OFFSHORE TRUSTS FAQ
What Are Offshore Trusts?
A Trust is a contract, a private legal agreement. Trusts are based upon
the "Trust Deed", which expresses the agreement between a person (the Settlor),
who places assets in a Trust, and the (Trustee), an individual, Trusts or Corporations
entrusted with the protection, management and ultimate distribution of the assets for the
persons, (the Beneficiaries), entitled to benefit from the assets and/or income held under
the terms of the agreement.
What Is Contained In A Trust Document?
This private agreement between the Settlor and the Trustee may be drawn
up in many different ways in order to define the desires or concerns of the Settlor. While
the specific instructions in the Trust document, know as the Trust Deed, may vary greatly
from case to case, the necessary features are:
- Naming of the Trustee.
- Defining the terms and conditions under which the Trustee can be removed or resign.
- Defining the Trustee's powers and restrictions.
- Describing the assets or, initial Trust Property
- Naming the Beneficiaries and describing how each is to benefit.
- Naming of the Settlor, the person who contributes the initial assets to the Trust.
- This Settlor then literally "gives away" the assets transferring legal
ownership of them to the Trustee.
- The Settlor names the Beneficiaries of the Trust.
- The Deed identifies the Property Settled upon the Trustee: the property then passes
on to the Trustee.
- The Trust Property can be increased at any time providing the Trust Deed has been
written to allow this.
Who Is The Trusts Settlor?
The Settlor gives away his assets and thereby transfers the legal
ownership to the Trustee. The Settlor arranges the Trust Deed so that the distribution of
income or assets by the Trustee is done completely at the discretion (subject to the
Settlor recommendations through "letters of wishes'), of the Trustee
(Discretionary Trust), or by clear definition (Non-discretionary Trust).
What Is The Trusts Trustee?
The Trustee is the person, corporate body, or other entity into whose
ownership the assets have been transferred. It is the duty of the Trustee to ensure that
the wishes of the Settlor are carried out and the beneficiaries' interests protected. The
Trustee can be removed and replaced by a new Trustee if for any reason it is deemed
appropriate.
What Is A Trusts Protector?
A Protector can be an individual or an entity who can be given the
power within the terms of the Trust Deed to remove a Trustee, protect the interests of the
beneficiaries, or appoint a new Trustee.
What Are Trusts Beneficiaries?
A Beneficiary is any person or persons or any other legal entity,
including another Trust or a Charitable Organization, who will benefit under the terms of
the Trust Deed. They may be nominated either specifically by the Settlor and their
benefits clearly defined, or by class, that is, sons, daughters, grandchildren, etc. The
Trustee is normally guided by the written or verbal wishes of the Settlor.
Is A Trust The Same As A Will?
Trusts are, in a sense, is a living "will" which works before
and after the death of the Settlor. Trusts can be terminated or "revoked" on
the wishes of the Settlor. However, making a Trust "irrevocable" (meaning
outside the Settlor control) can provides significant tax advantages. Belize law allows
for liberal response to Letters of Wishes, therefore even an "irrevocable" Trust
can effectively be terminated and assets liquidated and distributed without losing its
"irrevocable" status under law, while maintaining it's
"irrevocability" before external tax scrutiny.
What Type of Trusts Are There?
For Canadians, Trusts fall within two broad categories: Tax planning
Trusts, and Asset protection Trusts. That is not to say that the two are mutually
exclusive, only that they originate from different concepts and appeal to separate groups.
A Discretionary Trust
In a Discretionary Trust, Trustees are given very wide discretionary
powers to act as they see fit. It is not generally the case for assets of the Trust to be
held for specific beneficiaries in specific proportions. Assets are clearly held for the
benefit of beneficiaries who may either be defined as a group or left to be added in at a
later date. The proportion of ultimate distribution to any one or more of these
beneficiaries is entirely at the discretion of the Trustee. By its very nature, it is
flexible and therefore is by far the most commonly used in an offshore environment and
over the years has proved more effective then any other method for the protection of
family wealth.
In case any prospective Settlor becomes concerned about a Trustee
having absolute discretion over his assets, it must be quickly pointed out that a
responsible Trustee will follow the Settlor "Letter of Wishes". This document
contains wishes, which if contained in the Deed itself, would have converted the
Discretionary Trust into a Specific Trust. It can be amended at any time by the Settlor to
reflect changing circumstances.
Asset Protection Trusts
Take the form of a legal contract between Trustee and Settlor. All the
Settlor property is transferred to the name of the Trustee, where they will be safe from
any form of attack, if carried out in accordance with International law.
What Are The Main Benefits Of Owning A Trust?
A Trust is a unique legal entity that allows the Trust Deed to be
written to suit your personal requirements and intended purposes. The following are some
of the main reasons for the use of Trusts by Canadians.
Non-Resident Discretionary Trusts
With marginal levels of taxation rising, our Federal Government is
trying to stop the burdened taxpayer from escaping by using a tax haven jurisdiction.
While the Feds have not been successful at holding back a tide of middle to upper income
wage earners from using trusts (they could try lowering taxes), they have focused instead
on making the Canadian accountable for their World-wide income. Canadian taxpayers are asked
on page 2 of their T-1 tax form if they have an interest in a non-resident Trust? Providing a
check box, that will either compromise you if you check no but have a Trust, or lead to the
filling of a T-1135 form declaring the Trust and leading to more audit questions.
As one might expect, the Canadian rules in respect of tax planned
offshore trusts are extremely unfriendly, and monitored closely. Revenue Canada has
targeted the use of the "non-resident discretionary trust" under the new foreign
reporting rules, you have a reporting obligation after the 1997 tax year if:
- You transferred or loaned property to a non-resident trust.
- You received a distribution of income or capital.
- You have an interest in the foreign entity, trust or company.
This creates a minefield that even Bruce Willis couldn’t get
through safely. If you currently have a foreign trust, and you are a Canadian resident,
you are required to report it. (or become a tax fugitive). Before you get upset, remember
we are only the messenger here, this is the reality you must face, because the penalties
are extreme. An Exempt Trust for tax-savings is not still possible. Contact our office to discuss the
current opportunities available for using
Panama Foundations in an effective tax reduction
plan, or see the Platinum package.
Asset Protection
If you have worked hard to accumulate some assets, you should spend a
little to protect them so they don’t disappear! Asset Protection Trusts are created
as a tax-neutral method of transferring the legal ownership of your major assets into the
name of a Trustee prior to any litigation or other attack.. Can-Offshore Services
recommends the use of a Multi-Jurisdictional "International" APT. This unique
deed gives you the protection of the most favorable APT law in 3-4 jurisdictions, such as
the Cook Islands, Nevis, Belize, and the Turks and Caicos Islands. We coordinate the
Trustees to work under one deed so that transfers and transactions are done without any
delays. The presence of such a formidable APT should discourage nearly all potential
threats, and those that want to take a long shot gamble would have to hire counsel in each
of the 4 Countries, which requires posting a $25,000 US Bond in Nevis alone prior to
accepting a qualified claimant. All 4 locations would have to be fought simultaneously,
and losing in any one would likely cause a complete loss.
1st. Law: They can’t take it from you, if YOU don’t own it!
You probably do not carry a months supply of cash in your wallet, or
leave the same on your dresser…Why? Because someone might take it, right? In asset
protection, your assets are not physically moved, rather the legal and equitable title to
them is moved instead. Once your assets have been transferred to an offshore Asset
Protection Trust (APT), they are safe. The assets are held in the name of the Trustee or
its nominees. They can’t be levied or seized by creditors because they aren’t
yours. They can’t be tied up in probate court because they aren’t yours. You
can’t be taxed on them because they aren’t yours.
2nd. Law: They can’t take it away from you, if they can’t FIND it!
Imagine for a moment that you are a creditor. Where would you begin to look for
something that could be located in one of 70 Countries around the World? What if it was
hard to describe because you didn’t know the anonymous name or number it went by?
What if it was not registered with any Government or on any list, directory, or other
public document? What if every attempt lead to a frustrating dead-end trail without any
hope because even if you were lucky in locating it, it instantly moved somewhere else
unknown in the World…would you keep looking? (I don’t think so!)
3rd. Law: It must be LEGAL!
The only Asset Protection Trust worthy of holding the legal title of your wealth must be
specifically designed to conform with the intent of International law. When this is done
correctly, you will have the full force of the laws of that Nation to protect you from the
danger of expropriation by government agencies, creditors, divorce attorneys, or other litigation.
In order to receive the full benefit of an Asset Protection Trust, it
must be established prior to any notice being served on the Settlor. Think of a proper APT
as preventative medicine, not as an antidote for active litigation.
Family Protection
The Settlor can, through the Trust Deed or within the Letter of Wishes
advise on the administration up to his death. He can also advise upon who is to benefit
thereafter and in what proportions. These aspects are particularly attractive to residents
of countries which have strict laws on inheritance and can enable payments to be made to
people who might have to be excluded from a Will made in the Settlor place of
citizenship or residence.
Privacy, Anonymity and Flexibility
Under most offshore law, the Trust Deed is a secret document. No
information on its contents is available to any external authority. This secrecy is
supported in Belize by provisions in its Trust Act of 1992. Flexibility within the Trust
Deed, particularly of a Discretionary Trust, is provided by the following:
- through provisions that provide that the Trust can be revoked or terminated;
- that the Trustee can be removed;
- that the Law and Forum, that is, the location of the Trust, can be transferred to another
jurisdiction should it be felt that worldwide political developments make this a prudent precaution;
- policies on administration and disposition of the assets can be modified.
What About Costs?
Standard Belize Exempt Asset Protection Trusts designed for a Canadian to own an IBC, costs start at €999. An
(International) Asset Protection Trust, using Trustees in the Cook Islands, Nevis, Belize, and Turks and Caicos will cost $3750.
How Do I Begin?
Begin by going to our order form to ask more questions or start. Or, by faxing your
business card with "form an IBC and Trust" written on it. It's that easy.
Can-Offshore Services
For more information about our services contact us specifying the services you are interested in, or the questions you have. We will
get back to you with detailed information.
Articles about Trusts:
Offshore Trust main page
Asset Protection Trust
Offshore Trust Formation
Offshore Asset Protection
