Trust Formation

Offshore trusts can offer major benefits to many investors and other individuals with substantial capital assets. Our offshore trusts can transfer a person's investments to a vehicle which may permit the deferral or minimization of income taxes on investment income without contravening the tax laws of the person's home country. 

As a form of asset protection, and offshore trust is an agreement based on the English common law principle that allows separation of legal and beneficial ownership amongst a number of individuals. The Key benefit of offshore trusts are: Confidentiality: Assets in Trustee's name, Transactions in Trustees name, Banking privacy via Swiss banking policy. Effective and flexible control of assets. While the Settlor is living, even if incapacitated, the Trustee is under a strict obligation to carry out the Settlors wishes regarding distribution of income and capital, as expressed in the Trust Agreement, for the Settlor, for the beneficiaries, and after the Settlors lifetime for the named beneficiary. The Settlor may assign or retain power to manage the assets. There is no probate for Trust assets, no public record, no delays in distribution and no additional legal costs.

If you have $300,000 or more that you wish to protect click here for a Private Banking consultation. Our private bankers will advise you on the best way to secure your assets.

The most common purposes for trusts are as follows (from Wikipedia):

  • Privacy. Trusts may be created purely for privacy. The terms of a will are public and the terms of a trust are not. In some families this alone makes use of trusts ideal.

  • Spendthrift Protection. Trusts may be used to protect one's self against one's own inability to handle money. It is not unusual for an individual to create an inter vivos trust with a corporate trustee who may then disburse funds only for causes articulated in the trust document. These are especially attractive for spendthrifts. In many cases a family member or friend has prevailed upon the spendthrift/settlor to enter into such a relationship.

  • Wills and Estate Planning. Trusts frequently appear in wills (indeed, technically, the administration of every deceased's estate is a form of trust). A fairly conventional will, even for a comparatively poor person, often leaves assets to the deceased's spouse (if any), and then to the children equally. If the children are under 18, or under some other age mentioned in the will (21 and 25 are common), a trust must come into existence until the contingency age is reached. The executor of the will is (usually) the trustee, and the children are the beneficiaries. The trustee will have powers to assist the beneficiaries during their minority.

  • Charities. In some common law jurisdictions all charities must take the form of trusts. In others, corporations may be charities also, but even there a trust is the most usual form for a charity to take. In most jurisdictions, charities are tightly regulated for the public benefit (in the UK, for example, by the Charity Commission).

  • Unit Trusts. The trust has proved to be such a flexible concept that it has proved capable of working as an investment vehicle: the unit trust.

  • Pension Plans. Pension plans are typically set up as a trust, with the employer as settlor, and the employees and their dependents as beneficiaries.

  • Corporate Structures. Complex business arrangements, most often in the finance and insurance sectors, sometimes use trusts among various other entities (e.g. corporations) in their structure.

  • Asset Protection. The principle of "asset protection" is for a person to divorce himself or herself personally from the assets he or she would otherwise own, with the intention that future creditors will not be able to attack that money, even though they may be able to bankrupt him or her personally. One method of asset protection is the creation of a discretionary trust, of which the settlor may be the protector and a beneficiary, but not the trustee and not the sole beneficiary. In such an arrangement the settlor may be in a position to benefit from the trust assets, without owning them, and therefore without them being available to his creditors. Such a trust will usually preserve anonymity with a completely unconnected name (e.g. "The Teddy Bear Trust"). The above is a considerable simplification of the scope of asset protection. It is a subject which straddles ethical boundaries. Some asset protection is legal and (arguably) moral, while some asset protection is illegal and/or (arguably) immoral.

  • Tax Planning. The tax consequences of doing anything using a trust are usually different from the tax consequences of achieving the same effect by another route (if, indeed, it would be possible to do so). In many cases the tax consequences of using the trust are better than the alternative, and trusts are therefore frequently used for tax avoidance.For an example see the "nil-band discretionary trust", explained at Inheritance Tax (United Kingdom).

  • Tax Evasion. In contrast to tax avoidance, tax evasion is the illegal concealment of income from the tax authorities. Trusts have proved a useful vehicle to the tax evader, as they tend to preserve anonymity, and they divorce the settlor and individual beneficiaries from ownership of the assets. This use is particularly common across borders — a trustee in one country is not necessarily bound to report income to the tax authorities of another. This issue has been addressed by various initiatives of the OECD.

  • Money Laundering. The same attributes of trusts which attract legitimate asset protectors also attract money launderers. Many of the techniques of asset protection, particularly layering, are techniques of money-laundering also, and innocent trustees such as bank trust companies can become involved in money-laundering in the belief that they are furthering a legitimate asset protection exercise, often without raising suspicion. See also Anti Money Laundering and Financial Action Task Force on Money Laundering.

  • Co-ownership. Ownership of property by more than one person is facilitated by a trust. In particular, ownership of a matrimonial home is commonly effected by a trust with both partners as beneficiaries and one, or both, owning the legal title as trustee.

If you have $300,000 or more that you wish to protect click here for a Private Banking consultation. Our private bankers will advise you on the best way to secure your assets.

 

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