Discover the crucial role of trusts in offshore jurisdictions for safeguarding your assets from creditors, legal disputes, and unwanted scrutiny. Explore the safety of this unique wealth management structure and understand the key components, including the Settlor, Trustee, and Beneficiaries.
Why do you need a trust in an offshore jurisdiction? Well, if you have assets and you are concerned about their protection from creditors, greedy relatives or ex-spouses, or even the state, there is no better instrument than a trust – especially in a jurisdiction that does not recognize the decisions of foreign courts! However, a trust is a peculiar structure where you actually allow another person to own the assets on your behalf… Is it safe? In this post, we will look at the trust structure to show you that this is a perfectly safe way of taking care of your wealth.
We will be happy to see you on our portal where you can read a more detailed article on building offshore trusts efficiently. We write about different instruments for asset protection and various jurisdictions that will be real strongholds for your wealth. You can book a free initial consultation with our expert to discuss setting up a trust or any other ways of asset protection you may be interested in, and get the best solution for your situation at no fee. If you need any help with trust setup, you can choose our turnkey package of services and get a ready-to-use trust in a reliable jurisdiction in no time.
Trust: How It Is Created
When you set up a trust, you will need at least two persons: a Settlor and a Trustee.
A Settlor (also referred to as the Grantor or the Trustor) is the person who establishes the trust and transfers the assets to it.
A Trustee is the legal entity to which the assets are transferred and which will manage them on behalf of the Settlor.
A trust also has one or several beneficiaries. These are usually third parties (an individual or any legal entity), but the Settlor can also be one of the beneficiaries.
Wealthy people started to actively use trusts about twenty years ago, and it was at that time that one more trust member appeared called the Trust Protector. Why did it happen? Well, wealthy people felt naturally uneasy about transferring their funds to a third party, and they wanted to have an additional layer of protection. Thus, the position of a Trust Protector was created to oversee the Trustee’s actions and advise on some issues in case of need.
If all the assets are now officially possessed by the Trustee, how can the Settlor control them? The matter is that the Trustee is limited in its actions by a Trust Deed which is drafted by the Settlor. This document defines in what way the assets will be managed by the Trustee and distributed among the beneficiaries, and defines the scope of the Trust Protector’s interference with the Trustee’s actions (which may range from tacit supervision to the right to dismiss the Trustee and appoint another one).
What can you do after the trust has been created? Well, this is a good tool for asset management and investments. You can instruct your Trustee to find the best possible investment offers and invest your funds (after your approval), for example. Thus, you will manage your funds in any way you find convenient, and they will be perfectly safe as no one can take them away from you as they officially belong to another person! There is nothing better than this kind of protection as it is absolute and perfectly legal.
Types of Trusts
The most important characteristic of a trust that serves as an asset protection tool is whether it is revocable or irrevocable:
- If the trust is revocable, you can modify the list of assets kept in it, and also add or retrieve them if this opportunity is specified in the trust deed. This sounds convenient, but there is a serious drawback: if you need strong asset protection, a revocable trust will be of no use as the property legally belongs to you – and, as you may guess, it may be taken away from you.
- An irrevocable trust is the most powerful tool for asset protection. If you opt for this structure, you transfer the assets to the trust once and they cannot be retrieved anymore. Sounds scary? Don’t worry: we will describe the obvious benefits, and you will understand that this move is worth it!
There are a lot of lawsuits filed against people every year. If you lose, you will have to pay the debts using all the property that belongs to you (including any assets kept abroad) – or go to prison. This is a very unpleasant situation that we wish our customers would never find themselves in.
And what happens if you have a part of your assets in an irrevocable trust, especially the one set up in an offshore jurisdiction? Well, there is simply no way to retrieve them to pay the debts! First of all, they no longer belong to you: they are officially owned by another person. Second, even if the judge orders the trustee to relocate the trust to the settlor’s home country, the trustee will not be able to do it as the only order it complies with is the one set out in the trust deed. It simply has no power to do so! It practically means that your assets will remain intact – and even if everything has been taken away from you, you have at least the assets kept in a trust to start your life from scratch with.
How to Form an Offshore Trust
Here are the steps you will have to take to set up a trust in an offshore jurisdiction:
- Choose an appropriate jurisdiction.
- Collect the package of documents according to the requirements of the local laws.
- Draft the Trust Deed.
- Register the trust in the country where you are going to form it.
- Appoint a trustee. If you are in doubt, simply leave it to us: we cooperate with several reliable trustees who specialize in these services, and we can recommend them to you.
- Provide your Trust Deed to the attorney who will turn it into an official document.
Not every person needs to set up an offshore trust. However, if asset protection is an important issue for you, you can follow the above link to read the full text and/or contact our expert who will advise and support you in any matter related to trust formation that seems difficult to you. Welcome to the realm of bulletproof asset protection – the help is just a click away!
