What Are Offshore Trusts?

A Trust is a contract, a private legal agreement. Trusts are based upon the "Trust Deed", which expresses the agreement between a person (the Settlor), who places assets in a Trust, and the (Trustee), an individual, Trusts or Corporations entrusted with the protection, management and ultimate distribution of the assets for the persons, (the Beneficiaries), entitled to benefit from the assets and/or income held under the terms of the agreement.  

What Is Contained In A Trust Document?

This private agreement between the Settlor and the Trustee may be drawn up in many different ways in order to define the desires or concerns of the Settlor. While the specific instructions in the Trust document, know as the Trust Deed, may vary greatly from case to case, the necessary features are:

• Naming of the Trustee.
• Defining the terms and conditions under which the Trustee can be removed or resign.
• Defining the Trustee's powers and restrictions.
• Describing the assets or, initial Trust Property
• Naming the Beneficiaries and describing how each is to benefit.
• Naming of the Settlor, the person who contributes the initial assets to the Trust.
• This Settlor then literally "gives away" the assets transferring legal ownership of them to the Trustee.
• The Settlor names the Beneficiaries of the Trust.
• The Deed identifies the Property Settled upon the Trustee: the property then passes on to the Trustee.
• The Trust Property can be increased at any time providing the Trust Deed has been written to allow this.

Who is The Trusts Settlor?

The Settlor gives away his assets and thereby transfers the legal ownership to the Trustee. The Settlor arranges the Trust Deed so that the distribution of income or assets by the Trustee is done completely at the discretion (subject to the Settlor recommendations through "letters of wishes'), of the Trustee (Discretionary Trust), or by clear definition (Non-discretionary Trust).

What is The Trusts Trustee?

The Trustee is the person, corporate body, or other entity into whose ownership of the assets have been transferred. It is the duty of the Trustee to ensure that the wishes of the Settlor are carried out and the beneficiaries' interests protected. The Trustee can be removed and replaced by a new Trustee if for any reason it is deemed appropriate.  

What is a Trusts Protector?

A Protector can be an individual or an entity who can be given the power within the terms of the Trust Deed to remove a Trustee, protect the interests of the beneficiaries, or appoint a new Trustee.

What are Trusts Beneficiaries?

A Beneficiary is any person or persons or any other legal entity, including another Trust or a Charitable Organisation, who will benefit under the terms of the Trust Deed. They may be nominated either specifically by the Settlor and their benefits clearly defined, or by class, that is, sons, daughters, grandchildren, etc. The Trustee is normally guided by the written or verbal wishes of the Settlor.  

Is a Trust the Same as a Will?

Trusts are, in a sense, a living "will" which works before and after the death of the Settlor. Trusts can be terminated or "revoked" on the wishes of the Settlor. However, making a Trust "irrevocable" (meaning outside the Settlor control) can provides significant tax advantages. Some jurisdictions law allows for a liberal response to Letters of Wishes, therefore even an "irrevocable" Trust can effectively be terminated and assets liquidated and distributed without losing its "irrevocable" status under law, while maintaining it's "irrevocability" before external tax scrutiny.  

What type of Trusts are there?

Trusts fall within two broad categories: Tax planning Trusts, and Asset protection Trusts. That is not to say that the two are mutually exclusive, only that they originate from different concepts and appeal to separate groups.

A Discretionary Trust

In a Discretionary Trust, Trustees are given very wide discretionary powers to act as they see fit. It is not generally the case for assets of the Trust to be held for specific beneficiaries in specific proportions. Assets are clearly held for the benefit of beneficiaries who may either be defined as a group or left to be added in at a later date. The proportion of ultimate distribution to any one or more of these beneficiaries is entirely at the discretion of the Trustee. By its very nature, it is flexible and therefore is by far the most commonly used in an offshore environment and over the years has proved more effective then any other method for the protection of family wealth.

In case any prospective Settlor becomes concerned about a Trustee having absolute discretion over his assets, it must be quickly pointed out that a responsible Trustee will follow the Settlor "Letter of Wishes". This document contains wishes, which if contained in the Deed itself, would have converted the Discretionary Trust into a Specific Trust. It can be amended at any time by the Settlor to reflect changing circumstances.

Asset Protection Trusts

Take the form of a legal contract between Trustee and Settlor. All the Settlor property is transferred to the name of the Trustee, where they will be safe from any form of attack, if carried out in accordance with International law. 

What are the main Benefits of owning a Trust?

A Trust is a unique legal entity that allows the Trust Deed to be written to suit your personal requirements and intended purposes. The following are some of the main reasons for the use of Trusts.

Family Protection

The Settlor can, through the Trust Deed or within the Letter of Wishes advise on the administration up to his death. He can also advise upon who is to benefit thereafter and in what proportions. These aspects are particularly attractive to residents of countries which have strict laws on inheritance and can enable payments to be made to people who might have to be excluded from a Will made in the Settlor place of citizenship or residence.

Privacy, Anonymity and Flexibility

Under most offshore law, the Trust Deed is a secret document. No information on its contents is available to any external authority. This secrecy is supported in Belize by provisions in its Trust Act of 1992. Flexibility within the Trust Deed, particularly of a Discretionary Trust, is provided by the following:

• through provisions that provide that the Trust can be revoked or terminated;
• that the Trustee can be removed;
• that the Law and Forum, that is, the location of the Trust, can be transferred to another jurisdiction should it be felt that worldwide political developments make this a prudent precaution;
• policies on administration and disposition of the assets can be modified.