Solutions – Trust
A trust is a private (non-public!) contract where you hand over the legal ownership of a certain fraction of your assets to a confidant (trustee). This trustee manages your money and/or other assets in favour of specific beneficiaries who benefit from the trust. It’s a very lively legal vehicle, powered by comprehensive jurisprudence, which can achieve great things.
The creativity of a trust lies in the fact that it’s a contract where the trustee is the legal owner of the assets while the beneficiaries are the beneficial owners of the assets. It’s also possible to appoint a protector who monitors and supervises the trustee to check whether he/she is doing what he/she is supposed to do, and a protector can even decide to replace the trustee. Therefore the trustee receives instructions about how to manage the assets.
A trust may be useful in the following cases. When:
- you run the risk of claims: that fraction of your assets transferred into the trust is safe for such claims;
- your personal situation (for example an impending divorce) prompts you to transfer your assets into a trust;
- you want to organise your legacy according to the rules you desire;
- you want to invest discreetly;
- you’re an artist or an art collector and you wish that your art collection continues to exist according to the rules you desire, even after your death;
- you want to support good causes.
In the case of a real irrevocable trust, this means that the settlor transferred his/her assets into the trust permanently. This has its implications for claims, gift tax and inheritance tax and such a transfer of assets could also prove to be beneficial in fiscal matters.
The trustee is the legal owner of the assets transferred into the trust, but also of the income these assets produce, such as dividends and capital gains. In principle, revenues are only taxable in respect of the trustee. In most cases, the trustee is a specialised company in a low-tax jurisdiction which has no links with the country of residence of the settlor and the beneficiaries. Therefore, the income of the trust isn’t taxable in the country of residence of the settlor nor in the country of residence of the beneficiaries.
Each situation is different and properly setting up a trust is only possible by analysing the legislation of the countries of residence of the settlor and the beneficiaries. Several countries (listed below) offer trust solutions and you can read more detailed information by clicking on the flags below.
Do not hesitate to contact us if you would like us to determine if a trust would be the best asset planning structure for your family situation.