Choosing a Jurisdiction for Your Trust
Trusts are used for the purpose of ensuring all assets of the trust will be managed properly and protected under legal obligation and in line with the desires of the settlor. Wealth solutions firms such as Ora Partners Limited or Morgan Stanley provide services that can help you with this.
The three primary benefits of setting up an offshore trust are that they can provide favorable tax benefits, asset protection, and more confidentiality. If the settlor is from a country with economic or political instability, it can also be a haven for assets away from any turmoil.
Although there are many jurisdictions where it is possible to create an offshore trust, not all of them have trust legislation to suit modern needs.
Many offshore trust jurisdictions have aimed to modernize trust legislation, understanding the importance of having flexible wealth planning options. Trust legislation has to be easy to understand to best serve the needs of clients.
Unfortunately, there is no one-size-fits-all option when it comes to trust jurisdictions. Deciding which one is best for you depends on the size of your trust, investment goals, the banks you wish to open accounts with, your level of risk of litigation, and what assets you will put into the trust.
When deciding which jurisdiction is best for you, there are some key factors to consider:
Trust Laws – Look for a jurisdiction where trust legislation is modern and easy to understand. Many trust laws originate from English Common Law, making the Crown Dependencies a great choice for offshore trusts.
The tax regime – Establish whether inheritance or income tax will apply to the trust.
Economic and political stability – A stable country enables confidence that your assets are safe and secure in the trust.
Confidentiality – This can add an extra layer to asset protection. Make sure to clearly identify what details have to be divulged by settlors and trust managers in the jurisdiction.
Exchange controls – Determine how easy it is to move funds without much oversight from local authorities.
Although each trust jurisdiction has some similarities, there are a few subtle differences that should be taken into consideration.
The Cook Islands, Belize, and Nevis trust jurisdictions do not recognize judgments from foreign countries like the United States. Your legal opponent must initiate litigation in the offshore jurisdiction in order to seize the assets. Some jurisdictions place numerous legal hurdles for those who attempt to bring any litigation to offshore trusts. In Nevis, for instance, a creditor must post a $25,000 cash deposit to bring a suit against a trust. In the Cook Islands, the suit needs to prove beyond reasonable doubt that the trust settlor transferred the assets into the offshore trust in order to defraud the creditor in question.