An offshore trust is very much like a traditional onshore trust, except that it has the benefit of being held at an offshore financial centre. Just like a normal trust, offshore asset protection is a great method of protecting assets. It is an arrangement entered into by a person (or group) known as the “Trustee,” and a distinct person or group of people known as the “Settlor,” by which provisions are made in a binding, legal form known as the “Deed of Trust”. Overseas trusts are formed in order to hold the title to assets, funds and / or to property and to manage these assets in accordance with the deed of trust. These then provide offshore trust benefits and distributions to a person or group of persons known as the “Beneficiaries” of the trust funds. An offshore trust has the additional benefit of far greater offshore asset protection than the onshore variety.
The trustee and / or the offshore trust company entrusted with the management of the trust are bound by a fiduciary duty to uphold the agreement, and they agree to the requirements set out by the deed of trust. Attempts at describing trusts will often liken them to a corporation or foundation, they are unlike either; they are a trusting arrangement, which is supported by a written agreement that is binding in order to provide for the beneficiaries.
Offshore trusts may be created for a variety of reasons and many of our clients are now using them to ensure financial security in retirement and to provide funding for school fees and university fees, for instance.
Once you decide to setup an offshore trust to protect your assets, the type of trust must be selected, the duration of the trust, and important decisions on defining details must be made. This includes deciding whether or not the trust is revocable, whether or not the trust will be discretionary, and to specify the rights, duties, obligations, and expectations of the trustee.
With regard to revocable or irrevocable offshore trusts, they can either be revoked at any time with the provisions for this made clear by the Settlor, or they can have a pre-determined duration with no allowances for revocability, concluding only when the terms of its creation as specified in the deed of trust are fulfilled.
By contrast, a discretionary offshore asset protection trust can fall under either category and is defined as a trust with a lot of in-built flexibility with regards to how the trustee handles distributions to beneficiaries and even provides the trustee with rights to appoint or add beneficiaries. This relinquishes a lot of authority over the offshore trust to a trustee, however, and highlights the importance of the careful selection of a competent, well-reputed trustee or offshore trust holding company with good references, a worthy reputation, and the experience necessary to successfully and faithfully fulfill and honor the terms of the trust.