Offshore trusts and private foundations are structures often used by international taxation and estate planning practices to help their clients with the management of their assets, the protection of their privacy and the ongoing enhancement of their wealth.
Using offshore trusts in tax planning strategies requires expertise because trust law is complex, and every individual has a unique set of personal circumstances that have to be taken into account to ensure such a structure is as tax efficient as it can be whilst remaining entirely legal.
There are a number of jurisdictions in the world that are incredibly well regulated giving the grantor or settlor - the person who establishes the trust - the peace of mind they require when it comes to the safety of their assets. Countries such as Jersey, New Zealand, Austria, Lichtenstein, Nevis and the Bahamas are often chosen by international taxation planners when it comes to the underlying country in which an offshore trust should be established.
A great deal of thought and consideration has to go into deciding which jurisdiction best suits a client’s personal circumstances and overall tax planning objectives; furthermore expertise and care is required when it comes to selecting the trustees and a protector to oversee the actions of the trustees.
If an offshore trust is to be used successfully in an overall tax planning strategy all elements of the creation and ongoing management of the trust have to be considered carefully. Each element of the creation, management and distribution of the trust’s assets has to be thought out so that no one action taken by the trustees can render the effectiveness of the trust useless for example.
To this end a grantor is often advised to carefully select a specialist international taxation planning practice to assist them with the creation of an offshore trust. Such a practice will specialise in understanding international tax and trust law and how an individual’s country of residence and domicile as well as the country in which assets are located and in which beneficiaries reside can affect the legality, tax efficiency and overall effectiveness of a trust.
Specialist tax planning practices will assist an individual create an offshore trust structure and they will deal with the ongoing management and maintenance of the trust as well which removes a great deal of responsibility from the grantor.
One of the main additional benefits that international foundations and offshore trust structures offer those seeking a tax planning strategy is that well established and maintained offshore trusts operate in tax free jurisdictions which allow for the enhancement of the underlying wealth of the trust because income can be accumulated and gains realised without the deduction of tax.
Another great additional feature is that offshore trusts can often be used to legitimately avoid issues of forced heirship that exist in countries like France and Japan for example. Asset protection and the protection of a grantor and beneficiary’s personal privacy are also achieved with the creation of a carefully constructed offshore trust, and anyone interested in using offshore trusts for their tax planning, asset protection and ongoing wealth management needs should consider their options carefully before asking for advice from a qualified international taxation planning specialist.
