Offshore Trusts | Equityplusfintech

Offshore Trusts & Foreign Corporations

What

Offshore trusts are legal entities.
Typically, there are only four parties involved: the Settlor; the Trustee; the Beneficiary; and, the Protector.
Trusts can be Revocable, Irrevocable, Discretionary, Private, Corporate, Offshore, Domestic, Dynastic, Marital, Blind, Charitable Remainder or Perpetual.
Assets. The assets in a trust can include cash, securities, real estate, cars, boats, antiques and works of art, intellectual property, royalties, fees, salaries, commissions, gains on sale, revenue, digital currencies and tokens, copyrights and patents, pension funds, shares, annuities, inheritance gifts, lottery winnings and lottery tickets.
Qualified Investments. The Settlor can specifically determine what class of assets the Trustee can invest in. For example, these could be limited to only AAA corporate bonds, or publicly traded companies on a major exchange. Alternatively, the Settlor can give the Trustee limited or complete flexibility to invest in any security or asset class. To avoid a conflict of interest, the Trustee should not invest in any company where the Settlor owns any equity interest.

Why

Offshore trusts are used for estate planning, privacy of disclosure of wealth, reducing or eliminating estate taxes upon death of the Settlor, tax mitigation of revenue and capital gains, and protection of assets against creditors and litigators. Note: A Settlor cannot transfer assets to defraud a creditor but can transfer any type of asset to an offshore trust as prudent estate planning and to protect against seizure by creditors in the future.
Benefits. If revenue or transfer pricing can be assigned to an offshore trust then the Settlor’s estate can save taxes equivalent to the highest marginal tax rate. on which has zero taxation. See Examples.

Who

The Settlor is also known as Grantor, Transferor or Donor. The Settlor hires a trust attorney who creates a Deed of Trust that outlines the role, responsibilities, and authority of the Trustee. The Deed of Trust that defines the roles, authority and responsibilities related to the transfer, protection and disbursement of assets between and amongst the Settlor, the Trustee, the Beneficiary and the Protector. The Deed of Trust authorizes the Trustee to defend the trust against debtors and manage the trust assets so that it protects the Settlor and the Beneficiary. The Settlor transfers title to and ownership of the assets to the Trustee.
The Trustee is given the authority by the Settlor to perform the duties specified in the Deed of Trust. The Trustee might also be known as the Administrator.
Safeguard. The Trustee’s basic goal is the safeguard the assets of the Trust and perform the specific duties outlined in the Deed of Trust, but also to act actively and proactively to protect the assets on behalf of the Beneficiaries.
Ownership of assets. The Trustee is the legal owner of the assets in the offshore trust. The beneficiaries are the ‘equitable’ owners of the assets in the offshore trust.
A beneficiary can be any person or legal entity, including the Settlor but not the Trustee. Beneficiaries can be changed at any time. Beneficiaries receive any disbursements without holdback. Based upon the structure, beneficiaries might also be able to receive disbursements free of taxes as well.
A Protector is a neutral, trusted and skilled individual or institution who is appointed by the Settlor to oversee and ensure that the duties in the trust agreement are performed by the Trustee.
Role. The role is to advise and monitor the Trustee’s administration of the trust. Although the Protector can be the Settlor, it is wise to appoint an arms-length individual or institution so that a taxation authority does not consider the establishment of and distribution from a trust to be illegal or involved in tax evasion.
Authority. The Protector can have the authority to replace the Trustee if the Protector feels that the Trustee is not performing the duties as outlined in the Deed of Trust.
Citizenship. Under US law if a Protector is deemed to be an American resident or citizen then the Settlor or the assets in the trust might be deemed resident of the USA and subject to taxation, thereby eliminating the intention of the Settlor.

Where

Jurisdiction. Most offshore trusts are established or ‘settled’ in tax friendly jurisdictions that have an established history of stable democratic rule, can provide banking, follow English Common Law and have no currency restrictions. These jurisdictions include The Bahamas, Cayman Islands, Bermuda, St. Kitts and Barbados.
Offshore Example. The Settlor establishes an offshore LLC in The Bahamas because there is no income tax, capital gains tax, inheritance tax or company tax. The Settlor transfers assets into the LLC. The ownership of the LLC membership interests is transferred to the Trustee. As a further layer of protection and anonymity, the Trustee could form another LLC in Cayman Islands because Cayman is a British overseas territory and also has no income tax, capital gains tax, inheritance tax or company tax.

Definitions

FATCA

Foreign Account Tax Compliance Act is an important development in U.S. efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore.

ITS

International Treasury Services. The Bureau of the Fiscal Service provides international payment services to federal agencies allowing payments to be made in 140 currencies in more than 200 countries.

OFAC

The Office of Foreign Assets Control of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments.

The World Bank (WB) was established in 1944, the World Bank offers support to developing countries through policy advice, research, analysis, and technical assistance.

BIS

The Bank for International Settlements (BIS) is an international financial organization owned by 60-member central banks, representing countries from around the world that together make up about 95% of world GDP. Its head office is in Basel, Switzerland. The mission of the BIS is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.

ICMA

International Capital Market Association is a membership association, committed to serving the needs of its wide range of members representing both the buy side and sell side of the industry. Its membership includes issuers, intermediaries, investors and capital market infrastructure providers. ICMA currently has more than 500 members located in over 60 countries worldwide. Working actively with its members in all segments of the wholesale market, ICMA focuses on a comprehensive range of regulatory, market and other relevant issues, which impact market practices and the functioning of the international debt capital markets.

ISDA

The International Swaps and Derivatives Association makes the global derivatives markets safer and more efficient. It has over 850 member institutions from 69 countries. ISDA pioneered the development of the ISDA Master Agreement and a wide range of related documentation materials, ensuring the enforceability of netting and collateral provisions, helping to significantly reduce credit and legal risk. The Association has been a leader in promoting sound risk management practices and processes and engages constructively with policymakers and legislators around the world to advance the understanding and treatment of derivatives as a risk management tool.

SWIFT

The Society for Worldwide Interbank Financial Telecommunication was founded in Brussels in 1973 to establish common processes and standards for financial transactions. SWIFT provides a secure network that allows more than 10,000 financial institutions in 212 different countries to send and receive information about financial transactions to each other. The SWIFT network doesn’t actually transfer funds, but instead it sends payment orders between institutions’ accounts, using SWIFT codes. It was SWIFT that standardized IBAN (International Bank Account Numbers) and BIC (Bank Identifier Codes) formats. SWIFT owns and administers the BIC system, meaning that it can quickly identify a bank and send a payment securely.

OECD

The Organization for Economic Co-operation and Development (OECD) is an international organization that works to build better policies for better lives. Our goal is to shape policies that foster prosperity, equality, opportunity and well-being for all. We draw on almost 60 years of experience and insights to better prepare the world of tomorrow.

Schengen

The Schengen Area is a zone that includes 26 European countries that have abolished their internal borders and allow for visa free and unrestricted movement of people. They work cooperatively on fighting criminality by strengthening the common judicial system along with multi-national police enforcement. and sharing of information.
The 26 Schengen countries are: Austria, Belgium, Chech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and Switzerland.

E.U.

The European Union is a unique economic and political union between 27 EU countries. The common currency is the Euro. More than 340 million EU citizens in 19 countries now use it as their currency. People who are citizens of countries within the E.U. can travel freely throughout most of the continent. All EU citizens have the right and freedom to choose in which EU country they want to study, work or retire. Every EU country must treat EU citizens in exactly the same way as its own citizens for employment, social security and tax purposes.

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