Why set up an Offshore trust?

An offshore trust is a conventional trust that is formed under the laws of a foreign jurisdiction where the Trustee is a financial institution in a foreign country.

One of the common usages of a trust is to protect the trust assets from being abused by the beneficiaries and managed according to the wishes of the Settlor. 

Parties involved in a trust

The Settler: This is the first party or the individual who creates the trust. Under the British common law, the Settler must state clearly the following:

  • Their desire to establish a trust

  • The properties they wish to transfer
  • The list of beneficiaries; settlors can be included too

The Trustee: This is the second party in trust. They are mostly legal entities like a financial institution or a licensed trust company. They are entrusted with managing, administering and protecting the assets of the Settlor. Their duties include

  • Following the terms and conditions outlined in the Deed of Trust
  • Communicating with all the beneficiaries 
  • Refraining from making any profit off trust transactions.
  • Managing and protecting the trust assets

The Beneficiaries: They include all the individuals or groups that the Settlor designates to receive benefits from the trust. The Settlor has complete discretion in determining who includes in the list of beneficiaries. 

The Protector: This party is relatively a new one in the circle of forming a trust. It comes in with the advent of Offshore trust. Most Settlors are concerned with transferring their assets to a second party in a distant foreign country, and so they choose a new third party to look over their Trustee. 

Types of Offshore Trust

Having an offshore trust can give you several benefits, but it entirely depends on your needs in choosing the right offshore trust. Below are the most common type of offshore trusts:

Revocable Offshore Trust

This type of trust can be altered and even be cancelled anytime, or after a designated time by the Settlor. 

Here, income earned by the trust is distributed throughout the Settlor’s lifetime and also the transfer of property to the beneficiaries happens only after the death of the Settlor.

Irrevocable Offshore Trust

This is one of the ideal types of trust for asset protection. In this type of trust, the Settlor doesn’t possess the power to cancel or alter the trust in any way once the trust has been set up. The distribution of assets and the way it is to be used is entirely dictated by the “deed of Trust”. The Settlor can no longer demand the Trustee to return his assets.

So even if a court-ordered a Settlor to revoke his trust to pay off litigation fees, the Settlor wouldn’t have the legal power to do so. They no longer have access to the assets in the trust.

Discretionary Offshore Trust

This type of trust enables the Trustee to manage and administer the trust and its assets through a “Letter of Wishes” provided by the Settlor.

So, the Trustee has the discretion to determine what each beneficiary will receive and when. Also, there is no fixed percentage share of the trust income that a beneficiary can claim.

Fixed Offshore Trust

Here, the distribution of trust income to the beneficiaries is fixed, and the percentage share of the income cannot be changed by the Trustee.

Hybrid Offshore Trust

This type of trust includes elements of discretionary and fixed trust where it applies the best one according to the times of need. 

Benefits of having an Offshore Trust

Possessing any asset always carry some amount of risk involved, whether it be a robbery, a lawsuit or any form of liability like tax or payment to creditors. Your hard-earned money remains vulnerable. An offshore trust is something like a safety net. It is one of the strongest legal structure available which offers you the following benefits:

Accessing your assets

An offshore trust provides you the access to your assets in the trust despite all the protective layers placed around it. You can secure your financial future and receive a regular distribution of the trust income as a beneficiary. 

Asset Protection

This benefit is one of the main reasons why people set up an offshore trust so that they can get access to their property yet fully secured from unwanted hands. This idea of asset protection is often stigmatized with tax-evading and illegal activities, but it is completely legal if done right.

Assets like cash, stocks, and real estate that are in your name are easy to seize. But moving your assets in a foreign jurisdiction creates an additional layer of protection to your property from anyone who wants to take it, whether it be a creditor or a lawyer because a judge in your home country doesn’t have the jurisdiction over a foreign trust. 

Confidentiality and anonymity

Even though the trust will be legally registered, the parties of the trust, the assets and the terms in the ‘deed of Trust’ are to be kept private.

Tax Exemption

Assets that are transferred under an offshore trusts name are exempted from taxes or when they are distributed to its beneficiaries. 

Reliability

Moving your assets to a politically and economically stable country or jurisdiction legally protects your assets from the hands of the home government when they fall short. Your assets come under a foreign jurisdiction governed by a foreign law where your home government can’t interfere. 

Versatility

One advantage of forming a trust is that you can literally transfer any kind of property, whether it be cash, real estate, stocks, business, intellectual property, etc. This versatility makes it easier for anybody to just secure any kind of asset. 

Peace of Mind

Sleeping peacefully having known that your all hard-earned money is well secured is one the most sought-after thing and an offshore trust gives you that. 

With that you will always have access to your assets and use them in the way you want to. Plus, you will be assured that all your assets will be properly utilized just the way you mentioned in the ‘deed of trust’ even after you are gone. 

So now, if you have in  mind of setting up an offshore trust and choosing the right jurisdiction, We at Business setup worldwide can help you choose the right jurisdiction that suits your needs. Feel free to contact us for more information. We’d be happy to help you out!

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