Offshore Trust

There are many different purposes for setting up an Offshore Trust, and therefore many different types of Offshore Trusts exists. The most popular types of Offshore Trust are outlined below:

Asset Protection Trusts

This is probably the most popular type of Offshore Trust, with advantages including:

Assets held in this type of Offshore Trust are protected from courts, making them an effective way for a Settlor to protect assets from circumstances such as bankrupcy, creditor claims and divorce.
This type of Offshore Trust incurs no tax upon formation. For tax reasons, the assets remain in the Settlor's estate and, in terms of Income Tax, the Settlor is regarded as the Trust owner. Such an Offshore Trust is normally irrevocable.
Most offshore jurisdictions impose no tax on Trust assets, or on those assets transferred from an Offshore Trust or payments made from the Trust to Beneficiaries.

An Asset Protection Trust is often used by private individuals and corporations to hold their assets in a form which makes them untouchable under any court order imposed against them.

Beneficial Trusts

This type of Offshore Trust is ideal for asset protection and inheritance tax issues, because Beneficiaries are named in the Trust document. However, this type of Offshore Trust is not recommended for tax planning or confidentiality purposes, since the authorities know where the beneficiary lives and can quickly become aware of the inheritance.

Discretionary Trusts

If a Beneficiary is named in an Offshore Trust document, or if the Beneficiary is clearly also the Settlor, Revenue Authorities tend to 'look through' such Offshore Trust arrangements and regard the Beneficiaries as the owners of the Offshore Trust assets and income. It is therefore possible that Beneficiaries can be taxed on assets or income which they never own or receive - simply on the basis that they could be the owner.

To avoid this problem, a Discretionary Trust allows the actual beneficiaries of the Offshore Trust to be at the absolute discretion of the Trustees. Since no specific Beneficiaries are named in the Offshore Trust document, Revenue Authorities cannot tax any potential Beneficiaries since there is no way of knowing when, or even if, they will benefit from the Offshore Trust .

Charitable Trusts

A Charitable Trust is an excellent tool for tax planning or for administration of assets to be used for humanitarian purposes. A number of countries allow humanitarian donations into an Offshore Trust or foundation as a deductible expense. Charitable Trusts may be set up to support educational establishments, hospitals, churches, museums and a number of similar purposes. Settlors transfer part or all of their assets to Charity Trusts and the Offshore Trust benefits are distributed according to the wishes of the Settlors. Charity Trusts can also be established for the support of particular individuals or persons, including persons related to the Settlor.

Purpose Trust

Offshore Trusts established for a certain purpose which do not identify Beneficiaries can be established for support of a legitimate goal which is specific, reasonable and can be fulfilled without using procedures which would be immoral, illegal or which would contradict the government policy of the country in which the Trust is being established in.

Other information

The History of Setting up a Trust

For more information on the types of Offshore Trust available, email email@healyconsultants.com or telephone us at (+65) 6735 0120.

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