We are an independent trustee and do not operate under any bank or organisation. Our team is comprised of highly qualified individuals that includes lawyers and accountants, who take pride in providing excellent service to clients
The essence of a trust lies in the transfer of legal ownership of property from a settlor to the trustees. How can the settlor ensure that the property will be properly safeguarded and that his wishes will be observed? There are several considerations, including the following:
Settlor: This is the person who creates the trust by transferring or settling his or her assets into a trust. They may or may not be named in the trust, as may be desired.
The actual settlor need not be the person who instigates the trust. For example, a corporation may be formed specifically for the purpose of transferring legal ownership of the property to the trust. This aids confidentiality and asset protection.
Trustee: It is advisable to appoint an experienced and professional trust company as trustee. Trustees have a fiduciary duty to act in accordance with the trust deed and for the benefit of the beneficiaries. The trust may continue for many years and there needs to be confidence that the trustee will continue to provide good service.
Although numerous large international banks have trust company subsidiaries, many settlors prefer to deal with the smaller specialised trust companies. The appointment of a trustee is often revocable and an unsatisfactory trustee can be replaced.
Initial Documentation: The trust deed needs to be carefully drafted in accordance with current best practice. This document specifies the details of how the trustees are to administer and manage the trust assets and how they are to distribute and dispose of trust assets during the lifetime of the trust. Typically, the assets of a trust will comprise cash, real estate and shares in companies, but could be extended to include ownership of any movable or immovable assets and ownership of intellectual property. Most trust companies will have a standard trust deed which they will amend to suit the requirements of clients.
Since it is likely that an offshore trust will be in a jurisdiction unfamiliar to a client’s professional advisers, it is often desirable to get a legal opinion on the validity of the trust from a local lawyer as a safeguard. In a Discretionary Trust, the provisions of the Letter of Wishes must be clear.
Appointment of Protector: The protector is often an individual who is a friend or confidant of the settlor. The protector has watchdog role acting as a link between the trustee, settlor and beneficiaries. The protector can usually veto actions by the trustee and generally has an unfettered power to remove or appoint a trustee. It is important to delineate the powers of the protector carefully to avoid any attack on the trust as being a sham. The protector may usually nominate a successor in the event of death or incapacity or if he is unable or unwilling to continue with the role.
Choice of Domicile: While most offshore jurisdictions will function well from a tax planning point of view, some are distinctly superior in their asset protection features. The choice of domicile and governing law for an offshore trust is usually not final with most trust deeds incorporating so called “flee clauses” allowing for redomiciliation in the event that certain events such as civil disorder occur in the initial domicile. Redomiciliation may also take place to benefit from a better legal environment.
Use of Offshore Companies: It is common for offshore trusts to own companies in the same or other offshore jurisdictions. From the settlor's point of view, this may be a method to maintain influence or control over a business or to draw income from the company.
Most trust deeds will absolve the trustee from responsibility for the operation of companies owned by the trust. However a recent English legal decision implies that trustees do have a duty to enquire into and intervene in the operation of underlying companies. The BVI has enacted specific trust legislation (VISTA Trusts) to disengage and place solely in the hands of the directors the operations of a BVI company owned by a VISTA Trust. It may be expected that other jurisdictions will follow suit.
Zetland establishes companies in most offshore jurisdictions and administers them from Hong Kong. Please refer to Zetland’s Guide to Effective Offshore Operations for further details.
Captive Trust Company: In some situations, it may be desirable for a trust company to be set up and controlled by the settlor. Obviously, such an arrangement will involve extra costs and care needs to given to the shareholding arrangements for the captive trustee. There is an increasing trend for formal supervision of trust companies by governments (and often minimum capital requirements) and this option is now available only in a limited number of jurisdictions.
Liechtenstein Foundation: Although not a trust, a Liechtenstein Foundation has a combination of trust like features together with those of a corporation. Liechtenstein is also reckoned to be one of the best jurisdictions in the world in terms of confidentiality and safety of the legal environment. Liechtenstein is an independent principality situated between Austria and Switzerland and is regarded as politically and economically stable.
A foundation is a good holding structure for high net worth individuals who may continue to exercise complete control over the property and also make a determination as to the passing of control upon death or disability. Foundations are more expensive to establish and administer compared with most offshore trusts. A Panamanian Foundation is a lower cost alternative and details can be provided by Zetland on request.
No asset owning structure offers complete protection against a determined and well-funded legal action. In particular, a trust may be attacked on the grounds that it is a sham ie that the settlor effectively retains full control of assets and the trustees are compliant with his wishes. However this can be quite difficult to prove and a properly and clearly constituted trust that is well run should be safe from this avenue of attack.
Although a trust may be held to valid nevertheless it and the assets it controls may be subject to action. Increasingly the family courts of a number of jurisdictions have the power to vary trust deeds in the case of divorce or inheritance disputes. (Of course the courts in the jurisdiction of the domicile of the trust must also recognise the judgment of the court and this is not assured.)
Equally the assets owned by a trust may be determined to be a “resource” and may be allocated to one of the parties in a dispute by the courts. If the asset is, for example, a property situated in the same place as the court giving an unfavourable judgement it will inevitably be lost. A leading English case Charman v Charman (a divorce action in 2007) saw 37% of the assets of a Jersey trust valued at $120 million being awarded to the wife.
The choice of an offshore jurisdiction is also important. Although most offshore jurisdictions may seem fairly similar, there are important legal differences between them. For example, a few jurisdictions require registration of trusts usually in a confidential register maintained by the government.
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Other Zetland Guides and Info Sheets available on request: Asset Protection; Belize Companies & Trusts; Belize International Foundations; Foundations; Hong Kong Trusts; Hong Kong Visas; Effective Offshore Operations; Seychelles; Mauritius; Singapore Residency; Trusts; Wills and Probate in Hong Kong; Offshore RMB and info sheet on Hong Kong company ongoing obligations.