International trust for many seems like taboo, although it is the best asset protection you can have. In this article we will describe benefits of international trust and different types.
International trust is a trust established and registered in different jurisdiction where you reside. That means your trust will be in countries like Singapore, Hong Kong, Belize… Trust should not be used for tax evasion. The two most important trusts are Fixed trust and Discretionary trust. More on that latter.
You, as a settlor make trust for following reasons:
– Protection of beneficiaries
If you are wealthy you might want to give your children this wealth. However, at young age they don’t need that money, but instead trust is written on their name. If something happens to you, for example if you die, then children will get this assets.
Your accountant and lawyer shall cooperate to make a taxation plan for your trust. Get professionals on board to address your taxation issues. There is a wide range of benefits in regards to trust. The trusts can be established as tax neutral, so your trust doesn’t create tax benefits and doesn’t result in a negative tax consequences. (Only) tax motivated come under the scope of IRS, while tax neutral trusts often fly under the radar.
– Asset protection
Your government can come after your wealth in a number of different ways. Having a trust fund, which is separated legal entity in different jurisdiction, can protect you against your government, creditors, exchange controls…
International trust can have a substantial benefits over domestic trust funds. The most important one is privacy, where you keep your funds out of prying eyes. Even if creditors come after you at some point in the future, they can’t seize your assets, which are safe in international trust. You can further diversify assets with international trust established in offshore jurisdiction, which holds assets in another jurisdiction.
Two main types of trust
A fixed trust will have details of who will benefit from it and when in the future. Fixed trusts have the benefit of certainty, but are mostly unchangeable. They can cause problems if designated beneficiaries become unsuitable.
Discretionary trust define a class of beneficiaries who can benefit from it in the future, but interest is not yet specified. You as a settlor can also add new beneficiaries. Most professional companies will ask the settlor to write a letter of Wishes. This letter defines what settlor would like to happen to the trust fund in the future. Although it is not legally binding, trustee usually follows it. The letter can be changed at any time, but if settlor dies it is considered as a last wish.
Settlor can also name a person called a protector, who overlooks who and how much funds beneficiaries will get. They, the beneficiaries have to get an approval of protector before any funds are given away. Protector is usually a person who is well known to the settlor. He, the protector can also remove beneficiaries if he want or need to.
Why trust should be established outside of the U.S.
Tax haven trusts offer greater benefits and contros over the assets, than what is permissible in the U.S. Courts in the U.S. have refused to protects settlor’s assets from creditors if the trust is established in the U.S. You can still be attacked and your assets not safe in the U.S., so you should consider establishing a trust fund in one of the tax haven countries.