advisable to seek professional assistance from financial, tax, and legal experts before proceeding. The main steps include:

  1. Choose your jurisdiction
  2. Choose the legal structure
  3. Choose your professional provider
  4. Financial feasibility
  5. Fulfill due diligence processes and provide the necessary paperwork for the trust agreement
  6. The professional provider files the trust deed, making the trust legal and operational and the trustee, protector, and beneficiaries are appointed
  7. Assets are transferred to the trust granting the trustee legal ownership to acts in accordance with the trust deed
  8. The protector advises the trustee on how to protect the asset and distribute income to the beneficiaries
  9. Maintain trust with annual fees

Structure of an Offshore Trust

The settlor is the individual who creates the trust, they are also known as the trustor, grantor, or trust-maker. The settlor places their assets in the trust, transferring the legal ownership of the assets to the trustee who in turn manages the assets for the benefit of the beneficiaries.

The settlor appoints one or more trustees who are then accountable to manage the trust accordingly to the settlor´s wishes and objectives defined in the Trust Deed. The duties of the trustee include but are not limited to following the terms of the Trust of Deed, defending the trust against any judgments or lawsuits, managing and investing the trust´s assets, and act in the best interest of the beneficiaries

The protector of the trust is appointed to oversee the trust´s operations and to monitor, advise and ensure the trustee is acting accordingly to the Trust Deed. Protectors often have the power and flexibility, if detailed in the Trust Deed, to appoint and dismiss trustees and make decisions on their behalf and in the best interest of the beneficiaries.

The Trust Deed will define the objectives of the trust and outline the roles and duties of the trustee and protector and as well the terms and conditions for the distribution of trust assets for the beneficiaries.

The beneficiaries are the individuals who are benefiting from the trust and are often subject to any terms set out by the settlor.


Types of Trusts

Defining the objectives and goals of the trust will assist in determining the right trust structure to meet your needs. A few common trusts include:

In addition, trusts may be revocable or irrevocable. Revocable trusts can be changed or even liquidated by the settlor. A living trust is a great example of a revocable trust where the settlor names themselves as a trustee and freely moves assets within the trust, retaining complete control.

Irrevocable trusts, on the other hand, are a permanent structures that cannot be changed or liquidated by the settlor. The settlor relinquishes their control over the trust, granting the trustee legal ownership with objectives in managing the assets defined by the Trust Deed. In doing so, the settlor can reduce their taxable estate while gaining a greater layer of protection against the assets in case of a legal dispute.


Benefits

Setting up an offshore trust is creating a proactive legal tool that protects your assets from threats such as creditors, divorce, lawsuits and judgments. It is a powerful tool to store and grow your wealth while maintaining financial privacy. As trusts are private documents, they are not registered or filed in any public registries or records. They are also a great tool to creating a multi-generation legacy passing along family assets to future heirs. In addition to bypassing probate processes in the event of death, trusts are also used to reduce estate and inheritance tax.

In the case of legal disputes, trusts will significantly reduce the possibility of asset seizure or freezing of assets without proper due process due to the extensive statutory framework offshore trusts offer to protect the assets placed within the trust.

Offshore trusts will enforce the following to bring a dispute against the trust, which in turn makes it very difficult for creditors to proceed:

Statute of
Limitations

Many offshore jurisdictions impose a short statute of limitation such as a year or 2.

High
Bonds

Most offshore jurisdictions will first require a substantial cash bond to bring suit within their jurisdiction.

Physical
Presence

The majority of offshore jurisdictions will require a claim to be physically submitted within their local courts.


Process

1.While many offshore jurisdictions offer similar advantages and benefits, there is no one-jurisdiction-fits all. Our advisors will discuss your needs and goals and ask you the right questions to help determine which jurisdictions are right for you.

2. Defining the objectives of the trust will help establish which legal structure is right for you. Our advisors will assist in setting up the Trust deed in accordance with the settlor´s wishes.

3. Choosing an offshore trust company is key in establishing a well-defined trust that adheres to local laws and offers the trust the most protection and privacy. As this is an ongoing relationship, it is advisable to set up an offshore trust with a reputable and trusted firm.

4. Each jurisdiction will have its own setup process and set of due diligence processes. Requirements typically include fulfilling KYC (Know Your Client) by proving your identity with proof of address, and providing the trusts´ information to draft the trust agreement.

5. Once the required documentation is received, the provider can then file the trust deed, making the trust legal and operational. The trustee, beneficiaries, and protector if applicable are appointed accordingly to the trust agreement.

6. The settlor’s assets are transferred to the trust granting the trustee legal ownership to acts in accordance with the trust deed.

7. The trustee manages the assets in the best interest of the beneficiaries and distributes income in accordance with the Trust Deed. If appointed, The protector can advise the trustee on how to protect the asset and distribute income to the beneficiaries.

8. Expenses including maintenance fees as well as any tax expenses incurred by the assets must be paid and maintained. Trustees must act in accordance with the Trust Deed and the protector can step in on behalf of the beneficiaries if needed.

While many offshore jurisdictions offer similar advantages and benefits, there is no one-jurisdiction-fits all. Our advisors will discuss your needs and goals and ask you the right questions to help determine which jurisdictions are right for you.

Defining the objectives of the trust will help establish which legal structure is right for you. Our advisors will assist in setting up the Trust deed in accordance with the settlor´s wishes.

Choosing an offshore trust company is key in establishing a well-defined trust that adheres to local laws and offers the trust the most protection and privacy. As this is an ongoing relationship, it is advisable to set up an offshore trust with a reputable and trusted firm.

Each jurisdiction will have its own setup process and set of due diligence processes. Requirements typically include fulfilling KYC (Know Your Client) by proving your identity with proof of address, and providing the trusts´ information to draft the trust agreement.

Once the required documentation is received, the provider can then file the trust deed, making the trust legal and operational. The trustee, beneficiaries, and protector if applicable are appointed accordingly to the trust agreement.

The settlor’s assets are transferred to the trust granting the trustee legal ownership to acts in accordance with the trust deed.

The trustee manages the assets in the best interest of the beneficiaries and distributes income in accordance with the Trust Deed. If appointed, The protector can advise the trustee on how to protect the asset and distribute income to the beneficiaries.

Expenses including maintenance fees as well as any tax expenses incurred by the assets must be paid and maintained. Trustees must act in accordance with the Trust Deed and the protector can step in on behalf of the beneficiaries if needed.


Jurisdictions


Our Services

Trust
Formation

We assist with advising possible jurisdictions to suit your business needs and goals along with the incorporation process.

Continued
Support

We assist with trust maintenance as well as providing ongoing support.

Related
Services

We assist with related services such as offshore incorporations and offshore banking.


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