Offshore Trusts

and controlling and administering property. Offshore trusts are distinct from other forms of offshore vehicles because of the way in which they are structured.

The components of offshore trusts include the trust deed or letter of wishes, the settlor, the trustee and the beneficiary.

Offshore trusts may have one or more beneficiaries in whose interests the offshore trust is managed and to whom the trust’s assets are passed on once the trust has met its full term or expiration date (as may be the case).

In some instances protectors are required when establishing offshore trusts to ensure that the interests of the beneficiaries are protected and administered accordingly. Not only jurisdictions demand the appointment of protectors. In some, protectors are optional.

In essence, this is how offshore trusts operate, making it possible for individuals and companies to reduce their net worth and protect at least that portion of wealth that has been transferred to a trust offshore.

Assets that are generally transferred to trusts offshore are fungible and include cash, real estate, stocks, jewelry, pensions, or any other item that is exchangeable or considered to have substantial monetary value and worth protecting.

Offshore trusts can normally be formed by anyone who is above the age of majority, and for a more vigorous asset protection strategy, the assets of a corporation can be transferred to an offshore trust. In this way, ownership of the corporation’s assets is not in the corporation’s hands, but legally in the hands of the trustee of the offshore trust.

Offshore trust laws are usually sufficiently flexible, allowing settlors or protectors of trusts to be the beneficiaries and vice versa. In this way, it is ensured that the offshore trust is properly managed by the trustee.

It is generally unadvisable for the beneficiary of an offshore trust to be the trustee as well, since this would mean that the settlor, the person or company that establishes or forms the offshore trust, transfers the assets to him or itself. In many ways this defeats the purpose of establishing trusts offshore and personal net worth would not have been reduced or protected.

Rules for the management and formation of offshore trusts are contained in the respective international/offshore trust laws under which trusts are legislated. Anyone that intends to establish an offshore trust must therefore seek proper legal advice.

Offshore trusts are internally governed by a Deed in which the settlor of the offshore trust expresses his or her wishes as to how the trust should be managed, states the value of the assets that are transferred and whether or not a protector is to be appointed and grants powers and sets limitations on the powers of the protector, among other things.

The assets of an offshore trust would typically be placed in an offshore trust account that the trustee manages. Unlike corporations or even offshore foundations, offshore trusts are not legal persons, though they are legal entities. As legal persons, offshore trusts would be able to trade or conduct other business activities independently but this is not the case. Instead, the trustee conducts these matters as legal owner in the interest of the trust.

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