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For the UK domiciliary, UK tax laws have made the use of Offshore Trusts less attractive. Before embarking, therefore, on an Offshore Trust structure, professional advice should always be taken. There are still opportunities for the use of Offshore Trusts, particularly where these are coupled with an Offshore Company. Non-UK domiciliaries should also ensure that the tax laws of their own jurisdiction do not have any adverse consequences.
By far the most popular type of trust used in offshore jurisdictions is the Discretionary Trust, as it provides flexibility coupled with the potential for anonymity.
Common uses of offshore trusts are:
1 - To hold the shares in an offshore company
By holding the shares in an offshore company through an offshore trust, it can be ensured that on the Settlor's death, the shares can pass immediately to the Beneficiaries, or continue to be held in accordance with the Letter of Wishes. The Settlor can retain control of the Company in his lifetime, if desired, by being appointed a director. Care should be taken, however, that this does not adversely affect the tax status of the Company.
2 - To simplify succession
By the use of an offshore trust holding the Settlor's assets, those assets can be distributed to the Beneficiaries on the Settlor's death, or continued to be held in the trust upon the terms of the Letter of Wishes. As the assets will not be held in the name of the deceased Settlor, no probate formalities will be involved, thus saving much time and cost, particularly if the assets are in several different jurisdictions.
3 - Asset Protection
A person's personal assets are at risk from many sources - from creditors in the case of bankruptcy, divorce, or in the case of a professional negligence claim. The use of a Trust can put the assets beyond reach and protect those assets from being claimed. It is important that the correct jurisdiction for the Trust is chosen, as some countries may set aside a trust if it can be shown that the trust was set up with the intent of avoiding a current or future liability. We can advise you on the currect jurisdiction to use.
4 - Confidentiality
An Offshore Trust can be set up in a manner to provide the maximum confidentiality. This will also assist in the prevention of liability to Death Duties, subject to the Settlor's domicile.
5 - Avoidance of Forced Heirship
Many countries impose restrictions under a Will as to whom a person may leave their estate on their death. By the use of an Offshore Trust these restrictions are avoided.
These are but a few uses of Offshore Trusts and we would be pleased to advise you further on any aspect of Trust Planning.
