Offshore Trust

Our clients are often advised to set up trusts as part of their wealth planning arrangements but offshore trusts aren’t something that most people come across every day so we have prepared this short article to address some of the common questions and queries.
What is a trust ?
A ‘Trust’ is a longstanding concept in English law dating back to the Middle Ages. In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a settlor (i.e. you), who transfers some or all of his or her property to a trustee (for our clients this is usually a Trust Company based in The Isle of Man). The trustee is the party that holds that property for the trust’s beneficiaries.
How does it work ?
Unlike a Company or a Foundation, a trust is not a legal person therefore it can only operate via its trustee. The trustee is given legal title to the trust property, but is obligated to act for the good of the beneficiaries. The trustee is usually compensated and can have expenses reimbursed, but otherwise must turn over all profits from the trust assets to the beneficiaries.
What are trustees ?
The trustee may be either an individual, a company, or a public body. There may be a single trustee or multiple co-trustees. The trust is governed by the terms under which it was created usually this is documented by way of the trust deed.
What is a trust for ?
The uses of trusts are many and varied, for both personal and commercial reasons, and trusts may provide benefits in estate planning, asset protection, and taxes. Property of any sort may be held in a trust.
Are all Trusts the same ?
There are various categories of trusts; but offshore trusts are generally discretionary trusts; which are trusts where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust deed by the settlor.
What is a Letter of Wishes and who is a Protector ?
Often a settlor will write the trustees a letter of wishes which a non-binding indication of the manner in which he wishes the trustees to exercise their discretion in relation to a discretionary trust. A protector may be appointed as a person who has some control over the trustee—usually including a power to dismiss the trustee and appoint another.
OK, when do we start ?
Settlors should not enter into trust arrangements lightly. Any person considering entering into such an arrangement should study the trust deed carefully and satisfy themselves that they fully understand relevant tax and legal implications. Middleton Katz has prepared an annotated copy of their standard trust deed for clients to review (available upon request).
Points for Consideration
What are the objectives of the Trust (tax planning / intergenerational planning / other)
Ensure tax advice has been taken.
Ensure you understand any legal implications.
Ensure the Protector (if any) understands their role.
Settlor (you) should review trust deed with advisor.
Information required from Clients
Your full Name and address.
Details of assets to be held in trust.
The name of the Trust.
Identity details of Beneficiaries
Identity details of Protector (if any – advisable)
Letter of wishes – Trustees need to understand your intentions.

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