One of the main reasons for the establishment of an offshore trust is the tax saving advantages that can come with the creation of such a structure. In this day and age as taxation legislation becomes even more ‘all encompassing’ the thought of being able to legitimately protect assets from excessive and restrictive taxation is of appeal to many people.
This article discusses how it’s possible for some people to benefit from saving tax with an offshore trust; the advantages and benefits discussed may not be suitable for everyone.
Offshore trusts have many perceived benefits but the three that are most hotly in demand are: -
1) The ability to protect business assets or personal wealth from excessive taxation.
2) The ability to create an international tax plan for expatriates or those individuals or businesses with international interests.
3) The ability to utilise the tax friendly nature of ‘offshore.’
The thought of placing assets into trust is not something that anyone should take lightly, even if it is possible to achieve all of one’s desires for a lighter tax lifestyle by taking such action. Once assets are placed into trust they are placed outside of your direct control and you are no longer the legal owner of what you once held. If you have any on-going say over what can be done with your assets it will be minimal and your legal rights over the management of your assets will be strictly curtailed.
Therefore it is critical to ensure you have professional assistance right from the planning stage to make sure your desired results from an offshore trust can actually be legally achieved by it. Then it is of paramount importance that you employ the services of a legitimate, licensed and experienced trust company to establish and manage your offshore trust.
In terms of how an individual or business could potentially benefit from an offshore trust here are a few practical examples: -
If you’re considering becoming an expatriate and moving to a country other than one where no taxation is levied (!) you could place your significant assets into an offshore trust structure before relocating. The trust will be placed in a low or no tax jurisdiction as it is ‘offshore’ and even if you then move to a high tax jurisdiction you could potentially protect gains and income from the trust from taxation in this way.
Another benefit of an offshore trust can be achieved when assets with long term growth potential are placed in such a structure and any financial gain achieved can be realised without the payment of any gains taxation.
Another way to save tax with an offshore trust is by using such a structure in your estate planning. Depending on an individual’s circumstances it is possible to negate death tax liability on an estate through the utilisation of an offshore trust. Laws in this area are very complicated already though and being tightened up all the time and it is very, very difficult to remove an estate’s entire liability. Specialist expertise in this area exists among offshore trust professionals and no action should ever be taken without proper consultation taking place first. Without taking advice at worst you could be evading tax and at best the expensive establishment of your trust could be a complete waste of money.
It is also worth remembering that actually putting something into trust can be seen as ‘a chargeable action’ by the tax man and such action can result in a capital gains tax liability arising, to avoid this you could just liquidise all your assets and place all your available money in cash form into the trust. Cash generally isn’t subject to this capital gains tax rule but such action maybe a bit drastic!
When speaking to trust professionals they all agree that it is not worth considering establishing an offshore trust for tax saving or any other reason unless you have ‘significant assets’ to protect. This is because the creation of such a structure is basically expensive and simply time consuming. However, if you are high net worth or your business has a large turnover, an international position or is growing rapidly the consideration of an offshore trust might be a very worthwhile undertaking and if in doubt, contact us for advice about your situation and your options today.
