Trusts have their origins in medieval England when they were
associated with knights making provision for their families
when they went away to fight in the Crusades.
An offshore trust enables an individual (the "settlor") to donate
assets to a neutral third party or guardian (the "trustee"),
who holds the assets and administers them for the benefit of
other individuals nominated by the settlor and in many cases
the settlor himself (the "beneficiaries"). An offshore trust
arrangement is normally recorded in a written document (the
"trust deed").
The effect of creating an offshore trust is to shift the burden
of property ownership onto a trustee, while retaining the benefit
of the property for the beneficiaries.
An estate created under the will of a deceased person is a trust.
A trust created by a person prior to death is known as an inter
vivos trust. Most trusts created offshore are formed as inter
vivos trusts.
As trusts are a creation of English common law, the most suitable
location for an offshore trust is a jurisdiction which has English
common law and equity as the foundation of its legal system.
An offshore trust may be established as either revocable or
irrevocable. A revocable trust may be terminated or varied by
the Settlor either at the end of a specified period or at any
time. An irrevocable trust cannot be terminated by the Settlor
nor can the Settlor vary the terms of the trust. Whether a trust
is established as revocable or irrevocable will depend upon
the objectives and circumstances of the Settlor.
Both revocable and irrevocable offshore trusts may be either
discretionary or fixed interest trusts. Under a fixed interest
trust the interests of the beneficiaries are specifically fixed
in the terms of the trust deed and the trustee has no power
to vary those interests. A discretionary trust on the other
hand gives the trustee the power to determine the allocation
of income and capital amongst the members of the beneficiary
class and to vary the membership of the beneficiary class. The
flexibility provided by the discretionary form of trust is often
necessary to satisfy tax planning objectives.
In the case of a discretionary trust, the trustees will have
wide discretionary powers (although they may sometimes be constrained
by the requirement for the consent of a third party or the protector),
the trust deed will often be supplemented by an informal and
confidential letter from the settlor or grantor to the trustees
setting out his wishes on such matters as the amount and timing
of distributions, investments, employment of advisers, those
who should be regarded as primary beneficiaries and so forth.
While this letter is non-binding and intended for the trustees'
guidance only, the trustees will generally respect the settlor
or grantor's wishes and strive to act in accordance with them.
Most offshore trusts fall into four broad categories:
- Private: including
discretionary, accumulation and maintenance, life interest
and fixed interest trusts.
- Corporate: including
pension and employee benefit trusts.
- Charitable: solely
for the benefit of charitable organisations.
- Purpose: trusts with
no beneficiaries that are established for purposes that are
certain, reasonable and possible
Modern offshore trust deeds can be tailored to meet your specific
requirements. Generally they are worded in the widest possible
terms to allow a trustee scope to respond to changing circumstances
and requirements.
Discretionary Trusts
The most flexible form of offshore trust and used in wealth protection
and tax planning. A discretionary offshore trust will normally
allow the Trustees to appoint additional beneficiaries or to remove
existing beneficiaries, and will usually also allow the Trustees
to distribute the income and capital of the trust to the beneficiaries
in varying amounts and at various times. When a Settlor establishes
a discretionary offshore trust he will generally provide the Trustees
with a Letter of Wishes, which provides guidance to the Trustees
on how he would like them to administer the trust and manage the
assets.
Interest in Possession Trusts
These differ from discretionary trusts in that the beneficiaries
will be entitled to receive income and capital from the trust
as detailed in the trust deed.
Offshore Trusts
An offshore trust is created when assets are transferred to
a trustee. The trustee becomes the legal owner and is responsible
for managing the assets and distributing them to the beneficiaries
of the offshore trust (which could include the person or corporation
which transferred the assets to the trustees) in accordance
with the terms of the trust deed.
The terms on which the Trustees administer the trust assets
are detailed in a trust deed and trust legislation to govern
trusts has been enacted in many common law jurisdictions.
What assets can be held by an offshore trust?
- Shares and stocks in both quoted and unquoted companies.
- Investment portfolios.
- Real and intellectual property.
- Bank deposits.
- Life assurance policies issued on the life of the Settlor.
- Most other types of asset
The Advantages of Offshore Trusts
- Private relationship, for example, in the Isle of Man offshore
trust deeds are not publicly registered.
- Wealth protection.
- Tailored to specific family requirements.
- Recognized in all common law jurisdictions.
- Increasing recognition in important civil law jurisdictions.
- An important tool in international income, capital gains
and estate tax planning.
- Used by corporations for employee benefit plans, retirement
and stock option schemes, insurance plans and special financing
arrangements.
Offshore Trust Solutions for Individuals
A trust is the solution for individuals who:
- Want to preserve their wealth against uncertainty, political,
economic or family.
- Want to transfer wealth to their heirs in a tax-efficient
manner. They want to plan their estate to maximize the benefits
of their wealth for family members and others.
- Want to transfer wealth to their heirs in accordance with
their wishes and not in accordance with the laws of the country
where they live.
- Want to consolidate the ownership of assets owned throughout
the world in one location.
- Want centralised reporting
- Want to minimise or eliminate estate taxes arising on the
death of the Settlor.
For further information please contact:
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Brian
Monk
Brian Monk is a member of the Institute of Chartered
Accountants of Scotland and a graduate of Glasgow
University. He joined the Group in 1996 having held
equivalent positions in professional organisations
in the United Kingdom. He is based in the Isle of
Man. He specialises in matters relating to trusts,
UK property ownership and EU trading.
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Dharmesh
Naik
Dharmesh Naik is a graduate of the University of Allahabad
in India where he obtained his Bachelor of Engineering
in Computer Science. He joined the Group in 2000.
Dharmesh is a Registered Trust and Estate Practitioner (TEP) with the Society of Trust and Estate Practitioners (STEP) and a member of the International Tax Planning Association (ITPA), International Fiscal Association (IFA) and the Institute of Corporate Governance in Mauritius. He is a fellow of the Mauritius Institute of Directors (MIoD). He is responsible for the Group's IT implementations as well as Group Marketing.
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