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OFFSHORE TRUSTS

The Modern world is full of litigation and it looks like there are more chances for many people, especially for entrepreneurs, corporate executive officers, and self-employed professional practitioners, to be ruined by lawsuits than to become a casualty in a car accident. A properly structured offshore trust is a legitimate and effectual shield to protect one's assets from this impending danger. Needless to say, the prospective Settlor of a Trust must get a thorough advice on its applications from his/her legal and accounting councilors before starting to act.

The most popular applications for an offshore trust:

  • To protect assets from likely creditors' claims (never from the existing ones!)
  • To keep assets away from political or economical instability
  • To optimize tax planning
  • To avert dissipation of property by some relative wasters, at the same time the Trustee could provide a steady flow of benefits for them from the Trust assets
  • To be used as an offshore investments vehicle

The elements of a typical Offshore Trust

Settlor: sets up the Trust, transfers some assets to the Trust, may also be the Protector and Beneficiary

Trustee: becomes the legal owner of the assets of the Trust, is bound by strict secrecy laws. As a rule, the Trustee received a fixed fee. In the majority of Offshore Financial Centers Trustees must be licensed.

Protector: holds the power to direct the Trustee in matters relating to the Trust and to remove and/or appoint a new or additional Trustee. The Deed of Trust prescribes situations when the Trustee must obtain consent of the Protector for certain operations with the Trust assets. A Nominal Company is often used in the capacity of the Protector.

Beneficiary: is entitled to benefit under the Trust. The Beneficiary in a Trust may legally enforce the Trustee to fulfill his duties.

Deed of Trust: the legal document where all formal details of the Trust management and activities are described, inclusive details of the Settlor, Trustee, Protector, and Beneficiary.

Letter of Wishes: confidential instructions of the Settlor to the Trustee on dealing with the Trust's assets. It is a separate document in relation to the Deed of Trust, and, therefore, may be amended.

To sum it up: a typical trust is a design when the Settlor transfers the legal title to some part of his assets to the Trustee, who disposes it within the guidelines of the Trust Deed and the Letter of Wishes. The Protector is a bona fide independent guardian, keeping a check on the fulfillment by the Trustee of his applicable duties. All property and any earnings under the trust are distributed in due course to the Beneficiary.

SOME TYPES OF TRUSTS

(In practice, the types may superimpose each other when individually tailored for a particular client)

Discretionary trust. If the Settlor exposes too much control over the day-to-day trust administration the trust may turn into a "fake" and collapse under the creditors' attacks easily. The discretionary trust is designed to give as much as possible power (discretion) to the Trustee to distribute the property and income under the Trust, and even to choose the Beneficiary.

Asset protection trust. A trust created to protect the Settlor and Beneficiaries from probable creditors' claims in the future.

Resident (domestic) trust. A trust established in the jurisdiction of the Settlor's domicile or legal residence. The Deed of Trust must contain some variation of the Statute of Elizabeth preventing him from establishing a trust to keep assets away from creditors.
In most cases from the fiscal point of view, an offshore trust automatically becomes a resident trust, and the Settlor remains the owner of the property assigned to the Trust, if he is a resident of US, Canada, and some other OECD countries.

Offshore (International trust). A trust, which has the following features:

  • it is registered under the trust laws of applicable offshore jurisdiction
  • the trust may be created specifically to have protection against creditors as The Statute of Elizabeth is overridden in trust legislation of actually all Offshore Financial Centers
  • at least one of the Trustees is a local licensed professional
  • the Settlor and Beneficiaries are at all times non-resident
  • the trust assets often must not include any movable or immovable property situated in the jurisdiction

The Settlor and Beneficiary of a properly designed offshore trust may enjoy the following advantages as opposed to its resident counterpart: when a lawsuit is brought by a creditor before a court of the Settlor and/or Beneficiary's jurisdiction, the Trustees may ignore court orders, move the Trust to some other jurisdiction, and even refuse to fulfill the Settlor's orders enforced by the unfavorable court rulings.

You may find here some specific information about sophisticated and confidential Nevis Trusts.


DISCLAIMER FOR THE ABOVE

The above information may not be interpreted as soliciting for trust services and is given exclusively for representational purposes.


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