Trust Synopsis
The concept of a Trust originated in mediaeval times under Anglo-Saxon law but its usage has now spread worldwide. A Trust exists when a person (the Settlor) transfers assets to another person (the Trustee) who holds the legal title to assets (the Trust Fund) not for himself, but for the benefit of others (the Beneficiaries) in accordance with terms and conditions usually set down in writing in the form of a Trust Deed and the relevant law where the Trust is based.
The principal uses of an Offshore Trust are as a means of protecting assets.
Other common reasons for its use by an individual are:
Estate Planning – To enable property of all kinds, including land, to be held for persons who cannot themselves hold it, for example infants. To minimise the prospect of family property passing to those who may dissipate it. The Trust can enable such persons to benefit from the Trust property, but only under the control and direction of the Trustee. In some circumstances, to make provisions for purposes, usually, but not necessarily, of a charitable nature.
Flexibility – Subject to public policy, wide scope is available in the drafting of the Trust Deed to enable it to meet the specific intentions of the Settlor and the ongoing needs of the Beneficiaries.
Continuity – Continuity is assured as the Trust property is able to remain within the Trust for the life of the Trust, which may be unlimited and span several generations, irrespective of the death of the Settlor.
Security – Subject to the relevant law and the terms of the Trust Deed, a Trust can be mobile and allow for changes in the jurisdiction in which it is administered and the laws to which it is to be subject.
Taxation – A properly structured Trust put in place with appropriate legal and tax advice can legitimately reduce or completely avoid tax in appropriate circumstances.
Purpose Trusts – Purpose Trusts can be used for a variety of transactions, including ownership of private Trust companies, securitization structures and special purpose vehicles.
The most common type of Trust is the Irrevocable Discretionary Trust. Other forms include Fixed or Strict Trusts such as Accumulation and Maintenance Trusts for the benefit of minors and to provide specific tax mitigation.