You might’ve heard about the term ‘offshore trust’ and from the word itself, it means that an individual is probably engaging into a trust from in a different jurisdiction. That is quite true. However, this editorial would explain offshore trust’s fundamentals in order for you to find out more about how offshore trusts are defined, how it is performed, as well as its advantages and disadvantages. It could also help you make your decision on, whether or not, invest on such trust.
To start off, an offshore trust is a trust arranged in another location with different jurisdiction from where the individual resides in. This type of trust involves three parties. The first one is the grantor, also known as the ‘settlor’. He/she is the one that entrusts assets to the trust. In the process of doing so, it is understood that they are in consent of entrusting these assets to ‘the trustee’, a second party. The trustee will be in the right position to disperse the benefits of the trust to the beneficiaries, the third party. In some trusts, there is the presence of a fourth party, also known as, the ‘Protector’. The protector’s main task is to assure that the trustee is in compliance with the guidelines and maneuver the assets for his/her personal gain. In case that the protector finds the trustee in bad faith, the protector can opt to replace the trustee. However, getting a protector for offshore trust may cost around $750 USD. Still, many rich people opt to hire a fourth party to guarantee protection for their assets.
More often than not, the types of individuals who engage in offshore trust are the wealthy ones. The main rationale is to the provide wealth for their families that may last for generations. Thus, engaging in this type of trust could best assist them in protecting their assets. Even if it means that entrusting their assets to these trusts may cause the settlor to lose authority over his/her own assets, they are guaranteed that the whole transaction is protected and their beneficiaries would benefit from it.
Offshore trusts, just like any other trusts, may be subject to estate tax or any similar tax under a certain jurisdiction. Not to mention that these taxes can be relatively high. This is why many offshore trusts find a way of how to minimize or circumvent the process of taxation. In addition, the grantor could also select which jurisdiction and tax laws would best benefit them. Therefore, if you wish to engage in this type of trust, it is important to make a research about tax law on jurisdictions you’re interested and verify if your future strategies are all deemed legal.
Offshore trusts are advantageous for an effective management of your assets especially if your funds are spent unmindfully by your offspring and/or other family members. It has a tax-efficient structure since the agreement is initiated by private parties resulting to confidentiality. It is actually the best way to circumvent liabilities for taxes under asset transfers and inheritance. The disadvantage, however, is that the settlor has to relinquish his/her control over his/her trust entirely. In addition, there are applied complications in asset transfers between countries and this may be illegitimate depending on the nature of assets transferred from the country of origin to the country of destination.
Therefore, if you wish to secure your assets by engaging into an offshore trust, it is best advised that you seek professional tax guidance from reliable consultants. At the same time, do your own research about certain jurisdictions and outline the goalmouths you wished the trust to achieve.
Speak Your Mind
Tell us what you're thinking, if you want a pic to show with your comment, go get a gravatar!