Trusting In Offshore Trusts: What You Need To Know
Onshore and offshore trusts are relatively similar. In basic terms, a trust is a legal private agreement (trust deed) between the person who places the assets in the trust (the settlor) and the individual or corporation entrusted with the protection, management and ultimate distribution of the assets (the trustee) for the persons entitled to benefit from the capital, assets and or income held in the agreement (the beneficiaries).
Discretionary offshore trusts are the most flexible offshore trust available and is therefore the most commonly used trust for offshore purposes. The predominant feature of a discretionary trust is that the trustees decide which member(s) of a class of beneficiaries are entitled to benefit from the offshore trust's property. Some of the benefits of discretionary offshore trusts include the following:
In case there is any concern as to the trustee having absolute discretion over the assets, it should be remembered that a responsible trustee would be guided by the settlor. This guidance by the settlor is achieved by the use of a letter of wishes. This document, if contained in the deed itself, would convert the discretionary offshore trust into a specific offshore trust, and can be amended by the settlor at anytime to reflect any changes in circumstance. Finally, a little known benefit of discretionary offshore trusts is the use of a letter of wishes, which, once carried out, is destroyed, leaving no proof of its existence. A handy tool under any light! Another common tool today is the use of an appointed protector. The protector is usually located in a different jurisdiction to the trustee, so that if the location of the offshore trust becomes unsuitable, it can be changed to protect the offshore trust and the beneficiaries from potential risks. The protector can be a friend of the settlor or a corporate body, and his or her powers can be increased to include appointment of new trustees and beneficiaries, veto, arbitration, and investment advice. He or she can also act as an intermediary between the trustee and the settlor, often combining a number of their powers. A few things should be noted regarding the use of a protector, however. In most cases the use of a protector only increases the running costs of the offshore trusts. As well, the location of offshore trusts can be changed by many people - you don't need a protector to move it. If for some reason, offshore trusts need to be moved, you might consider Belize as a suitable location, as it has no 'status of Elisabeth,' which means that you are protected from the start instead of the usual 3-5 month wait encountered in most other countries.
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