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Offshore Trusts: Can You Really Trust Them?

An offshore trust is seemingly such an inaccessible concept for many people.  Such structures are almost mythical in status because their benefits and uses are shrouded in secrecy.  ‘Normal’ people are turned away from the entire concept of potentially establishing a trust because their benefits are seldom clearly marketed.

Because legal and financial advice has to be sought before a trust can be correctly established, the companies who promote trusts tend to be very stuffy and make the structures sound so complex and confusing that it’s impossible for any of us to tell whether we, and our assets, could actually benefit from the establishment of such a structure.

Well, the fact of the matter is, offshore trusts are seriously flexible and useful solutions with tax benefits, inheritance tax benefits, privacy and security advantages – and they can be used and benefitted from by the likes of you and me.  Today we’re going to lift the lid off offshore trusts and clearly demonstrate how you could potentially utilise one and trust an offshore trust to protect your best interests.

Word of Warning: Offshore Trusts Aren’t a Cheap Solution

If you ‘just’ have a few thousand pounds worth of assets and you want to protect them from potential litigation, (a divorce settlement perhaps), you’re not necessarily going to be best advised to structure an offshore trust.

There can be substantial establishment and ongoing management fees, which is why trusts are usually only utilised by wealthy individuals and families with substantial assets for example, or by companies.

Having said all of that, as we will now demonstrate, because the benefits of offshore trusts are extremely far reaching, it may well be worth your while taking personalised advice to see if you could benefit from such a structure.  Or whether the costs are too prohibitive, and perhaps an alternative solution such as an offshore company structure would be better for your assets instead.

What is an Offshore Trust?

In an earlier report entitled ‘offshore trusts, definition and application,’ we explained that an offshore trust: “is an entity in legal terms but in practicality it is an arrangement whereby the owner of particular assets, (who is referred to as the settlor), passes complete legal ownership of the assets in question to a trustee.

“The trustee, (which can be a company or an individual), then becomes the administrator for the assets.  The assets within the trust are administered according to the clearly defined terms of a key document known as a ‘Trust Deed’ as well as according to the governing law of the jurisdiction in which the trust is established.”

Confusingly, offshore trusts are occasionally referred to as fiduciary structures – which once again only serves to make them sound more complex than they actually are!

What are the Benefits of an Offshore Trust?

The advantages of offshore trusts can include, but are not limited to the following: –

  • Privacy – in some jurisdictions such as the Isle of Man for example, offshore trust deeds are not publicly registered
  • Asset and wealth protection – assets are held in trust for the beneficiaries and administered according to their best interests
  • Flexibility – your trust would be structured to suit your beneficiaries’ specific requirements and/or in the best interests of the assets in question
  • Respectability – the concept of a trust is an ancient one; when established in a well-regarded jurisdiction these structures are not only recognised in all common law jurisdictions, they are respected legal structures
  • Civil law benefits – there is increasing recognition of offshore trusts in important civil law jurisdictions
  • Tax planning – when it comes to expatriates, non-doms and those with income and assets around the world for example, i.e., those with potentially complex tax arrangements, offshore trusts can be very flexible tax planning tools for income, capital gains and inheritance tax
  • Company benefits – offshore trusts can be utilised by companies seeking solutions for employee benefit plans, retirement and stock option schemes, insurance plans and even special financing arrangements.

Should You Trust an Offshore Trust?

It practically goes without saying that because offshore trusts are so flexible and yet so absolutely individual and bespoke each and every time, you have to have expert advice to determine whether you could benefit from an offshore trust.

What’s more, the advice you need doesn’t stop there.  You will need advice about what sort of trust to establish, where to base it, who to use as your trustees, what should be included in the trust deed, and how it should be managed on an ongoing basis.

You will need to trust a reputable company to assist you, because they will need to understand not only all the legal and taxation ramifications of your trust, but they will need to ensure it is correctly structured to suit you, your beneficiaries and your assets too.

They will also need to ensure the trustees chosen are right for you and your trust.  The importance of using a reputable company was recently highlighted in an article in The Lawyer which highlighted that case law concerning offshore trusts in matrimonial disputes can be particularly tricky to navigate, necessitating trustees’ lawyers’ full attention.

In other words, you need to trust a company that really knows what its talking about when it comes to all aspects of an offshore trust!

If you would like to take the first tentative steps and enquire about an offshore trust, we can absolutely put you in direct touch with a leading company for offshore trust services.  Your enquiry will be handled in confidence by a company with over 25 years’ experience in this area, which currently administers over 30,000 client companies and trusts already.

Here’s a guide to who can potentially benefit, but once again, the list is not exclusive: –

  • Those who want to protect their wealth and assets from uncertainty – whether political or economic for example, as well as those who want to protect from litigation or even family.
  • Individuals who want to transfer their wealth to their heirs in as tax-efficient a manner as possible.  I.e., those who want to manage their estate to maximise the benefits of their accumulated wealth for beneficiaries.
  • Anyone potentially affected by unacceptable laws of succession.  E.g., expats who have homes, assets or wealth in different jurisdictions who want to avoid forced heirship issues for example.
  • People who would like to consolidate the ownership of their international assets under one potentially tax efficient and legally strong umbrella.
  • Companies or individuals seeking centralised reporting and asset management.
  • Families wanting to minimise or even eliminate death/inheritance/estate taxes that would arise on the death of a family member.

Could an Offshore Trust Work for You?

If you want to research the potential advantages of an offshore trust further, we suggest you read our report ‘using offshore trusts in tax planning.’

Alternatively, you can contact us to begin exploring the practical aspects of a trust for your personal circumstances.  As stated above, we will put you in direct touch with a leading offshore trust service provide with over 25 years’ experience in this specific area.  The company currently administers over 30,000 client companies and trusts already, and will treat your enquiry in confidence.

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