|
An offshore trust is simply a conventional trust that is formed under the laws of an offshore jurisdiction. Wiktionary has related dictionary definitions, such as: trust Trust may refer to: Trust (sociology), the willing acceptance of one persons power to affect another Property law Trust law, where ownership and management of property is on behalf of another Escrow, where a thing is held in trust until conditions...
This article or section is missing references or citation of sources. ...
An offshore company is one which does not conduct substantial business in its country of incorporation. ...
Generally offshore trusts are similar in nature and effect to their onshore counterparts; they involve a settlor transferring (or 'settling') assets (the 'trust property') on the trustees to manage for the benefit of a person or class or persons (the 'beneficiaries').
However, a number of offshore jurisdictions have modified their laws to make their jurisdictions more attractive to settlors forming offshore structures as trusts.
Also, two civil jurisdictions, who are sometimes considered to be offshore, Switzerland and Liechtenstein have artificially imported the trust concept from common law jurisdictions by statute. This article concerns the common-law legal system, as contrasted with the civil law legal system; for other meanings of the term, within the field of law, see common law (disambiguation). ...
A statute is a formal, written law of a country or state, written and enacted by its legislative authority, perhaps to then be ratified by the highest executive in the government, and finally published. ...
Rule against perpetuities Trusts in general are subject to the rule against perpetuities which, in practical terms, puts limits on the length of time within which all trust property must be distributed. Because of the strictures of the rule, a number of trusts have been struck down in wildly hypothetical circumstances because of possible infringement of the rule (see, e.g. the fertile octogenarian). The rule against perpetuities is a rule in property law which prohibits a contingent grant or will from vesting outside a certain period of time. ...
The fertile octogenarian rule and the unborn widow rule are two concepts from the law of real property commonly used to examine the empirically unreasonable consequences of the rule against perpetuities. ...
Most offshore jurisdictions which have sophisticated trust laws have modified their laws relating to perpetuity to allow settlor to select lengthy, fixed, perpetuity periods, to avoid the use of "Royal lives" clauses. Many have also adopted "wait and see" laws, which mean that trusts which might potentially infringe the rule against perpetuities are no longer automatically but invalid, but instead the trust remains valid unless and until the perpetuity period is breached.
Management of subsidiaries Trusts in general are subject to the rule in Bartlett v Barclays Bank which provides (briefly) that where trust property includes the shares of a company, then the trustees must take a positive role in the affairs on the company. The rule has been criticised, but remains part of trust law in many common law jurisdictions.
A number of offshore jurisdictions (notably the Cayman Islands, with STAR trusts, and the British Virgin Islands, with VISTA trusts) have created special forms of trust that may be expressly settled without imposing an obligation of the trustees to interfere in management in this way.
Paradoxically, these specialised forms of trusts seem to infrequently be used in relation to their original intended uses. STAR trusts seem to be used more frequently by hedge funds forming mutual funds as unit trusts (where the fund managers wish to eliminate any obligation to attend meetings of the companies in whose securities they invest) and VISTA trusts are frequently used as a part of orphan structures in bond issues where the trustees wish to divorce themselves from supervising the issuing vehicle. The term hedge fund dates back to the first such fund founded by Alfred Winslow Jones in 1949. ...
The central idea of a mutual fund is to enable investors to pool their money and place it under professional investment management. ...
Note: the Unit Investment Trust (UIT) is a separate US fund type. ...
In finance, a bond is a debt security, in which the issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon). ...
Critics in onshore jurisdictions have suggested that these specialised trusts have provisions that so fundamentally undermine the nature of a trust that they should not be recognised in an onshore jurisdiction, but whatever the view of onshore tax authorities and regulators, it seems unlikely that the courts in onshore jurisdictions would be prepared to derogate from the Hague Convention on the Law Applicable to Trusts and on their Recognition.
Asset protection - Main article: Asset-protection trust
Certain jurisdictions (notably the Cook Islands) have provided special trusts which are styled as asset protection trusts. Whilst all trusts are, to a degree, asset protection trusts, some jurisdictions have enacted laws trying to make life difficult for creditors to press claims against the trust (for example, by providing for particularly short limitation periods). In practice the effectiveness of such trusts is limited as the bankruptcy and/or divorce laws in the settlor's home jurisdiction will usually operate to set aside transfers to the trusts, and most jurisdictions (including offshore jurisdictions) set aside transactions entered into defraud creditors. An asset-protection trust is a term which covers a wide spectrum of legal structures. ...
An Asset-protection trust is a term which covers a wide spectrum of legal structures. ...
The examples and perspective in this article or section may not represent a worldwide view. ...
Divorce or dissolution of marriage is the ending of a marriage before the death of either spouse, which can be contrasted with an annulment, which is a declaration that a marriage is void, though the effects of marriage may be recognized in such unions, such as spousal support, child custody...
Powers of investment Most traditional jurisdictions only permit trustees to make very conservative financial investments. Most offshore jurisdictions permit (or allow the settlor to specify in the trust instrument that they are permitted) a wider range of investments, including higher risk investments such as derivatives and futures contracts. Investment is a term with several closely related meanings in finance and economics. ...
A derivative is a financial contract whose payoffs over time are derived from the performance of assets (such as commodities, shares or bonds), interest rates, exchange rates, or indices (such as a stock market index, consumer price index (CPI) or an index of weather conditions). ...
In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a pre-set price. ...
Purpose trusts Whilst in most common law jurisdictions, trusts must either be formed for the benefit of persons, or charitable purposes, many offshore jurisdictions have also amended their laws to permit trusts to be formed for non-charitable purposes. Such trusts need to enforce a "protector" to be able to enforce the terms of the trust, but doubt remains as to who should be treated as the beneficial owner of the trust funds for tax purposes prior to its distribution.
Interestingly, no offshore jurisdiction yet appears to have made a serious effort to expand upon the flexibility of trusts in relation to certainty of objects, as expounded in McPhail v Doulton. This may be because the common law rules are now considered to be sufficiently flexible to make no widening necessary to attract trust business.
Use of offshore trusts Official statistics on trusts are difficult to come by as in most offshore jurisdictions (and in most onshore jurisdictions), trusts are not required to be registered. The perception is that offshore trusts are predominantly used by wealthy individuals and families as part of their tax planning, and whilst this may be true, there are also other purposes that offshore trusts are used for. Note: the Unit Investment Trust (UIT) is a separate US fund type. ...
A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities. ...
The capital market is the market for long-term loans and equity capital. ...
ICC logo The International Cricket Council (ICC) is the governing body for international Test match and One-day International cricket. ...
See also | 
Feeds |
Contact