How to Set Up an Offshore Trust

World Bank

A fiduciary arrangement that assigns the responsibility of distributing, managing and reporting certain holdings to a trustee is called a trust. Rules regarding who is and who isn’t eligible to be a trustee differ from one offshore jurisdiction to another. For instance, certain jurisdictions require the trustee to be a permanent resident of the nation where the trust is being established, while others have the completely opposite requirement. The rules offer a valid reason for substantial tax benefits and protect the privacy of involved parties.

An offshore trust offers a number of advantages like customized solutions for unique needs, wealth protection, recognition in all common law jurisdictions and a useful tool for estate tax, capital gains and international income planning. Offshore trusts are often established by organizations for employee insurance plans, retirement programs, benefits plans, stock option schemes and other special arrangements.

Establishing an Offshore Trust

Opening an account at an offshore bank for a trust involves the same steps as those for setting up an onshore trust. The Deed of Trust includes all the significant details regarding the trust. Some of the key elements of a deed include:

  • Asset listing: While it is not mandatory to include all the information about relevant assets in the deed, it is necessary to record them.
  • Names of beneficiaries: Even if a specific person is not named, it is important to ensure that the trustee/trustees and the settler are aware of the beneficiary’s identity.
  • Names of trustees: Simple or multiple entities can be named as trustee. Trustee/Trustees manage the trust and make sure that all the directives are followed.
  • Name of the settler: This refers to the person establishing the trust or person in whose name the trust is set up.

These are some of the main elements of a Deed of Trust. Based on the jurisdiction where the trust is established and the type of trust, the contents of a deed may include a variety of other details.

Types of Offshore Trusts

There are several different types of offshore trusts. A common factor between all kinds of trusts is that they all include a beneficiary (entity or person under whose name the holdings are managed), a trustee (entity or person who manages the trust) and a settler (entity or person who funds the trust). Offshore trusts can be differentiated on several basis, for instance fixed interest trusts and discretionary trusts. In case of fixed trusts trustees do not have the power to make changes to the directives given by the settler, while trustees may vary asset disbursement in case of discretionary trusts.

Trusts can also be categorized as revocable and irrevocable.  The settlor can either dissolve or modify a revocable trust as desired because of changed circumstances or by prior arrangement. An irrevocable trust once set up can neither be dissolved nor altered. There are endless ways of customizing an offshore trust inside the fundamental framework. Customizability is one of the key benefits of an offshore trust.



About this author

Caye International Bank Limited (CIBL) was granted an Unrestricted "A" Class International Banking License on September 29th, 2003 by the Central Bank of Belize and is regulated by the Central Bank of Belize which set the standards for liquidity and capital adequacy.