subject: Making Offshore Trusts Work For You [print this page] When it comes to managing and protecting ones hard earned wealth, many financial experts go by way of the trust. Trusts are legal structures forming a relationship between Settlors and Trustees, where the Settlor transfers or entrusts holding and management of assets to the Trustees in favour of particular Beneficiaries.
In the past decades, the movement towards globalisation has boosted considerably the formation of trusts in jurisdictions outside of the Settlors country of origin. These offshore trusts are essentially the same form as traditional onshore trusts; however, they also differ in several respects, the least of which is the geographical location where the trust is in effect.
Distinguishing Offshore Trusts
Primarily, offshore trusts differ from traditional trusts in that it takes advantage of beneficial legislation found in such territories. Although technically speaking, forming a trust outside of ones own borders is already going offshore, not all trusts in this sense fall under what is now popularly referred to as offshore trusts.
For the trust to be a bona fide offshore trust, along the lines defined by those in the global financial circles, it must have the distinction of safeguarding the assets from liability claims, protecting privacy and confidentiality, and allows substantial tax savings.
Offshore jurisdictions that enact trust and tax laws to these effects have the reputation of being tax havens. The term offshore financial centre is the more politically correct term used these days to refer to such jurisdictions.
Are Offshore Trusts for All?
With such beneficial traits that are inherent in offshore trusts, the question then arises Are offshore trusts recommended for everyone? Some offshore services located at offshore financial centres, especially the emerging ones, will probably say yes. However, just as in any investment or financial strategy available in the market, offshore trusts may only be relevant for certain classes of people.
Therefore, before rushing headlong into forming a trust in the Caymans, the Bahamas or in Belize (and there are many other jurisdictions that offer offshore trust services amongst others), check that you fit the profile of one who is suited to avail of offshore trusts.
Offshore trusts are used mostly for purposes of asset protection. However, offshore trusts are also applicable in estate planning and tax planning. The general rule is that offshore trusts are ideal for high-income, high-risk professions. By high-risk we mean those that have a high probability or likelihood for being sued at some point in time.
Company executives, doctors and dentists, famous celebrities, land owners, property developers, lawyers and other such individuals are more prone to litigation. This is not because they are constantly doing something wrong or that they have something to hide; but simply because they have conceivably more properties and assets, which makes them a larger target for liability claims.
The other criteria that would determine whether or not someone has a need to use the facility of an offshore trust is the persons particular requirement to protect his or her assets. If you foresee the possibility of litigation due to the chance failure of a new business venture, or perhaps you need to secure what wealth you have in case your latest marriage ends up in divorce, then these are examples of situations that necessitate protecting your assets through offshore trusts.
Anyone who has achieved considerable financial success should look into the possibility of engaging the benefits of offshore trusts. Of course, if your personal assets are not as substantial or there is little possibility that there will be claims against you then forming offshore trusts may be a tad overkill. The compelling idea here is that no one wants to have the fruits of their labour whisked away by a single unfavourable judgment.
Costs and Considerations
The costs of offshore trusts are very competitive these days but it will still require a small fortune to maintain. There is no minimum estate value required per se but the usual ballpark figure to entrust is around $250,000. Conceivably though, you can setup an offshore trust for much less.
Most services providing offshore trusts will require an estimated $10,000 up to $30,000 for setting up. After that, an annual fee in the vicinity of $3,000 to $7,000 will also be needed.
Selecting a suitable jurisdiction is an important consideration. You need to examine the relevant laws as well as the overall stability of the jurisdiction and see if these matches to your taste as well as to your goals.
Also, remember that the benefits of offshore trusts can work for you only if it is setup properly within legal limits. Therefore, be sure to get professional legal services in your corner and heed their advice.
