What is an Offshore Trust?

Summary: This article contains information about the history of the trust. And information about its modern day use in financial planning strategies and how an offshore trust is created.

This article contains information about the history of the trust.

And information about its modern day use in financial planning strategies and how an offshore trust is created.

The History of the Trust

The use of a ‘trust’ in the financial planning sense can be traced back to around 400 BC when Plato was using a non profit trust to finance his university in ancient Greece.

Around 800 BC there is certain evidence to suggest that trusts were used by the Roman Empire, and around that time they were also being utilised in Britain.

In Europe during the Middle Ages excessive taxes, strict limitations and general restrictions were increasingly being placed on landowners.  In an attempt to circumvent this restrictive situation landowners began to make use of trusts.  Legal titles of any property the landowners held were transferred to a trustee and the landowners’ heirs became the trust’s beneficiaries.  The secrecy of this transfer was key.  Many of the taxes and restrictive legislation which applied to the landowner before transfer of deeds did not apply to the trustee after transfer and could therefore simply be ignored!

Throughout history the concept and form of the ‘trust’ has been developed upon, but the most basic goal has always remained constant, i.e. to preserve assets and wealth from threat and uncertainty whether that be political, economic or familial.

What is an offshore trust and how is one created?

A trust is a legal entity into which you can pass ownership and control of assets. 

Once created, the trust and the assets within it are managed by a neutral third party called the trustee.

The person who establishes the trust by placing the assets with the trustee can be referred to as the donor, grantor, settlor, or trustor.  For the purposes of this article, the term settlor will be used.

A settlor is the original owner of the assets.

Upon transfer of assets to the trust, the trustee becomes the legal owner of the property and the beneficiaries are the equitable owners.

The trustee does not hold the assets within the trust for their own use or personal benefit, rather they are bound in equity to administer the trust and its assets for the benefit of the beneficiaries.

The trustee of an offshore trust is generally a trust company.

An offshore trust is usually set up in a tax haven or a low tax jurisdiction - it makes little or no sense, especially if using a trust to reduce taxation liability, to establish an offshore trust in a country with higher taxation than your own!  That would just be silly!

If you’d like to establish an offshore trust or would like to learn more about their practical application contact us with your requirements.

Countries often favoured for the establishment of an offshore trust include: -
Lichtenstein
Isle of Man
Gibraltar
Bahamas
And Jersey & Guernsey.

The trustee is responsible for the management of the assets within the trust and for the distribution of any income or interest etc., to the beneficiaries of the offshore trust.

The beneficiaries of the offshore trust can include the settlor, i.e., the individual (or company) who transferred the assets to the trustee originally.

An offshore trust arrangement is normally recorded in a written document called the trust deed, and any distribution of assets by the trustee is 100% in accordance with the terms of the original trust deed.

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