Features and Benefits of Offshore Trusts

If you are interested in finding out about the general features of an offshore trust and how such an entity could benefit you personally, this article should address the main factors for your consideration.

There are eight main features of an offshore trust and they are privacy, protection, flexible terms and application, legality, tax planning and efficiency and financial security.

There follows a a brief examination of each point.

In addition you may like to examine the following publication: -

Taxation of Offshore Trust and Funds

Ross Fraser

Dealing with the taxation aspects of offshore trusts and funds from a UK perspective, this popular title has now gone into its fourth edition and has been thoroughly updated throughout.

Including new sections on the impact of various aspects of capital gains tax, new Inland Revenue approaches, taxation treatment of derivatives and EU issues and combining basic information with debate on recent changes and potential problems, this title aims to be a guide for both the experienced practitioner and people new to the field.

Click here to order a copy directly from Amazon!

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1) Privacy.

In the Isle of Man for example, offshore trust deeds are not publicly registered.  Furthermore depending on the jurisdiction where the trust is established the settlor can give assets to a trust anonymously.  Implemented correctly, this feature is highly valuable as it can enable someone to disassociate themselves with assets for the purposes of tax reduction or to remain anonymous for personal or business protection purposes.

2) Protection.

Protection of both assets and wealth from the threat of taxation or litigation for example, and personal protection through the potential retention of anonymity.

3) Flexible terms. 

An offshore trust can very easily be designed to meet specific personal, familial or company requirements.

4) Flexible application. 

Offshore trusts are commonly used by companies for their employee benefit plans - from retirement and stock option schemes to insurance plans and special financing arrangements.

5) Legality. 

Offshore trusts are recognised in all common law jurisdictions and have an increasing recognition in important civil law jurisdictions as well.

6) Tax planning.

Offshore trusts are an important tool when it comes to international income, capital gains and inheritance tax planning.

7) Tax efficiency. 

If a trust is established in a suitable offshore jurisdiction and no resident of that offshore jurisdiction will benefit from the offshore trust then there will be no local taxes applicable to either the assets or income of the trust.

8) Financial Security. 

A trust can be used to protect assets from the risk of unforeseen financial difficulty, securing assets in an offshore trust can also guard against financial emergency in the settlor’s home country.

As an individual concerned about the protection of your assets from financial, fiscal or political risk or as an individual in any of the following situations you may benefit from an offshore trust solution: -

-  Generally if you want to preserve your assets and wealth from uncertainty whether that be political, economic or familial.

-  If you want to transfer assets to your heirs in a tax efficient and also less emotionally painful way after your death.  IHT and probate costs can be high, especially upon the death of a high net worth individual, these costs can be prohibitive for the heirs and may result in the necessary but unwanted sale of assets.  Prior to death, if a settlor wishes to reduce the pain of their death in financial and administrative terms they can place assets into a trust and rest assured that after their death events will be dictated in accordance with the terms of their trust and any letter of wishes given to the trustees.

-  If you want to transfer wealth to your heirs in accordance with your wishes and not in accordance with the laws of the country where you live or are domiciled.  In certain countries there are laws to dictate to whom a person may leave their assets on death.  Sometimes the law can be quite contrary to the wishes of the settlor.  In this case the settlor can transfer assets into a trust located in a common law jurisdiction which accepts that a trust is 100% valid even against forced heirship issues that may arise in the settlor’s country of domicile or residence.

-  If you want to centralise the management of assets owned throughout the world in one location.

-  If you want to protect the future of certain family members who may be less capable of managing their own affairs than a trustee.  This can apply to the young, the ill and infirm, the elderly etc., and in cases such as these, employing professional trustees can be a great emotional relief to the settlor.

-  The protection of assets from personal or business liability.  An offshore trust can potentially offer protection of assets from litigation.  Such litigious situations as malpractice claims, product liability, divorce proceedings, foreign judgments and personal or corporate creditors for example.

-  If you want to make on going provision for a favoured charity.

If you would like more information about this topic or any other subject Shelter Offshore write about, feel free to contact us and ask us!