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Trust have existed for more than 500 years and the last century has seen the
emergence of different forms of trusts ranging from charitable trusts, to asset
protection trust to discretionary trust. Trusts are set up for different reasons
but the most common ones are for assets protection and privacy goals.
A popular planning option to avoid concerns over litigation is to set up an
asset protection or discretionary Trust. In this event, assets are settled into
the discretionary trust by the settlor. These assets are then legally regarded
as the assets held in Trust and owned by the Trustee (which is normally a
professional trust company). In the event the settlor faces legal proceedings by
creditors, the assets held in the Trust cannot be used to settle his debts as
they are not legally his assets.
THE USES OF OFFSHORE TRUSTS
The wealthy have used the trust approach for many years. There are numerous ways
to use an offshore trust seriously and effectively. It depends on your
individual needs and your situations. Some of the uses are:
As a tax-planning tool - Because the settler gives up legal
ownership of the assets it may be possible to avoid or defer capital or gift
taxes, death duties, high income tax rates, etc.
Asset protection - The risks of holding assets in highly
volatile and politically unstable areas of the world (including the introduction
of exchange control regulations and the "freezing" of assets held in those
areas) can be avoided. It is essential that the trust is set up when there were
no claims or potential claims known to the settler this would enable you to
protect personal assets from creditors, professional negligence, divorce
settlement, product liability and similar claims legally.
Substitutes for a will - Some countries have punitive
legislation dictating the manner of wealth distribution on the death of the
owner. If the legal requirements conflict with the wishes of the owner of those
assets fixed succession or forced heir ship rules of those countries can be
avoided by the transfer assets into an offshore trust.
Make a secret provision - Provision can be made, for example,
for an out-of-wedlock child, for charitable causes or even a lover.
To establish a mutual (or Unit Trust) fund -The trustee can buy
holdings in several companies and invite the public to buy "units" or shares in
the trust fund.
Preservation of family wealth
- Assets can be set aside for the future benefit of family members while
restricting the beneficiaries' access, until such a time that it is appropriate
that those assets be distributed. For example, when a child becomes of age to
hold title to property or to protect the assets from being dissipated by a young
wayward family member.
Confidentiality of financial affairs
- There is no requirement to register or record Trust Deeds with any authorities
in many offshore jurisdictions. Avoiding any entry in the public records.
Avoiding Probate - If you are from a civil law country with
forced heir ship requirements, a trust can keep assets out of the local probate
system, since the trust and its assets are governed by the laws of the country
in which the trust is located. Trusts especially if established for several
years, is less likely to be challenged legally compared to a will, which may be
more easily contested during probate. The trust is an obvious defense to the
charge of mental incompetence often used to attack the validity of a will,
especially ones written late in life.
Discretionary Trusts
As the name suggests, the trustee is given certain discretionary powers
regarding the distribution and/or allocation of the income (and ultimately the
capital) to the beneficiaries. When establishing a discretionary trust, the
settler decides exactly how wide the powers of the trustee will be. These powers
are set out in the trust deed. The trustee can be given absolute discretion as
to which beneficiaries will benefit, to what extent and on what occasions. This
absolute discretion to appoint, at some future time, beneficiaries not even
named in the trust deed can be very useful when establishing a trust structure
providing extra confidentiality.
Once you have established your offshore trust it can be used to:
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Conduct a business.
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Hold title to and invest in real estate, cash, stocks, bonds, negotiable
instruments and all sorts of personal property.
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Take care of minors or the elderly.
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Pay medical, educational or other expenses.
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Provide financial support in retirement, marriage or divorce.
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Assist in the execution of a premarital agreement.
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Serve as a major avenue of avoidance for the muddle of probate and the burden of
inheritance taxes.
In addition your trust can also be used for your international investment
activities. Your offshore trustee would take care of the investments and paper
work, while you make the recommendations. In this way, you benefit from the
world's best investment opportunities, without worrying about boundaries or
conflicting laws. With the use of a foreign trust in an offshore jurisdiction
you are able to diversify your investments and assets international.
Trust and GBC 1 in Mauritius
Global Business Companies ("GBC") are the term used for offshore companies that
are set up in Mauritius. Two types of GBCs’ can be set up namely GBC 1 and GBC
2. GBC 1 benefits from the double taxation avoidance treaty network of
Mauritius. Setting up a GBC allows the shareholder to retain control of his
assets as opposed to a Trust whereby the assets are settled into Trust and legal
control lost.
To add another layer of safety, the GBC can be set up as a limited liability
company (LLC), which can be used either independently or in conjunction with an
offshore trust. The GBC will have minimum assets and will be responsible for the
operational side of the investor affairs. Profits realized by the LLC are
distributed as dividends to the shareholder which can be a Trust. In the event
of legal action by creditors, the liability of the investor is limited to the
assets held in the LLC.
The LLC is able to provide what many clients need in an offshore structure:
corporate personality, limited liability, minimal administrative requirements,
asset protection, no loss of control and minimal disclosure (depending on the
type of GBC that is set up)
For more information regarding offshore trust write to us on
query@nrilegalservices.com or click on
Send a Query.
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