Before reading this material, we should advise that trusts, although still in use, are not that much in use anymore as are the Private Interest Foundations.

This a better tool since it is a hybrid between the corporation and the trust, meaning that has the best of both worlds and the founder can remain in total control of the foundations assets in anonymity, no needing to transfer the property of the assets to a trustee.

A "disadvantage" (although not always a disadvantage) is that the Private Foundation has to be registered, but the only information that goes Public is the name of the foundation council members and the name of the founder (which can be nominee, to overcome this disadvantage).

Why use a foundation instead of a Trust?
Before the new trust laws established in 1996, we used a foreign trust as the entity which held the shares of the IBC. The new trust laws required that any assets held in foreign trusts be reported and taxed. The solution is the Private Interest Foundation. Today, we use this foundation regularly in virtually all of our clients offshore structuring.

WHAT IS A TRUST?

A Trust is a legally acknowledged and binding arrangement whereby a person (or a number of people), known as the Trustee or Trustees, become the legal owner(s) of assets transferred to them by a Settlor or Settlors but only in as much as they are holding those assets for the benefit of another person or people, known as the Beneficiary or Beneficiaries.

The assets which are placed into a trust are called Trust Properties and can include anything which can be legally transferred such as:-

In our experience, cash (bank accounts), property and trading companies are the three most common assets to be placed in offshore trusts, for obvious reasons.

Although a trust can be a verbal agreement and implied by law, i.e., your words and actions are legally acknowledged by previous, similar precedents, it is far more common for a trust to be established by way of a written document called either a Deed of Trust or Declaration of Trust. This document describes the trust and details how it is to be administered and for who's benefit.

The person giving assets to a trust is known as the Settlor and is commonly named in the Trust Deed, but, depending upon the jurisdiction where the trust was established, not necessarily so. It is therefore quite possible to give assets to a trust anonymously (in the sense that you don't want to be linked as having given your assets to 'your' trust). This feature of certain trusts is regarded by many as one of the most valuable, if implemented correctly it can enable someone to appear to be of only modest means, yet live a luxurious lifestyle, the 'trappings of wealth' all belonging (ultimately) to a trust with no legal connection to that person. Great care must be taken in such instances since otherwise tax authorities tend to 'see through' the trust and tax you accordingly - it can be mighty hard to disprove such a 'connection' with a trust!

When either periodic or terminal payments are made from a trust to either a person or people named in the Trust Deed, the recipient(s) are known as Beneficiaries, i.e., they benefit from the trust.

BACKGROUND AND HISTORY

Most countries have one or other of two basis for their laws, either CIVIL law, historically derived from an early Roman concept, or COMMON law, derived from an early English concept where trusts can be traced back as far as medieval times.

In countries where civil law rules, trusts are either very uncommon or are not legally recognized, thus making Offshore Trusts of great importance in tax avoidance and asset protection to residents in those countries. Common law countries recognized trusts quite freely, indeed many trusts are established 'onshore' for asset protection or inheritance purposes. However Offshore Trusts still play a significant part as far as residents of common law counties are concerned, for they are ideal vehicles for tax avoidance.

Offshore countries, with their liberal taxation laws and strict non-disclosure arrangements (usually by way of not even knowing) are ideal bases for trusts of all kinds. Some offshore jurisdictions will allow nominee Trustees, will allow assets to be settled into a trust after it is formed to protect the identity of the Settlor and the type and value of the assets placed in trust, will allow trusts to have an indefinite life (most jurisdictions insist on a specific life span for a trust) and will allow Beneficiaries to be un-named and left to the discretion of the Trustees (see next section). Indeed it is not unknown for some enlightened jurisdictions to ensure that their laws over-ride the laws of the Settlor's and/or Beneficiaries' country in any trust matters.

Types of Trusts