forming an offshore trust Formation of a trust provides a number of advantages for managing the estate and wealth of a private person or corporate entity. A trust is a structure within which a property is managed by one person or entity on behalf of another one. Every trust has a settlor, trustee and beneficiary. A settlor creates a trust and gives rights to someone else to manage its estate. A trustee is a person or a company which is in charge of managing someone’s property and wealth. A beneficiary is a beneficial owner of a trust, who gets proceeds from a trust management. A trustee is appointed to execute its duties on a fiduciary basis.
Trusts are administered in correspondence with the existing trust law and a trust deed – a document which is created for each trust individually to represent the aims and terms of that particular trust. It includes a period of a trust duration and describes duties and rights of the parties involved in it.
Often offshore jurisdictions are chosen for creating a trust, as they provide substantial tax advantages. Usually licensed trust companies with good international reputation are chosen as trustees. An offshore company is often appointed to be a beneficiary of a trust for protecting privacy and tax optimization purposes. A trust must be created professionally and correctly, in order to ensure security and good management of one’s estate and wealth.
It is advised to choose a trust company rather than an individual in a role of a trustee for the following reasons:
Trusts are often created by parents for their children, in order to manage family wealth in the most cost effective and professional way. In addition, trusts are used for non-profit and charitable purposes.
protecting assets with offshore trusts An asset protection trust is created with the aim of ensuring a high level of confidentiality in the most cost-effective manner. A suitable and highly personalized asset protection strategy will let you save money for tax purposes and ensure the most cost-effective succession. When assets are transferred to a trust, a settlor no longer has any rights over them. A trust, in turn, works in the best interests of the beneficiaries, who are appointed by the settlor. At any time, however, according to a trust deed, a trust may be terminated, and assets may be returned to the settlor.
Usually, an asset protection trust is created for the following main purposes:
Different techniques and jurisdictions are used to create an asset protection trust for an individual or company in different cases. A perfect strategy for one entity may not only be unsuccessful but may even be harmful or illegal for another strategy. Therefore, it is vital to take the many nuances of international legislation and modern business polices into consideration in order to ensure and realize an effective asset protection solution.
However, almost all asset protection strategies have one element in common. They are worked out with the aim of making it as difficult as possible for a creditor or the authorities to identify to whom certain assets belong and what the full estate in possession of a particular entity is. Correctly structured and implemented offshore trusts in addition to the above-mentioned advantages are at the same time an efficient method of tax optimization.
An “offshore trust” can be described as a legal document which provides how a person’s assets will be held and distributed to beneficiaries upon his or her incapacity or death. The term offshore means away from that person’s resident country.
offshore trusts protect assetsWhen it comes to managing and protecting one’s hard earned wealth, many financial experts recommend the trust. Trusts are legal structures forming a relationship between settlors and trustees, where the settlor transfers or entrusts holding and management of assets to the trustees in favor of particular beneficiaries.
The movement towards globalization over the last several decades has boosted considerably the formation of trusts in jurisdictions outside the settlor’s country of origin. These offshore trusts are essentially the same form as traditional onshore trusts: however, they also differ in several respects, the least of which is the geographical location where the trust is in effect.
Primarily, offshore trusts differ from traditional trusts in that they take advantage of beneficial legislation found in such territories. Although technically speaking, forming a trust outside of one’s own borders is already going offshore, not all such trusts are actually what are now popularly referred to as offshore trusts.
For the trust to be a bona fide offshore trust, along the lines defined by those in the global financial circles, it must have the distinction of safeguarding the assets from liability claims, protecting privacy and confidentiality, and allowing substantial tax savings.
Offshore jurisdictions that enact trust and tax laws favorable to these ends have the reputation of being offshore tax havens. The term “offshore financial center” is the more politically correct term used these days to refer to such jurisdictions.
jurisdictions for offshore trustsWith such beneficial traits inherent in offshore trusts, the question arises – “Are offshore trusts recommended for everyone?” Some services located at offshore financial centers, especially the emerging ones, will probably say “Yes.” However, just as in any other investment or financial strategy available in the market, offshore trusts may only be relevant for certain classes of people.
Therefore, before rushing headlong into forming a trust in the Caymans, the Bahamas or in Belize (and there are many other jurisdictions that offer offshore trust services), check to be sure you fit the profile of one who can benefit from offshore trusts.
These trusts are used mostly for asset protection. However, they are also applicable in estate planning and tax planning. The general rule is that offshore trusts are ideal for high-income, high-risk professions. By high-risk we mean those that have a high probability or likelihood of being sued at some point in time.
Company executives, doctors and dentists, famous celebrities, land owners, property developers, lawyers and other such individuals are more prone to litigation. This is not because they are constantly doing something wrong or that they have something to hide, but simply because they have considerably more properties and assets, which makes them a larger target for liability claims.
The other determinant as to whether or not someone has a need to use the facility of an offshore trust is the person’s particular requirement to protect his or her assets. If you foresee the possibility of litigation due to the chance failure of a new business venture, or perhaps you need to secure what wealth you have in case your latest marriage ends in divorce, these are situations that necessitate protecting your assets through offshore trusts.
Anyone who has achieved considerable financial success should look into the possibility of engaging the benefits of offshore services. Of course, if your personal assets are not as substantial or there is little possibility that there will be claims against you, forming an offshore trust may be a tad overkill. The compelling idea here is that no one wants to have the fruits of their labor whisked away by a single unfavorable judgment.
The costs of offshore trusts are very competitive these days, but it will still require a small fortune to maintain. There is no minimum estate value required, per se, but the usual ballpark figure to establish a trust is around $250,000. Conceivably, though, you can setup an offshore trust for much less.
Most offshore services providing trusts will require an estimated $10,000 up to $30,000 for setting them up. After that, an annual fee in the vicinity of $3,000 to $7,000 will also be needed.
Selecting a suitable jurisdiction is an important consideration. You need to examine the relevant laws as well as the overall stability of the jurisdiction and see if these match your taste as well as your goals.
Also, remember that the benefits of an offshore trust can work for you only if it is set up properly within legal limits. Therefore, be sure to get professional legal services in your corner and heed their advice.