Concept & Benefits
The Trust concept is widely recognised as a very effective structure for individuals and corporate entities. The Trust is an arrangement whereby assets are transferred from one person (The Settlor) to another person or corporate body (The Trustee) to be held by the trustees for the eventual benefit of the persons specified by the Settlor (The Beneficiaries), in accordance with the terms and conditions as determined by the Settlor as contained in the Trust instrument. A protector may also be appointed to oversee the Trustees, and to who they must seek approval for certain actions, as an additional safeguard over the trust's assets.
The Trust is unique in its distinction between legal and beneficial ownership of property. This enables a settlor to divest themselves of legal ownership whilst still being a position to direct, via the Trust Deed, how the assets are managed and distributed. Whilst the Settlor can be both a trustee and a beneficiary the more control the settlor retains over the Trust the greater the risk of undermining the objectives of the Trust.
The modern International Trust has become an extremely sophisticated and practical arrangement. The trustees, by virtue of their very wide powers and discretion are able to conduct, for the benefit of the beneficiaries, most of the transactions that can individual can perform. For example, they may be empowered to form companies, to invest, give guarantees, borrow and lend money for the benefit of the Settlor or their business, purchase domestic or overseas property, or make interest free loans to beneficiaries.
The benefits of using a Trust structure are extremely wide and include:
- Estate and tax planning
- Succession planning
- Asset protection
- Holding of family property
- Forced heirship or Sharia Law considerations
- Provision for the needs of children, the elderly or vulnerable
- Confidentiality
- Charitable and philanthropic purposes
Types of Trusts
The principal Manx legislation governing Trusts are the Trustee Acts 1961 and 2002, the Variation of Trusts Act 1961, the Perpetuities and Accumulation Act 1968 and Purpose Trust Act 1996.
The Trusts Act 1995 introduced into Manx law provisions which take account of the Recognition of Trusts Act 1988 and Hague Convention on the law applicable to Trusts. This ensures that an Isle of Man court will not have regard to foreign laws in determining matters relating to the Trust, overcoming forced heirship issues.
A Trust deed is a private document and, apart from circumstances where the Trust acquires land in the Isle of Man, there is no requirement for the Deed to be publicly registered.
There are a variety of Trusts available:
- Discretionary Trust: the Trustees have full 'discretion' on how best to apply the income and capital of the Trust for the benefit of the beneficiaries. The Trustees are bound by the provisions of the Trust deed in making these decisions. The Trustees may be guided by a "letter of wishes" normally created at the same time as the Trust deed, however the Trustees are not legally bound by the letter of wishes.
- Interest in Possession Trust: exists where a beneficiary has an absolute current right to all the income arising from the Trust and is not reliant on the Trustees discretion. The beneficiary need not have any right to the capital of such a Trust which may pass to a second class of beneficiary on the death of the beneficiary with the absolute right to income.
- Protective Trusts: are commonly used for children, disabled persons, or anyone whom the settlor considers incapable of handling their own affairs adequately, but whom the settlor wishes to support financially.
- Purpose Trusts: are established to fulfill a particular purpose, rather than for the benefit of a particular beneficiary, or class of beneficiaries. The purpose of the Trust does not have to be charitable.
- Corporate Trusts: are mainly used to provide employee incentives or company pensions in a tax efficient way. They may also be commonly referred to as Employee Benefit Trusts.
Our services
We can offer our clients a comprehensive range of services relating to the establishment of offshore Trusts, including Trusts established outside of the Isle of Man. Our services include:
- Establishment, management and administration of all Trust types
- Implementation of tax planning structures
- Provision of Trustees
- Appointment of Protectors
- Preparation and submission of tax returns
- Opening and operating of a Trust bank account and other financial transactions
- Bookkeeping, maintenance of accounting records and Preparation of accounts
- Client reporting
- Introductions to other professionals, such as lawyers and financial advisors