Offshore Trusts

An offshore trust is a useful and legitimate device for planning and protecting wealth. Property or valuable possessions to be passed on to a minor or disabled child are protected by an offshore trust, which provides a device for managing those assets or possessions until the child reaches a mature age and may be better able to manage the assets on his or her own. The use of an offshore trust is similar to that of a Will, in that the assets held in the offshore trust can only be disposed of and allocated as indicated by the offshore trust’s deed, which is a legally binding document.

Offshore trusts are composed of fundamental actors which each serve a specific role in the manner in which the offshore trust is ran. The members of an offshore trust are the same as those of a regular trust entity. According to offshore trust law, an offshore trust is only fully formed when comprising of a settlor or grantor, a trustee, beneficiary and, in some cases, a protector (optional).

The settlor or grantor of an offshore trust is the person authorized to transfer property. A settlor or grantor can be the offshore trust’s beneficiary, protector or trustee. The settlor is the person who forms the offshore trust and states exactly how he or she wishes for the assets held in the offshore trust can are to be distributed. The wishes and order of the settlor are contained in laid out in the offshore trust’s deed.

Trustees of offshore trusts are normally persons who have already gained the age of majority. The trustee is the administrator and legal owner of the offshore trust. The trustee of an offshore trust is required to comply with the clauses of the trust deed. Most offshore trust laws state the minimum or maximum number of trustees that an offshore trust may have. The settlor and trustee of an offshore trust can be one and the same person, as well as the beneficiary of the funds or real property put in the offshore trust. With respect to the appointment of an offshore trust protector, provisions may or may not be made for the carrying out of a protector role by an individual. Offshore trust laws dictate the functions and powers of a protector in the case where an offshore trust protector is appointed.

Offshore trusts generally have the same characteristics but may have slight differences from one jurisdiction to the next based on the provisions of the legislation governing offshore trusts. Before forming an offshore trust it is important to be knowledgeable about the laws or at least the main features regarding the advantages and disadvantages or limitations of a given jurisdiction. Not only are the characteristics of an offshore trust worth knowing about, but the soundness and stability of the jurisdiction as a center for offshore services as well as the various treaties signed with foreign governments and tax authorities on in matters such as double taxation and information exchange agreements. This aspect of offshore trust formation is important because it ultimately affects the level of asset protection and privacy that a jurisdiction is disposed to provide despite the offshore trust’s ability to safeguard assets through privacy and stern offshore principles. Further, when setting up an offshore trust, the court system’s effectiveness and the quality of the judiciary are also vital because the benefits of an offshore trust can be lost if the laws governing offshore trusts cannot be held in the jurisdiction.

Offshore trusts generally tend to be likened to offshore foundations based on their principle characteristic of protecting assets, but differ in basic areas. One of these includes the total lack of ownership of an offshore foundation, which prevents it from being claimed by any one, while offshore trusts do have a legal owner.

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