What is a trust ?
A trust is a legal arrangement, almost always in
writing (the Trust Deed), where the original owner of the assets
(the Settlor), transfers them to another (the Trustee), who will
hold the assets for the benefit of others (the Beneficiaries).
There can be more than one Settlor, Trustee or Beneficiary.
The Settlor can also be a Beneficiary of the trust.
What are the benefits ?
In any of the following situations, the creation of an
offshore trust is capable of delivering significant benefits both
to the Settlor and Beneficiaries:
- the need for avoidance of expensive and complicated probate
procedures
- tax planning, especially in the context of migrating from one
country to another
- the need for confidentiality
- succession planning, especially in the area of avoidance of
forced heirship
- providing a safeguard against possible political disturbance in
a home country
- protection from adverse consequences of the imposition of, or
changes in, exchange control regulations in a home country
By creating a trust the Settlor gives up legal ownership of
the assets. They are transferred or gifted into the trust fund so
it is essential that the Settlor understands fully the implications
of creating a trust.
Discretionary trusts
The most usual type of offshore settlement is
the discretionary trust and under such an agreement it is possible
for the Settlor to provide guidance to the trustees by issuing a
letter if wishes. Such a letter is not legally binding but affords
flexibility as it may be altered from time to time by the
Settlor.
Discretionary trusts are popular in the
offshore environment because they can afford maximum flexibility at
the same time as offering protection from hostile government
expropriation or taxation. By creating a trust the Settlor ceases
to own assets which consequently do not form part of his or her
estate, as on his or her death they continue to be held by the
Trustee.
Interest in Possession Trusts
Under this type of arrangement the Trustee may
have no discretion as to the application of income arising from the
trust fund other than to pay it to certain specified Beneficiaries
or accumulate it for their future benefit. Typically, upon the
death of the person entitled to receive the trust income, the
capital will pass to certain other beneficiaries on fixed terms, or
possibly, at the discretion of the Trustees.
Accumulation and Maintenance Trust
This is designed principally for the benefit of
minors. It has particular application in the context of UK
Inheritance Tax Planning. It is usual for income to be accumulated
by the Trustees for a fixed period, normally expiring on a
Beneficiary's 25th birthday. During this time, payments may be made
for education and maintenance purposes.
At the end of the accumulation period income may be made
available on fixed terms to the relevant Beneficiaries with the
capital being transferred at a later date, often at the discretion
of the Trustees.
Employee Benefit Trusts
Trusts administered in Jersey are popular for the purpose of
holding shares to provide the means whereby employees may
ultimately acquire shares in their employing companies in a manner
mutually advantageous to the company and its employees.
These are just a few examples of the services that can be
provided by the Jersey office. Our team is also well versed in
insurance related products and the incorporation and administration
of corporate vehicles.