When you set up a trust structure, you transfer the property in your possession to it. Thus, you cease to be the owner of these assets, and there are no legal grounds that could allow taking them away from you. The trust is managed on the basis of a Trust Deed, the document that lists the rules according to which the assets will be managed. It means that you can remain the beneficiary of the property transferred to the Trust and keep it reliably protected.
Two decades ago there was no sense in establishing a trust unless you had one million dollars or euros or more. Today you can think of setting up a trust if your capital reaches the mark of $100,000. You will need to choose the jurisdiction wisely, and it will depend on the main purpose of the trust establishment.
Read our article on the best offshore trust jurisdictions that exist in 2023.
Trust: why do you need it?
There are plenty of reasons why people set up a trust, and we are going to enumerate the most obvious of them:
- Managing family property. The capital you transfer to the trust may be used to buy real estate abroad on behalf of a legal entity, pay for your kids’ education, cover the cost of living in a foreign country, make provisions for your pension, or allocate some funds to your dependents.
- Protection against overspending. If you set certain limits in a Trust Deed, it will be hard for you or your children or relatives to indulge in excessive spending.
- Protection against adverse political and economic goings-on. Who knows what the future keeps in store? The government may adopt a hard line, you may face bankruptcy, or your creditors may file a lawsuit against you. A trust is your personal territory that no one can enter without your personal permit.
- Passive income. The capital kept in your trust can be profitably invested, and you can derive income that is not subject to taxes or control.
- Keep your purchases secret. You can use the assets managed by the trust to buy any property without this fact being known to the wide public.
- Start a charitable project. If you want to attract other like-minded people to your project, you may decide to set up a special-purpose trust.
- Minimize currency control. A trust can help you reduce the currency control in your country of residence (and CFC-related rules) to a minimum.
- Inheritance instrument. A trust is a far better instrument for inheritance management than a will as it provides much wider possibilities.
Our specialists will recommend the jurisdictions where your assets, real estate, or any other property you put in the trust will be tax-exempt. However, trust beneficiaries will be liable for taxes when they receive profit, in the same way as heirs. In any case, seek the financial advisor’s help prior to the trust establishment to get information on all tax-related matters.
Offshore trusts: possible risks
The risks associated with establishing a trust are directly proportionate to the jurisdiction you select. The matter is that various countries offer absolutely different conditions for trust set-up, and an onshore trust and an offshore trust are absolutely dissimilar in terms of confidentiality and asset protection.
If you decide to form a trust in a jurisdiction that uses Common Law (like the United States or the United Kingdom), it may potentially have the following disadvantages:
- In these countries, the assets owned by your trust may be seized following a court decision made after a creditor’s lawsuit. The same may happen if the settlor goes bankrupt.
- If your assets are transferred to an irrevocable trust, you legally cease to own them. If you come to some turning point in your life, you may regret this decision.
- In some jurisdictions, a trust settlor cannot appoint himself as a trust beneficiary under a Trust Deed. If he does, it will mean that he is the actual owner of assets, and then he will not receive any benefits that a trust may give in terms of asset protection or confidentiality.
How can you avoid risks? Follow the link to read a full article on the risks and benefits of registering a trust on our portal. We provide sessions with advisors on trust formation (some of them are free, and some are paid) to help you choose the jurisdiction that will bring the most benefits to you personally and set up a trust without much hassle on your part.
Trust: main advantages
While the risks of setting up a trust can be minimized if you entrust the matter to professionals, the benefits could be really enormous. Here is a list of them:
- The property you keep in a trust (as well as your identity as a settlor) will be kept absolutely confidential. Public registers have no information on the real assets owner whatsoever.
- The trust is fully exempt from taxes (except for the cases when the assets are distributed to the beneficiaries or heirs. In this case, the respective parties have to pay their taxes).
- Nobody wants to imagine that heirs will dispute the property. A trust is a much more convenient and flexible instrument for inheritance planning than an ordinary will.
- Some jurisdictions, like Nevis and Belize, have a legal framework that will reliably protect all trust owners against any creditor lawsuits or decisions made by foreign courts. The same can be said about protection from relatives or ex-spouses who would like to lay their hands on your wealth.
- Accumulate all your wealth in your trust! You can transfer any property to it that you acquire in the course of your life, like yachts, real estate, or whole corporations.
- Hedging political risks. Diversify your assets geographically to make sure you have at least a part of your wealth intact if any adverse situation occurs.
As you see, a trust is a really advantageous instrument that helps you manage your wealth in the way you want, far from the public eye. If you need any help with trust establishment or you have any questions that need to be clarified before you can think of further steps, please follow one of the above links to our portal and get in touch with a consultant who will help you in no time.
Build a stronghold for your wealth today!
