TRUST FORMATION AND OPERATION

Corporate and Trust Services (Caribbean) Limited and its trust professionals are equipped to meet and to advise upon all your trust needs enabling flexibility of planning, protection of privacy, wealth, assets and inheritance wishes.

What is a Trust
A Trust is a relationship created by a "settlor" whereby during his lifetime he transfers assets to a "trustee" for the benefit of another person or class of persons called "beneficiaries". The underlying principle of a trust is the clear separation of the legal ownership of the asset - which lies with the trustee - from the beneficial ownership of the asset, which lies with the beneficiaries. The trustee gives the settlor an assurance that he will take responsibility for the asset and distribute or deal with it in accordance with the settlor's wishes.

The main purpose of an offshore trust is to protect the assets of the settlor against financial disaster which may be caused by excessive death duties, a spendthrift family member, marital or family breakdown, mismanagement of business ventures, contingent creditors and political risk.

The Trust Deed is a written instrument or contractual agreement which sets out in detail the duties of the trustee, the names of the beneficiaries and the assets which are the subject of the trust. It enables the settlor to make confidential provisions for himself or his family in a tax efficient manner during his lifetime or upon death, by divesting himself of income and assets to a trustee who will hold and administer them in a tax free jurisdiction such as Antigua and Barbuda.

Advantages and usages of a Trust

The known advantages of a Trust are set out below.
  • Preservation of family wealth by avoidance of death duties and inheritance tax
    Upon death tax authorities will be looking for any hidden assets held by the deceased for the purposes of levying death duties and inheritance tax in addition to making good on taxes and penalties avoided during the life of the deceased. If the deceased has left a will upon death his asset are disclosed to the world and hence to the tax authority. By parting with his property during his lifetime to trustees the settlor avoids this eventuality and so preserves family wealth.
  • Continuity of ownership and management of business assets
    A Trust is akin to a limited liability company and hence notwithstanding the death of the settlor its management and operation continues especially where the trustee is a well established organization that has been specifically authorized to manage trusts.
  • Protection of inheritance wishes through heirship provisions
  • Asset protection against future unknown claims
    Since by setting up the trust the assets technically do not form part of the settlor's estate, the assets cannot be seized in the event of financial insolvency.
  • Planning for emigration / immigration in the event of restrictions or changes in law
    There will be assets readily available for use outside the onshore jurisdiction.
  • Tax avoidance in relation to income or assets
    Generally, in most offshore jurisdictions the trust is administered free of taxation. Onshore jurisdiction will general not allow trusts to be administered tax free.
  • Avoiding or reducing probate formalities where assets such as bank accounts are held in several countries
  • Protection for infant children, aged parents or persons of unsound mind
    Trusts provide a means whereby persons under a disability can be looked after.
  • Confidentiality
    The alternative to a trust is a will. A will is a public document once probated and does not provide the kind of confidence as the trust.
  • Provide pensions for retired employees and their dependants.
  • Estate Planning
    Trusts allow the continued administration of property after the settlor's death in the way that he has requested and thus it relieves him of fears that the estate will be squandered away upon his death.
Some countries have introduced anti-avoidance laws to lessen those advantages and it is therefore important that the Trust be carefully drafted.

Offshore Trusts

For the international client a trust instrument can be prepared to meet any requirement of the settlor and may take cognizance of and incorporate the following types of provision in the trust instrument:
  • Acceptance of additional property into trust
  • The appointment of trustees outside the jurisdiction of choice
  • Changing the governing law
  • Appointment of additional beneficiaries and exclusion of any beneficiary
  • Distribution of the trust fund to another trust.
A settlor can set out in the trust instrument the way in which he wishes the trustee to administer, invest and distribute trust property to beneficiaries. Alternatively, the trustee by way of the trust instrument accompanied by a legally non-binding letter or "Letter of Wishes" may give the trustee a wide discretion while at the same time giving guidance as to how both investment and distribution of trust property should be effected.

Note that although the trustee given a "letter of wishes" is not legally bound to follow the instruction, he would normally do so unless a change in circumstance led him to believe that following those wishes would have undesirable consequences for a particular beneficiary or beneficiaries.

The "Letter of Wishes" may be amended as often as required during the lifetime of the settlor to take into account any change in circumstances of either the settlor or the beneficiaries.

Should the client wish to guard against the excesses of a trustee he may wish to appoint a protector. The terms of the trust would require the protector's consent before certain decisions or functions can be carried by the trustee.

Offshore trusts offer great flexibility in a wide range of financial planning and strategy.

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