trusts

Trust Services

Origins | The Concept | Deciding on a Trust | Civil Law | Other Jurisdictions

With careful tax planning, we can establish trusts for our clients that can lead to mitigation or even avoidance of international taxes. Benefits associated with trusts include:

1. Tax Planning
   Trusts can be used effectively to reduce tax liabilities in situations where a person(s) moves from 1 jurisdiction to another and the trust is set up before tax residence is established in the destination jurisdiction.
2. Avoiding Conspicuous Ownership of Assets
   Trusts are not always used for tax planning objectives. Numerous high net worth individuals in many countries use the trust arrangement to achieve confidentiality as to the ownership of their assets. Reasons for seeking the confidentiality afforded by the trust arrangement include the desire of not having one's assets confiscated by evil political regimes and fear of kidnap for ransom from the organised crime syndicates, for example.
3. Asset Protection
   A trust can be set up well in advance to preserve a person's wealth against adverse consequences arising from unforeseen business failures or the award of extravagant damages arising from litigation. US professionals such as lawyers, doctors and dentists frequently seek to preserve some of their assets from the reach of the courts, by transferring spare assets to trustees in a different jurisdiction. There are severe laws that reduce the effectiveness of these trust arrangements. Asset protection trusts therefore need to be set up with great care, and in any event, long before an opportunity for any claims arises.
4. Forced Heirship
   Forced heirship is a system under some jurisdictions whereby a deceased person's asset must be divided according to the law. If an individual has different ideas as to who should benefit from the assets left after death, a trust can be set up during the individual's lifetime in which a chosen person is made the beneficiary. The assets would then be taken out of the individual's estate, and hopefully out of reach of the forced heirship rules.
5. An International Trust
   This type of trust is a modern development of English trust law and involves the basic trust relationship whereby a person (the settlor) transfers assets or property to another person (the trustee) for the benefit of others (the beneficiaries). The arrangement becomes "international" due to the fact that 1 or 2 elements are located in different jurisdiction. For example, the settlor could be a resident of country X, transferring a property to a trustee who is resident in country Y, for the benefit of individuals based in country Z. Such an arrangement can produce complications if not planned out with due care as to the overall objective to be achieved because different rules apply to each aspect of the trust formation and administration, as well as to the transfer of the assets to the trustees.
   
   The Hague Convention on the Recognition and Enforcement of Trusts has endeavoured to solve many of the complications associated with international trusts, but unfortunately, in addition to the Convention not dealing with various complications, many countries have not joined the Convention.

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