Offshore trusts
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A trust is a form of legal contract between an individual (the settlor) and one or more persons (trustees) who oversee the settlor's assets and are legally bound by the instructions given them by the settlor via the "Trust Instrument" which governs all dealings by the trustees. Trusts fall into one of two categories; Revocable and Irrevocable.
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The trust instrument comes in the form of a document signed under seal by both the settlor and the trustees. A "Declaration of Trust" may be formed when and if the settler wishes to remain anonymous and is signed and executed under seal by the Creator and Trustees.
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A Trust fund can consist of a variety of assets including cash, investments like company stocks and bonds, property, businesses, homes, or insurance policies. This is why the choice of trustees is crucial as the trustees are under a strict legal obligation to carry out the precise terms of the trust.
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The "Discretionary Trust" is the most common form of trust established in an offshore jurisdiction, and is very flexible, providing a high level of confidentiality as there usually is no requirement to file the trust instrument with any government agency. The privacy of the settlor, their activities and the identity of the beneficiaries is fully protected. The Discretionary Trust has become the first choice for international businessmen to hold various investments, thus circumventing many reporting requirements.
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The trust is usually created in a country which does not levy tax of any kind on the settlor, the beneficiaries or on the income or capital gains earned by the trust. Furthermore, most offshore trusts select jurisdictions which do not have any requirements for the trustees to file trust accounts with the local tax authority, further preserving the confidentiality of the settlor. This also allows for the distributions of capital or income from the trust completely tax free.
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Trusts can be specially designed to protect the settlor's assets from attack from erstwhile creditors, thereby preserving the settlor's assets for the enjoyment of the settlor and his or her selected beneficiaries.
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| Discretionary Trusts are often used by; wealthy persons to dissociate from certain assets, expatriates working abroad who wish to accumulate funds offshore prior to returning to a highly taxed country, or by businessmen engaged in international trade and investments who require anonymity as to the ownership of offshore companies. The Discretionary Trust provides certainty and security as to the passing of the trust fund to their chosen beneficiaries at a time of their choosing. |
