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Ask us your questions or request our information Offshore
Banking
About
Using
Offshore
Trusts
The
Bahamas
Dominican
Republic
Forming
a Panama
The
Panama Offshore
Is
it Better in
Investing
With
About
Y2K
The
Premium
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We often have heard the term ~ Trust or Offshore Trust ~ but what does having an offshore trust really mean? Is an Offshore Trust something I need or should consider as part of an overall plan to protect my assets and reduce my tax liabilities? The concept of a Trust is one that has it's modern day roots in English Common Law. As such, the Trust vehicle can be found as a recognized entity in almost all English speaking countries. A Trust is basically a
private agreement between parties. Trust structures are created and
used to place assets under the ownership of a separate legal entity, thus
distancing the former owner and permitting certain types of protection
and tax advantages. In short, if someone gives their property to
another party to hold, safeguard or manage for them ~ that is the essence
of a trust arrangement.
Quite simply, if one is concerned about tax issues, or protection from legal attack (creditors or lawsuit), the formation of a common law trust might be one possibility to consider. Another key advantage to
the trust sctructure is the benefits achieved when planning for estate
taxes or transfer of assets to heirs. By maintaining a trust structure
in an offshore tax haven, one has the opportunity to pass along trust assets
free from inheritance taxes. In addition, if one is concerned that
a child may squander the inheritance, the trust vehicle provides a mechanism
where not only there are tax benefits, but also controls as to how the
beneficiaries are to obtain funds.
Trusts also provide another
advantage. Should you become injured or incapacitated to such a point
that you have difficulties physically or mentally, you have some security
knowing that a trust third party is capable of assiting you with your affairs
(specifically assets or property management)
A Settlor or Grantor: Most likely, this would be you. That is to say, the person or entity placing property or assets inside the trust. A
Trustee: The person, persons, company, bank, attorney or
whom-ever has been assigned with the task of managing and safeguarding
trust assets. In reality, the trustee could be either a natural person
or a company. Regardless of who is named as the trustee, it is that
entities repsonisibility to manage the trust assets sensibly and to make
sure that the wishes of the grantor are carried out.
The
Trust Deed: The document you use to establish a trust entity
is usually referred to as a deed. This trust deed or agreement nornally
indicates the beneficiaries, the trustee, the role of the trustee and what
assets are included in the trust itself.
The
Beneficary: This is the person, persons, or entity
that are entitled to receive any income generated from trust assets and,
if
There are a number of Trusts
that carry a variety of confusing names, such as Grantor Trust, Discretionary
Trust, Asset protection Trust ~ and the list goes on. Rather than attempting
to memorize the names or terms, the following are some key points you should
be aware of when deciding to form a trust structure.
Most countries, such as the US, which honor trusts ~ have some specific litmus tests or guidelines in order to determine if a trust can be treated as a tax free vehicle or offers true protection from creditors. Point # 1 - In order for a trust to gain certain types of tax or creditor protection, it must be irrevocable. This simply means once you place your assets in a trust, you cannot ask that those assets be returned. Point # 2 - Many tax
authorities and courts will look at a trust to determine if you, the grantor
or settlor, have any control of the trust assets, or are receiving the
trust income. If that is the case, they certainly may decide to assess
tax liabilities because your are
Anyone considering the formation of a trust, should only consider using a jurisdiction outside their home country, or the country where they are presently residing. In addition, they should make sure they find a jurisdiction that stricly honors the law and provides protection to the individual or entity that is being used. Trust assets should also be physically moved or domiciled someplace other than where you live. If one establishes a trust in Belize, for example, but all of the trust assets are readily available for seizure in your home country or place of residence, in reality ~ you would have accomplished very little in the way of asset protection. Consider the use of another offshore structure as the beneficiary or recipient of trust income. Ideally, one may even want to use a separate jurisdiction for this purpose. This further separates the grantor or settlor as being a named participant that is benefitting directly from trust income.
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