A trust is a well established concept in common law originating in England during the Middle Ages and is a way of indirectly controlling assets without legally owning them. The original owner of the assets (the settlor) transfers assets (cash, investments etc) into a trust to be administered by a Trustee. The Trustee then administers the assets for the benefit of others, called beneficiaries. The settlor by transferring the assets to the Trustee can effectively divest direct or indirect ownership of those assets yet retain control through the terms of the trust deed, which provides the rules and regulations governing the trust.

The trust instrument is usually signed and sealed by both the settlor and the trustees. If the settlor does not wish to be named personally in the trust instrument, the trust can be formed by a "Declaration of Trust" which is signed and executed under seal by the Creator and the Trustees alone.

The most common form of trust established in an offshore jurisdiction is the "DISCRETIONARY TRUST". This is a very flexible trust and gives a high level of confidentiality as usually there is no requirement to file the trust instrument with any government agency, so that privacy of the settlor, the trustīs activities and the identity of the beneficiaries is fully protected.

We have an arrangement with a Vanuatu firm who can establish a Discretionary Trust and if required act as Trustee. The fees for these services are as follows:

Trust Establishment Fee - (includes stamp duty) US $1,655
Annual Trustee Maintenance Fee - US $675

Benefits of a Trust
This package provides all the products required by the majority of international investors who are looking to take advantage of a low tax jurisdiction
  • Preserve family wealth. Trusts can be used to arrange for business ownership, investments or wealth to be passed on to the next generation of a family. Trusts may avoid problems of probate and inheritance laws in the settlor's country of domicile and can be easier to administer than wills and are less vulnerable to legal contests.

  • Non-control of assets. By holding the shares in an offshore company, a trust may allow the settlor to remove themself from control of the company.

  • Overcome instability in home country. The settlor who resides in a region that is politically unstable or where there is a risk that the government may expropriate assets or impose exchange controls can protect his wealth by placing assets in a trust in a more stable jurisdiction.

  • Facilitate tax planning. The taxation of gifts or bequests may be reduced by using a Discretionary Trust. As the Trustee is the legal owner of the assets of the trust, neither the settlor nor the beneficiaries can be said to have any taxable ownership of the trust. The Trust Deed need not disclose the names of the beneficiaries and the Trustee has absolute discretion as to whom the beneficiaries are, how much is appointed to each and when and how any distribution may take place.

  • Trusts are confidential. Since assets are held in the Trustee's name, details of the settlor are not known. There is no legal requirement for either the Trust Deed or the accounts of the trust to be filed with the government authorities.

    Disadvantages of a Trust
  • Assets transferred to an offshore trust are legally owned by the Trustee and whilst the settlor may provide the Trustee with a Letter of Wishes outlining how the trust should be administered, this document is not legally binding and the Trustee may administer the trust as he sees fit.

  • Many countries have legislation imposing strict reporting requirements in relation to offshore trusts. The United States for example has reporting requirements on assets transferred into trusts and the management and beneficiaries of the assets.

  • Practical difficulties can occur in transferring assets across national boundaries and may even be illegal depending on the nature of the assets and the country of origin. Professional taxation advice should be sought in the settlor's home country prior to establishing a trust.

  • Normally income or capital gains generated by a trust will be transferred to the beneficiaries of the trust and it may be subject to taxation on receipt.

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