Trust license.
What is a Trust?
A Trust is a way of controlling assets without legally owning them. The original owner of the assets (the Settler) places the real or personal property, cash, investments or any other assets into a trust to be administered by a trust company, bank, or individual (the Trustee). The trustee then administers the assets for the benefit of others (the beneficiaries). Any act or neglect on the part of the Trustee not authorised or excused by the terms of the trust or by law is called a Breach of Trust.
The Beneficiaries have an equitable interest or estate in the trust assets, whereas the Trustees have a legal interest or estate in the assets. The trust document, appointor document and letter of wishes may be made, signed or held anywhere in the world.
Key Benefits
- Helps to hold or manage an offshore corporation engaged in international activities.
- Holding assets obtained by international corporations engaged in multinational trading. Stocks, bonds and cash investment products gained during international operations may be held in offshore trusts without being subject to taxes.
- Protection of wealth when living in unstable areas: Expatriates who settle in a region that is politically unstable or where there is a risk that a government will expropriate assets or impose exchange controls can protect their wealth by placing it in a more stable jurisdiction.
- Preserving family wealth: Trusts can be used like a Will to arrange for business ownership, investments, or other wealth to be passed on to one's inheritors. Trusts may avoid problems of probate and inheritance laws in the Settler's country of domicile. They can also be easier to administrate than wills, are less vulnerable to legal contests, and assure the assets will be used by the beneficiaries in the way intended.
- Facilitation of tax planning: A Discretionary Trust can be useful in reducing taxation of gifts or bequests. The Trust is under the control of and legal ownership of the Trustees and the neither the Settler nor the Beneficiaries can be said to have any taxable ownership of the trust. The Trust Deed need not show the names of Beneficiaries. These may only be specified in a Letter of Wishes that is private. The Trustees have absolute discretion as to whom the Beneficiaries are, how much is appointed to each, and when and how any distribution may take place.
- Confidential and flexible: Since assets are held in the Trustees' name, Settlers enjoy complete privacy as to the nature of their investments and to whom they are giving benefits. The Trust Document is not a public document and is handled with absolute confidentiality. Trusts can be created, or changed, rapidly.
- Trusts are private arrangements: Trusts need not be registered with any tax authority and are a private agreement between the concerned parties. Nor is there a legal requirement to file the accounts of a trust or have them audited by an independent auditor.
The Parties to a Trust:
The SETTLER is the original owner of the assets. The Settler can place assets in three ways:
- By settling assets on a trust,
- Through a "Declaration of Trust" prepared by the Trustees,
- By a "Memorandum of Addition" added to a Declaration of Trust at a later time.
The TRUSTEES may be individuals or a corporate entity (such as the Guardian Trustees Limited). The powers, duties and obligations of the trustees are written in the Trust Deed. Their actions are governed by law, and violations of the agreement result in criminal penalties.
The BENEFICIARIES are the persons or corporations entitled to receive the income or the assets of a trust according to the "Letter of Wishes" prepared by the Settler.
The APPOINTOR (sometimes called the PROTECTOR) is a person appointed to the trust to oversee the actions of the trustees. The Appointor may remove or appoint trustees, may be required to sign all decisions of the Trustees, and may be more than one person. Where an ostensible settlor is employed, the client, by being designated the Appointor, retains a degree of control over the trust administration.
The LETTER OF WISHES states how the Settler wants the trust to be administered. It may be provided at the creation of a trust or at a later date. It can be changed from time to time and can name a successor in the event of the death of the Settler. Letters of Wishes are not legally binding, but are followed by Trustees providing the wishes are, not illegal or in contravention of the trust deed.
The TRUST DEED is the document that establishes a Trust. It contains:
- An acknowledgement of the transfer of trust property from the settlor to the trustee subject to the terms of the trust deed.
- A provision whereby the trustee can accept further property as part of the trust fund and the initial transfer need only be a nominal amount.
- A statement as to the duration of the trust. The usual period is a maximum of 80 years.
- A statement identifying the beneficiaries by name or class.
- A statement as to the circumstances under which the income and the capital of the trust fund are to be disbursed to beneficiaries.
- The powers and duties of the trustee.
- A statement as to the removal of the trustee and the appointment of a new one.
- A statement of the law to which the trust deed is subject.
- An optional provision for designating an APPOINTOR who may be able to remove the trustee and exercise a series of checks and balances over the trustee's conduct.
Additional Trust Options. Discretionary Trusts are the most common type of trust, but there is a wide assortment of trusts depending on the requirements of the particular client. For more information on different types of trust, contact Freedomland Finance and Consulting Ltd.
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