If you want to take advantage of ultimate asset protection, there is nothing better than a properly established trust in a suitable jurisdiction. However, there are a lot of questions you need to answer. What is the best jurisdiction to set up a trust and why should you choose a foreign country rather than the jurisdiction where you are living? What is a properly established trust? Which type of trust should you choose to achieve the desired result? We are going to talk about all these aspects in the post. We recommend anyone who has substantial capital to set up an offshore trust as he/she will gain the capability to keep assets in the safest place possible. Click on the link to read more details.
A Foreign Trust: Possible Risks
The choice of a jurisdiction for your trust is an important step to make as foreign nationals will be able to take advantage of different conditions, which will define how efficiently assets are protected and to what extent the owner’s personal information remains confidential.
If you choose a country that practices common law (the US or the UK), you will come across the following disadvantages:
- Trusts function on the basis of national laws, and the assets you keep there may be seized by a court decision. It usually happens if the settlor becomes bankrupt or a creditor wins a lawsuit against the settlor.
- If you set up an irrevocable trust, you will no longer be the owner of the assets you decide to keep there. No one knows what will happen in the future, so you may regret the decision made.
- Some countries allow the trust settlor to be the trust beneficiary at the same time. In this case, the assets are considered to be owned by the settlor, so you have zero protection and the trust makes no sense.
These are the reasons why we recommend setting up a trust in a country where you will not face such risks (and such destinations do exist!).
A Foreign Trust: Benefits
Let’s now look at the main advantages of foreign trust establishment:
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- Tax exemption. The only case when taxes are paid is when the property is inherited or the profit is distributed to beneficiaries. Keep in mind, though, that foreign real estate transferred to the trust may be taxable in the country where it is located under the local laws.
- Confidentiality of assets and the settlor’s identity. There are offshore jurisdictions where public registers do not contain this information and the assets belong to the trust under the documents, which creates the ultimate privacy many wealthy people are after.
- Inheritance planning. A trust is an excellent alternative to a will that we strongly recommend. No court hearings or arguments between heirs – you’ve got it all planned. If you set up a trust, you can take advantage of different inheritance methods – for instance, set the date when the heir will come into asset possession or assign lifetime alimony to one of the heirs.
- Reliable asset protection from ex-spouses/greedy relatives. If you are the settlor, you are the only person who can manage the assets. You can think of the proper wording for the Trust Deed to keep your ex-spouses or greedy relatives at bay.
- Asset protection against creditors and foreign court decisions. If you want to take advantage of a jurisdiction that does not recognize the decisions of foreign courts, you can choose Belize, Nevis, or the Cook Islands. Even if your creditor wins a lawsuit against you elsewhere, he will have to start the proceedings all over again after paying a considerable bond before that. This scares off the majority of creditors, as you may have guessed. An irrevocable trust in these jurisdictions means absolute protection for your money and other assets: no one (even a court) can take away something from you if you are not its owner! However, you still retain the right to manage all your property.
- Capital accumulation. Your trust can take part in international investment projects, set up bank accounts, or own commercial companies. You can use it to get income from different sources and distribute the required share to beneficiaries under the conditions set out in the Trust Deed.
- Versatility of the asset protection mechanism. The trust can own any assets whatsoever, including securities, financial assets, intellectual property, companies, and so on.
- Protection against political risks. The number of conflicts in the world is growing every day, so you can hardly talk about stability. This affects the business environment, and people are looking for safe havens. It’s definitely the right time for geographical diversification of your assets.
Trusts in Europe and Offshore Destinations: Pros and Cons
There are different kinds of trusts for different purposes, and there are onshore and offshore jurisdictions where you can set them up. Let’s look at the existing opportunities:
- If your primary goals include tax burden reduction, making regular allowances to a dependent, or participating in international investment projects, it’s better to choose an onshore jurisdiction (Great Britain, the UAE, Singapore, or the state of Nevada, US).
- If you want to form a trust to control an offshore company, protect your personal assets, or plan inheritance, an offshore jurisdiction would be a better choice. Opt for Belize, Nevis, and the Cook Islands as they offer reliable protection of settlors’ and beneficiaries’ identities.
- If you want to use the trust to manage an offshore company, calculate all the costs (including those to be spent on trust registration). It may happen that you will obtain some tax reductions, but the trust formation and maintenance costs will be higher.
- Remember that the real estate you keep in a trust is subject to the laws of the country where it is located, so you have to take it into account before you decide to transfer it to the trust.
Want to know more about trusts and their formation? Do not hesitate to follow the above link and explore our portal to discover how a trust works and why we recommend setting up an irrevocable trust for the strongest protection possible. Talk to our expert if you have any questions – it’s free!