Our support is guaranteed! For help about how trusts work and provide a reliable asset protection solution. As will be seen, the advantages of trusts flow from the many ways in which they can be utilized. Asset protection and management in a tax free environment can be much simpler than you’ve ever imagined.
Tax, inheritance and succession planning can be complicated, but with our support does not have to be.
At CCP Inc., we work with individuals, professionals, families and corporations to help them achieve financial and personal goals in a tax-advantaged manner.
Offshore trusts have their own distinct features, are tax-exempt and allow assets to be managed and preserved.
Illustration of How Trusts Work
As complicated as it may seem, understanding what ‘trusts’ are and how they work is really not that difficult. A basic example can be demonstrated through the example of a father who wishes to put away $75,000 for his two sons and daughter.
However, at the time he wants to do this, the three children are aged 10, 13 and 5. So, rather than directly handing over that money to them, which many might consider risky, he settles a trust in their favor.
This he does by transferring the money to a trustee and expressly declaring his intentions by way of a document/instrument known as a Letter of Wishes, commonly known as a Deed. Letters of Wishes contain the terms of trusts according to which the administrative duties of trustees are carried out.
By signing the deed and making the necessary transfer of the $75,000, the father (settlor) would have transferred his rights of ownership as ‘legal owner’ of that money to the trustee.
The end result is that the settlor is no longer legal owner, the trustee becomes the new legal owner and the three children for whose benefit the money has been transferred become the beneficiaries under the ‘trust’.
On the other hand, the father could have settled the trust or can settle a trust for any charitable, religious, social or political purpose, if say, he did not want to settle it for the benefit of his children.
Benefits of a Trust
Keeping with the ‘father theme’, numerous benefits flow this action:
Protecting the Asset
- By virtue of the fact that the settlor no longer owns the asset, in essence, he cannot lose what he does not own in case of bankruptcy, divorce, having to compensate someone in a lawsuit, or say, if he would have eventually spent the $75,000
- For the duration of time that the trust is in effect, the money is preserved
Freely Choosing How and When the Asset is Distributed by
- Specifying an event upon which the $75,000 is to be transferred; example, upon the 18 th birthday of each child or upon enrolling for university
- Specifying an event upon which a child should forfeit his/her inheritance; example for failing to attend university by the age of 24
- Specifying the portion each child is entitled to ($25,000 in equal share or 25%/25%/50% in favor of the youngest child (the daughter); etc.)
- Prevent becoming deceased without formally stating in writing to whom and how assets are to be allocated
- Avoid having assets distributed by ‘default’ property distribution rules which may work against what the settlor may have intended to do; ie, usually first to spouse, 2 nd to children, 3 rd to parents and distant relations
- In the case of a will, avoid the Court of Probate which is public; trusts are private.
Providing a Source of Income by
Several possibilities exist, a few of which are:
- Directing the trustee to pay out cash periodically until the funds are exhausted
- Directing the trustee to make investments, eg. purchase shares, so that dividends are either added to the fund or distributed accordingly so that initial assets remain in the trust
- If a house were to be later added to the trust, rental income could also be paid out to the beneficiaries. In this way, capital (the house) is preserved (can be passed on to generations) and a regular source of income is provided.
For information on how to structure an offshore trust to suit your particular needs, please Contact Us .
Our offshore trust formation services include trust formation; preparation of deeds, corporate trustees, safe holding of trust instruments and records.