By Andrew Rogerson LLB (Hons) TEP
If you are immigrating to Canada, using an offshore trust enables you to take advantage of the government’s 5 year holiday from income tax and capital gains. It is a very valuable incentive offered by a government committed to attracting wealthy and industrious immigrants.
Offshore trusts established in offshore tax havens protect your assets from others who have a hostile intent. Once you transfer assets into a properly created trust, they cannot be seized by governments, creditors, former business partners and former spouses
Trusts are popular amongst entrepreneurs, company directors and professionals. Whilst insurance is important for all such groups, there are always the times when the policy does not pay out, or the cover is insufficient, or one cannot obtain cover at an economic price.
Trusts have been used for generations by wealthy and landed families to safeguard their birthrights and that of future generations from the attacks of populist governments.
It is a sad fact of life that the more wealth you acquire, the more you become a target for hostile litigation. Even if the litigation is without merit, it can tie up valuable resources and manpower for years. If, prior to commencing proceedings against you, a potentially hostile litigant performs a search that reveals no assets recorded against your name, he or she may think twice before commencing an action. If proceedings are commenced, then many tax havens have strict limitation periods that lean in favour of the debtor. Even those with meritorious claims against you will be prompted to opt for an early settlement, rather than endure expensive litigation in a far away place, whose legislation leans in favour of maintaining the confidence of wealthy persons who settle trusts which create valuable employment for its citizens
Once established, as indicated above, legal title rests with the trustees and the settlor and / or his family may become beneficiaries and entitled to receive discretionary distributions. It is well settled that with a properly established trust, there is no right on the part of the beneficiaries to require payments to satisfy their creditors. Accordingly execution against such a beneficiary could prove fruitless.
How safe is your money? Most offshore trusts are established in former British colonies all of which efficiently oversee and regulate trust companies and require them to affect hefty insurance cover.
How much should I put into the trust? Generally, not all of your assets should be tied up in a trust. You will keep funds in your normal accounts for day to day living. Beyond that, it is a question of preference as to what proportion of assets you wish to secure out of harm’s way. Even for those individuals that may be buying and selling assets all the time, trusts can be structured to provide flexibility with asset protection.
Trusts enable one to avoid succession laws, enabling family members to be provided for as you think appropriate, rather than how religious or secular law may dictate. However, trusts may be specially designed to ensure they are Sharia compliant. Flexibility is the key.
Trusts may be used to shield your children from attacks of potential spouses who perhaps love your family’s money more than they love your child. Not having control over their inheritance precludes spending on drugs and extravagances.
Shares, bank accounts, land, and buildings, even patents may all be held directly or indirectly by a trust. Each trust is different and established to meet your individual needs.