A trust utilizes a fiduciary agreement which permits a third party (such as a trustee) to protect and manage assets on behalf of the beneficiary. There are a variety of different purposes for trusts and they can be created in varying ways. The following listing describes the usual purposes for trusts.
- Protection of assets such as personal property and estate management
- Protection from creditors by creating tax shelters
- Planning inheritance distribution whereby there is freedom to choose how the personal wealth is distributed; without having to abide by dictates of heirship rules
- Benefits for children as well as benefit schemes for employees
- Financial planning regarding the following factors: stocks and shares, insurance plans, retirement schemes and pension plans
Generally, individuals who decide to take steps to preserve their capital from negative effects of unstable governments in their home country are required to create international trusts. Such trusts are also required for individuals who want to protect their wealth from outside creditors and compulsory heirship rules. Typically, these international trusts are formulated when individuals with a high net worth need a venue for asset protection and wealth management. There is an exception to this general rule where an international trust is not required to be established in certain jurisdictions. Due to this exception, more individuals from varying backgrounds are enabled to create a trust.
There is one example of an effective way to protect your financial interests and property rights when a trust is created prior to marriage. Such a trust would be considered as separate property. A secondary scenario pertains to recently divorced women. They can utilize trusts as a means of protecting post-divorce assets from future lawsuits and creditors.
International trusts remain one of the most optimal solutions regarding asset protection. The variety of benefits is discussed below.
Offshore Trusts and Foundations
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Individuals may choose to create a trust purely for privacy reasons. For example, wills have terms that are public; whereas the terms of a trust are private. This benefit is an invaluable consideration for many people when deciding to create a trust.
A secondary benefit toward creating a trust is the variety of flexible options that an individual has. For example, many people utilize trusts regarding asset protection as well as managing an estate for future generations. However, trusts and foundations also have been utilized for the following purposes: stocks and shares, insurance plans, retirement schemes, pension plans, employee benefit schemes and charity groups. Such foundations may be either charitable or non-charitable entities.
International trusts protect foundation assets from any type of unstable governments of the individual’s home or resident country as well as from unsecure financial infrastructure.
Trusts are fully acknowledged under common law. There are many instances where civil law jurisdictions also now recognize such trusts. In numerous jurisdictions, many have not been known to acknowledge foreign judgments.
Foundations maintain their own specific legal character, thus establishing the owner, or head, in the foundation. Lawfully, it can participate in various third party agreements. Additionally, there is the power endowed to open bank accounts, enter into legal action or be sued and become the owner of various corporations.
Another benefit of creating international trusts is the practical tax planning aspect. Such property may then be exempt from the following factors: exchange controls, income tax, inheritance tax and capital gains taxes. Such tax formation aspects create a valid avenue for profiting from another jurisdiction’s customized tax system. Foundations are entitled to apply tax deductible donations for the purposes of income taxes. Additionally, when an acceptable amount of work is completed by individuals, compensation can be provided.
Any type of income which results from a trust is then exempted from local taxes. The caveat here is that the trust beneficiaries must be nonresidents of that jurisdiction. The following countries currently permit the formation of international trusts:
- Cayman Islands
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