Offshore Trusts Guide

The British government is constantly chipping away at the effectiveness of offshore trust structures in inheritance tax planning strategies for British citizens, and their latest changes to the way trusts are taxed have further reduced the usefulness of these tools for many.

So the question is, are offshore trusts still suitable for expat IHT planning, after all, Britons living abroad and who are tax resident elsewhere often have no liability to the likes of income or capital gains tax in the UK once their nation of tax residence alters.  Therefore, could an offshore trust be a suitable vehicle for an expatriate to use when it comes to the structuring of their affairs to legitimately reduce their estate’s IHT burden?

Many in the financial services industry say ‘no’ – they feel that the restrictions now placed on the creation of a trust, on the settlor, beneficiaries and trustees are too strict, and that the tax treatment of these vehicles makes them unattractive.  However, there are alternatives that expatriates can explore…

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If you’ve never heard of a private offshore trust company – or PTC for short - don’t worry!  These entities were lesser known and used until recently, but they are becoming more flexible, more likely to be accepted by most jurisdictions and therefore better known and more widely used, which is why we have decided to feature private offshore trust company benefits and features so that more people can get to grips with the intricacies of these highly useful entities.

If you’re familiar with the concept of an offshore trust but always had issue with handing over control of your assets to a third party you are not alone.  Many people fear that the establishment of a trust really leaves them in too tenuous a position regarding the protection and management of their own assets…which is why private offshore trust companies came into being.  They give the settlor far greater asset control.

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Both the governments of Bahamas and the British Virgin Islands (BVI) have been working hard in 2007 to make their particular offshore tax havens especially attractive to those seeking offshore trust solutions.  Because there is big business to be gained by making the laws of your jurisdiction tax attractive and highly competitive when it comes to the attraction and retention of offshore trust business, it makes sense for these locations to be diversifying away from their current relatively heavy focus specifically on the offshore IBC business.

In terms of offshore trusts in the Bahamas and BVI now, it’s possible for the establishment of PTCs which are Private Trust Companies which, when created can specifically allow the person establishing the trust, (the settlor), greater control over the assets within the trust and the ongoing management of it.  The Bahamanian bespoke PTC legislation makes this jurisdiction particularly attractive for those seeking offshore trust solutions for a family group for example.

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