TRUSTS EMPOWER SECURITISATION
The term "trust" is widely known and used, however there are often many misunderstandings as to what a trust actually is. The correct definition of a trust is an agreement or contract. It is not, as many believe a special type of company. It is purely an agreement -albeit a very special one, between the interested parties.
Normally the original founder of the Trust and or the beneficiary(s) are a person or persons who could potentially come under attack from many directions such as creditors, bankruptcy proceedings, ‘child maintenance related’ property settlements, government sponsored lawsuits, divorce settlements, liquidators or spurious litigation. (For reference purposes we will refer to these people as the ‘affected parties’).
The role of the Trustee is to provide a legal firewall between litigants and the ‘affected parties’. This can be easily achieved due to the following:
The Trust is not a related party to any of the Trust beneficiaries
The Trustee is immune to any court proceedings from another country or jurisdiction.
The local courts have no legal authority over the Trustee who is resident in another country.
The Trustee is a corporate entity subject to its own jurisdictional laws.
A fiduciary structure can help not only preserve your wealth but can also offer you greater flexibility over the management and distribution of your assets. The most common type of fiduciary structure is a trust, a binding arrangement whereby assets are transferred to a “Trustee”. The Trustee is required to administer the trust assets for the benefit of specified beneficiaries strictly in accordance with the terms of the trust.
Advantages in Forming a Trust
The Settlor can transfer any assets he has and legally declare he does not own them No assets that belong to the trust can be seized Potential inheritors cannot make claims against the trust because it stands separate to any will related estate. Trusts may also be free from taxation
The Interested Trust Parties:
The Settlor:
The Settlor is the transferor of the assets into the trust. Any kind of asset can be transferred, funds, shares, cars, boats, real estate and even non entities such as patents, intellectual property or other rights. Once the assets have been transferred into the trust this cannot be revoked.
Once the Settlor has transferred all the assets into the trust he can legally declare that he does not then own them. This is of special interest in cases of bankruptcy, divorce, child maintenance and inheritance or legal claims. Trusts are one of the most preferred methods employed by medical professionals to protect their assets in case of malpractice claims being brought against them.
The Appointor / Principal:
An Appointor, if relevant and applicable to the Trust Deed, is the actual controlling influence in the structure of a Trust and has the power to remove and appoint Trustees.
The Appointor can require changes to be made to a Trust Deed at any time providing that those changes are deemed to be in the best interests of the beneficiary.
The Trustee:
The Trustee is the official manager of the trust. Officially the trustee must be independent from the Settlor and has all rights and full control over the actual running of the trust. Obviously few people would wish to pass that amount of control over their assets to a third party so generally the trustee will always act unofficially on instruction from the Settlor.
It is possible to draft a separate agreement between the Settlor and trustee ensuring the Settlor retains full control. In order to act as trustee over any trust, the trustee must hold a special license. WSR have the benefit of using the services of a long established and reputable trustee.
The Beneficiary:
As the name suggests, the Beneficiary is the person or persons who finally receive the assets from the trust. The Settlor can be a named Beneficiary. All entitlements to beneficiaries must be set at the commencement of the trust and cannot be revoked or changed.
Once the beneficiary has received the assets from the trust he is then liable to declare this and pay due taxation. The Beneficiary can receive regular payments from the trust, for example from the interest or can wait for the expiry of the trust and receive all assets and interest in full.
The Guardian:
A Guardian, if relevant and applicable to the Trust Deed, has many similar powers to the Appointor but can only exercise this power if the Appointor becomes unavailable for any prolonged period.
The Protector:
A Protector may be appointed by the Settlor to 'control' the actions of the Trustee and safeguard against the Trustee doing anything that would not be deemed in the interest of the Beneficiaries.
Why establish a Trust offshore?
When a Trust is established in a suitable offshore jurisdiction, provided that residents of the offshore jurisdiction are excluded from receiving benefit from the offshore trust, then there will be no local taxes applicable to the assets and income of the trust or the Foundation.
What is an offshore Trust?
An offshore trust is created when assets are transferred to a trustee, who resides offshore. The trustee becomes the legal owner and is responsible for managing the assets and distributing them to the beneficiaries of the offshore trust in accordance with the terms of the trust deed.
The terms on which the Trustees administer the trust assets are detailed in the relevant trust deed and applicable jurisdictional trust legislation to govern trusts has been enacted in many common law jurisdictions.
Advantages of an Offshore Trust
Eliminates the power of domestic court related processes provided that the ‘affected parties’ cannot be seen to exercise control over the trust or its assets.
The Settlor can initially transfer any assets he has and legally declare he does not own them;
Properly structured, NO assets that belong to the trust can be seized;
Potential inheritors cannot make claims against the trust;
Trusts are normally free from taxation provided the beneficiary(s) is not resident in the Trustee's jurisdiction;
The unilateral offshore trust - a perfect instrument for asset protection!
Establishing Offshore Foundations
A Foundation is the ultimate Trust;a separate legal entity, without members or shareholders, and is generally established to reflect the wishes of the founder, who may be an individual or a corporate entity. These wishes are contained within the Foundation's Deed of Incorporation, Articles of Association and Bye Laws.
Foundations can be established for a fixed or indefinite period of time and can be used for charitable, commercial or for family purposes.
Foundations are a very important component when structuring the ownership of family and corporate assets and are particularly important where Trusts are not generally recognised. They are in many respects similar to corporate entities but afford the protection and continuity derived from the use of Trusts.
Why establish a Foundation offshore?
When a Foundation is established in a suitable offshore jurisdiction, provided that residents of the offshore jurisdiction are excluded from receiving benefit from the offshore trust, then there will be no local taxes applicable to the assets and income of the trust or the Foundation.
