The definition of trusts and foundations are the same for this article, as this is an introductory explanation. Offshore means outside your own country. Offshore trusts and foundations then are those entities organized or placed abroad.
Trusts are entities setup under common law to keep assets for beneficial parties by an individual or a group of people, to be administered by a trustee in the country of settlement. This trustee would manage these assets on behalf of the beneficiaries and in line with the wishes of the settlor.
Offshore foundations are the civil law entity equivalent of the common law trust and work along much the same lines as a trust.
As offshoring has became more popular, different countries have begun constructing their laws to be as competitive as possible and making the requirements to establish and maintain these entities as easy as they can be. As expected, wealthy individuals and corporations have begun choosing countries with the most attractive and convenient laws.
But why do people opt to place their trusts and foundations offshore?
The Benefits of Offshore Trusts and Foundations
The benefits of having offshore trusts can be looked at in two different perspectives: protecting assets and preventing liabilities.
An offshore trust protects and even increases your assets through the following:
1. International Diversification. Placing a portion of your assets in a trust elsewhere is a way of insuring your future. The offshore local of your trust serves as another nest for storing your valuables creating a barrier between your assets and your onshore country in the event that it falls or someone sues you for no good reason, there’s no way they can obtain a judgment to access what’s rightfully yours.
2. Reduced taxes. Some people choose to put their trusts offshore because of the efficient nature of that jurisdictions tax system. The assets will accrue lesser taxes in the offshore country, thus creating a larger pool of assets to further grow your wealth.
3. Privacy and flexibility. Holding assets offshore is a great way to add privacy from nosy parties that are seeking to cause you harm or loss. They are generally more flexible in the case of asset transfers from one owner to the next or from one jurisdiction to the next. This flexibility creates more opportunity for partnerships or sales and ultimately for increased profitability.
4. Sustainability. Trust based assets will be entirely detached from your personal estate and ownership. This is one way of preventing onerous forced heirship rules that are present in some jurisdictions from taking a larger share of your assets on your death. A well structured Trust will ensure the succession of the assets to the next generation and beyond. Offshore trusts can also be a means of centralizing global assets making for a sustainable and easier managed legacy.
5. Business opportunities. By having offshore assets you will be able to access a range of opportunities both investment and business wise due to the nature of been offshore. The world is made up of many markets some of these markets never interact with each other due to geo political situations, by have a presences offshore you can easily and legally access these restricted markets creating very profitable income streams.
Offshore deals are clearly useful tools in maximizing your assets and minimizing costs. If you have a great deal of money and you haven’t ventured into any of these options yet, now is the best time to further protect and increase your assets.
An offshore trust can protect you from prying eyes as they will remain confidential and out of the eyes of any other nosy party. Think of it as a reduced publicized wealth, the less you flaunt, the less likely that anyone will launch a civil case and obtain a monetary judgment against your assets. These assets are legally shielded from creditors, governments, angry ex spouses, or unfound lawsuits. This goes to say that when extreme unfavorable situations happen in your primary country, life could still continue because you have assets kept and protected somewhere else.
So if you have significant assets and you have existing situations where these assets maybe of risk, it would be wise to form an immediate strategy to protect your assets.