A Trust is a legally acknowledged and binding arrangement whereby a person (or a number of people), known as the Trustee or Trustees become the legal owner(s) of assets transferred to them by a Settlor or Settlors but only in as much as they are holding these assets for the benefit of another person or persons, known as the Beneficiary or Beneficiaries.
The person giving assets to a trust is known as the Settlor and is commonly named in the Trust Deed, but, depending upon the jurisdiction where the trust was established, not necessarily so. It is therefore quite possible to give assets to a trust anonymously (in the sense that you donât want to be linked as having given your assets to “your” trust). This feature of certain trusts is regarded by many as one of the most valuable, for implemented correctly it can enable someone to appear to be of only modest means yet live a luxurious lifestyle, the “trappings of wealth” all belonging (ultimately) to a trust with no legal connection to that person. When either periodic or terminal payments are made from a trust to either a person or people named in the Trust Deed, the recipient(s) are known as Beneficiaries, i.e., they benefit from the trust.
Offshore countries, with their liberal taxation laws and strict non-disclosure arrangements (usually by way of not even knowing) are ideal bases for trusts of all kinds. Some offshore jurisdictions will allow nominee Trustees, will allow assets to be settled into a trust after it is formed to protect the identity of the Settlor and the type and value of the assets placed in trust, will allow trusts to have an indefinite life (most jurisdictions insist on a specific life span for a trust) and will allow Beneficiaries to be un-named and left to the discretion of the Trustees (see next section). Indeed it is not unknown for some enlightened jurisdictions to ensure that their laws over-ride the laws of the Settlor’s and/or Beneficiaries’ country in any trust matters.
A Beneficial Trust is one in which the Beneficiaries are specifically named in the trust document, i.e., “John Smith will receive the sum of US €100.000 on his 25th birthday.” Whilst beneficial trusts can be of value for asset protection and perhaps inheritance tax purposes, because there is a specifically named beneficiary (or several), they are all but useless for tax planning and privacy purposes, the Revenue Authorities in the country of residence of the beneficiary will soon become aware of the “inheritance.”
Asset Protection Trusts
Just as their name says, asset protection trusts are designed to protect assets of all kinds from claims made against them. They form no part in tax avoidance but are ideal for people whose lifestyle or profession may leave them open to either legal or civil claims. For example they are widely used to avoid malpractice suits against doctors and surgeons (especially in the USA), to protect personal and family assets against claims made by wives/partners in divorce cases or to protect businesses against the financial consequences of legal claims.
If a beneficiary is named in a trust document, or if the beneficiary is clearly also the settlor, Revenue Authorities tend to “look through” such trust arrangements and regard the beneficiaries as the owners of the trust assets and income. Thus it is quite feasible that beneficiaries can be taxed on assets or income which they never own or receive, simply on the basis that they could be the owner(s)! To get round this problem, what are called Discretionary Trusts were established. These are arrangements where the actual beneficiaries of the trust are at the absolute description of the trustees. Since no specific beneficiaries are named in the trust document, revenue authorities cannot tax any potential beneficiaries since there is no way of knowing when, or even if, they will benefit from the trust, although tax is (in theory) payable on the receipt of the proceeds of the trust by a specific beneficiary. But you wouldn’t be so foolish as to have any distributions from the trust made over directly to you anyway would you? Do so via an offshore account or via an offshore company linked to the trust. OFFSHORE DISCRETIONARY TRUSTS ARE, IN OUR OPINION, ONE OF THE MOST VALUABLE TAX AVOIDANCE VEHICLES AVAILABLE.
Setting Up Your Trusts
As with Offshore Companies and Offshore Foundations, we employ the Republic of Panama for the majority of our Trust work, the legislation there being amongst the most comprehensive in the world. Panamanian Trusts are totally private, there is no taxation of Trust income, assets can be settled AFTER a Trust is formed and Trusts established within the Panama jurisdiction are governed by Panamanian secrecy/confidentiality laws, one of which is that it can over-ride that of other countries, i.e. a “foreign” court order that a Trust (or Trustee) should be liable for payment of damages will be overturned by a Panamanian Court.
In order to establish your Discretionary Trust in Panama, please submit the following:
The name of your Trust (Please indicate three choices in case name is not available.)
Beneficiaries. (Please indicate Beneficiary/ Beneficiaries or if you would like your Beneficiary to be the BEARER or an offshore corporation.)
Please complete our order form
Panamanian Offshore Discretionary Trusts
Base Price: 1100.00 EUR