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Offshore Trusts (Making sure you can have trust in your financial arrangements)

Previous articles have referred to trusts on a number of occasions. Trusts are extremely useful financial planning vehicles for all sorts of reasons and circumstances.

It is fair to say that there is a certain amount of  “mystery” about trusts and the feeling that they are only for the super rich. Frequently, tax specialists refer to trusts as “fiduciary structures” which makes them sound quite complicated. This is not the case at all, in the main the structures are quite simple and fairly easy to understand and are certainly not the preserve of the super rich.

Whilst it is true that someone with only a few thousand euros is not going to benefit from a trust arrangement, there are significant numbers of people that could benefit from such structures.


So, to summarise, what are the benefits of offshore trusts?

Wealth protection- Where assets are held for the benefit of others (perhaps young children), or against political/economic uncertainty or possible future litigation and action from creditors.

Tax Planning- Offshore trusts can be extremely flexible financial planning tools for income, capital and inheritance taxes. Often simplifying tax affairs. Ensuring that money is available for families upon the death of the breadwinner, immediately and without unneccessary taxes, could be very important for families.

Flexibility- Some trusts are flexible to reflect potential future changes in financial planning needs.

Privacy- Some jurisdictions do not publicly register trust deeds.

Employee benefits- Trusts can be ideal structures to reward staff by way of pension benefits, insuarance schemes and share option agreements.

Legal structure- Trusts are long established legal structures.


How do offshore trusts work?

The trust allows the owner of assets to pass the responsibility and legal ownership of those assets to someone else (trustees).

The trustees (which could include the original owner- known as the settlor) then have the responsibility of managing those assets. The assets must be managed in accordance with; 

  • The trust deed. This is the document that spells out what the trust can and cannot do and these rules would be drawn up in accordance with the wishes of the settlor.
  • The trust must adhere to the laws of the jursdiction in which it is based.


Basically, the trust is there to ensure the right people get the right money in the right form at the right time.


The next step

Trusts are flexible and can be highly personalised to suit individuals‘ differing circumstances. Therefore, it goes without saying that not all trusts can be “bought off the shelf” and advice is needed to consider the best structure individually.

Considerations will include; who to appoint as trustees, the type of trust, the most appropriate jurisdiction and who should manage the assets within the trust.

So, why leave your future financial planning to chance? Let the people you trust ensure that your wishes are met, whether you are still here or not.


About the Author: Christopher Lean is a consultant at Square Mile Financial Services (http://www.squaremilefs.com ) and an Associate of the Personal Finance Society (Chartered Insurance Institute).