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INTRODUCTION TO OFFSHORE TRUST
Before reading this material, we should advise that trusts, although still in use, are not that much in use anymore as are the Private Interest Foundations.
This a better tool since it is a hybrid between the corporation and the trust, meaning that has the best of both worlds and the founder can remain in total control of the foundations assets in anonymity, no needing to transfer the property of the assets to a trustee.
A "disadvantage" (although not always a disadvantage) is that the Private Foundation has to be registered, but the only information that goes Public is the name of the foundation council members and the name of the founder (which can be nominee, to overcome this disadvantage).
Why use a foundation instead of a Trust?
WHAT IS A TRUST?
A Trust is a legally acknowledged and binding arrangement whereby a person (or a number of people), known as the Trustee or Trustees, become the legal owner(s) of assets transferred to them by a Settlor or Settlors but only in as much as they are holding those assets for the benefit of another person or people, known as the Beneficiary or Beneficiaries.
The assets which are placed into a trust are called Trust Properties and can include anything which can be legally transferred such as:-
In our experience, cash (bank accounts), property and trading companies are the three most common assets to be placed in offshore trusts, for obvious reasons.
Although a trust can be a verbal agreement and implied by law, i.e., your words and actions are legally acknowledged by previous, similar precedents, it is far more common for a trust to be established by way of a written document called either a Deed of Trust or Declaration of Trust. This document describes the trust and details how it is to be administered and for who's benefit.
The person giving assets to a trust is known as the Settlor and is commonly named in the Trust Deed, but, depending upon the jurisdiction where the trust was established, not necessarily so. It is therefore quite possible to give assets to a trust anonymously (in the sense that you don't want to be linked as having given your assets to 'your' trust). This feature of certain trusts is regarded by many as one of the most valuable, if implemented correctly it can enable someone to appear to be of only modest means, yet live a luxurious lifestyle, the 'trappings of wealth' all belonging (ultimately) to a trust with no legal connection to that person. Great care must be taken in such instances since otherwise tax authorities tend to 'see through' the trust and tax you accordingly - it can be mighty hard to disprove such a 'connection' with a trust!
When either periodic or terminal payments are made from a trust to either a person or people named in the Trust Deed, the recipient(s) are known as Beneficiaries, i.e., they benefit from the trust.
BACKGROUND AND HISTORY
Most countries have one or other of two basis for their laws, either CIVIL law, historically derived from an early Roman concept, or COMMON law, derived from an early English concept where trusts can be traced back as far as medieval times.
In countries where civil law rules, trusts are either very uncommon or are not legally recognized, thus making Offshore Trusts of great importance in tax avoidance and asset protection to residents in those countries. Common law countries recognized trusts quite freely, indeed many trusts are established 'onshore' for asset protection or inheritance purposes. However Offshore Trusts still play a significant part as far as residents of common law counties are concerned, for they are ideal vehicles for tax avoidance.
Offshore countries, with their liberal taxation laws and strict non-disclosure arrangements (usually by way of not even knowing) are ideal bases for trusts of all kinds. Some offshore jurisdictions will allow nominee Trustees, will allow assets to be settled into a trust after it is formed to protect the identity of the Settlor and the type and value of the assets placed in trust, will allow trusts to have an indefinite life (most jurisdictions insist on a specific life span for a trust) and will allow Beneficiaries to be un-named and left to the discretion of the Trustees (see next section). Indeed it is not unknown for some enlightened jurisdictions to ensure that their laws over-ride the laws of the Settlor's and/or Beneficiaries' country in any trust matters.
TYPES OF TRUST
To get around this problem, what are called Discretionary Trusts were established. These are arrangements where the actual beneficiaries of the trust are at the absolute discretion of the trustees. Since no specific beneficiaries are named in the trust document, revenue authorities cannot tax any potential beneficiaries since there is no way of knowing when, or even if, they will benefit from the trust, although tax is (in theory) payable on the receipt of the proceeds of the trust by a specific beneficiary. But you wouldn't be so foolish as to have any distributions from the trust made over directly to you anyway would you? Do so via an offshore account or via an offshore company linked to the trust. We will advise fully on such structures, including ideas such as using credit/debit cards for drawing cash 'onshore' from an offshore trust.
OFFSHORE DISCRETIONARY TRUSTS ARE, IN OUR OPINION, ONE OF THE MOST VALUABLE TAX AVOIDANCE VEHICLES AVAILABLE.
Offshore Asset Protection Trusts
TRUST STRUCTURE AND ADMINISTRATION
A Trust, whether onshore or offshore, and of any type, has a number of component parts, several of which have already been mentioned, but for the sake of completeness, we'll summarize them again here. In essence these are very simple and straightforward, although the Deed itself is a complex legal document and must only be written and modified by someone with detailed, in depth, understanding of the trust laws of the chosen jurisdiction. The major components of a trust (of any type) are:
The Settlor (Grantor)
Deed of Trust (Trust Document)
Trust Property (Assets)
Letter of Wishes
Obviously for any form of trust to work efficiently and effectively and be secure, the Settlor must have absolute faith in the Trustees, otherwise a Trustee could simply run off with the trust assets, name friends and relatives as beneficiaries or invest trust assets in a totally reckless way. There are a number of safeguards in this respect and trustees worldwide will observe both written and unwritten rules:
Firstly, in all the offshore jurisdictions were we have handled trust work, Trustees have to be licensed by the government to carry out trust work, and these licenses are usually only given out to highly reputable and established organizations such as lawyers or accountants - if a Trustee was ever even suspected of misconduct it would be the end of his business career. To our knowledge there has not been a case of misappropriation of funds by a Trustee in over 20 years.
Secondly, when a trust is established, the Settlor can prepare a 'Memorandum of Wishes' ('Letter of Wishes'). This document, which may be changed at any time, expresses the Settlor's wishes concerning the management and distribution of the trust. Whilst not legally binding, a Memorandum of Wishes is usually the major guide a Trustee has, and is usually observed to the letter, unless there are over-riding considerations which prevent a Trustee of doing so. In this event, and offhand we can't think of one, the Trustee would return to the Settlor for instructions.
Thirdly, it is also possible to appoint a Protector or Guardian to oversee a trust and control the powers exercised by the Trustees, however there are potential problems with tax authorities here, since the appointment of a protector could be construed as a thinly veiled attempt by a settlor to influence the Trustees to his advantage.
Finally, Panama Trust laws make specific provision to allow the Settlor, under the written authority of a Power of Attorney given by the Trustees, to act effectively as a Trust Manager. This can have major advantages for a Settlor who wishes to have tight control over a Trust and is reluctant to let any Trustee have total control..... But, and it is an important but, whilst legal under Panama law, this provision is regarded by most major tax authorities as making the trust a sham and thus giving them full legal rights (in their eyes anyway) to disregard it and over-ride its provisions and protection. Having said that, this Power of Attorney is a totally private document between the Settlor and the Trustees and if used wisely and carefully can be a very valuable tool in offshore asset management.
Offshore Trusts can be valuable vehicles for tax avoidance, (not evasion) either in a personal or a corporate role, as offshore companies can be. There are many cases where a combination of the two can be used for both tax avoidance on worldwide company income, plus a means of ensuring that all those profits are centralized and can be inherited, again free of tax, by your heirs or other named people. To recap:
PRIVATE INTERESTS FOUNDATIONS
In an effort to provide additional opportunities to the Offshore Community Law 25 of 1995 was created. Said Law contains the procedures and requirements for the creation of Private Interest Foundations.
ADVANTAGES OF PRIVATE INTERESTS FOUNDATION
Private Interest Foundations may be used as tax and estate planning device with the following advantages:
The transfer of unmovable property, titles, certificates of deposits, assets, funds, securities or shares carried out by reason of the fulfilment of the objectives of the foundation or the termination of the same, in favor of relatives within the first degree of consanguinity or the spouse of the Founder shall also be exempted from all taxes.
The Foundation Charter shall be executed by the Founder by means of a private document, in which case it should be authenticated by a Notary Public, or by means of a public document directly before a Notary Public.
In order for us to provide services in the constitution and management of Private Interest Foundations, the following information will be necessary:
3. Names and addresses of the members of the Foundation Council, which will be no
If required, we can provide standard Regulations with blank spaces to name beneficiaries for an additional fee of US$150
We use Panama to form the offshore foundations, because the Panama law offers most protection.
The fees to form a Panama Private Interests Foundation: US$1350
Process of incorporation will take between 8 to 15 working days after receipt of payment.
Annual maintenance fees after first year: