What are Trusts

What Are Trusts?

Trusts have been around since the time of the crusades. Modern trusts allow individuals to benefit from the trust assets without owning them. Trustees have the day-to-day control over the assets and trustee powers are set out in the trust deed. A settlor is the person who transfers assets into the trust.  A beneficiary is the person who enjoys income or capital from the trust. Trusts are a legal entity for UK tax purposes and are subject to special rules for all the main taxes.

Evolution

A trust has special legal protection in UK law, with many of the legal principles established over more than 300 years. You may rest assured that Minerva fees include ongoing legal support, and trust amendments will not adversely affect the trust fees should there be any challenges against the trust mechanism.

How Trusts Work

A trust is a legal mechanism which determines how assets provided by the settlor are distributed. The trust is set up by the trust deed which sets out the powers of the trustees and identifies the beneficiaries or class of beneficiaries and how they may receive trust benefits. The trustees are responsible for the management of the trust and do not benefit from the trust funds. Trustees, however, are personally liable for the trust’s liabilities.

Why Create A Trust?

Possible Tax Planning.

As the settlor does not own the trust assets there would be no liability for tax on those assets. The trustees would be liable for any income and capital gains taxes. Where the trust is established offshore, where there may be low or no liability to tax, a trust makes an attractive possible tax planning vehicle. 

Family Succession Planning.

A settlor may use a trust to provide finances for him or herself, their family or others during his or her lifetime and also post death.

Provide for those who cannot manage their own affairs.

Beneficiaries who are incapacitated, for whatever reason (such as age), may be provided for financially through a trust. These beneficiaries will normally be included in the trust deed and will receive income or capital at the discretion of the trustees.

Asset Protection

Specialist advice should be taken where a trust is needed to protect against forced heirs or future creditors. However, treasured assets such as the family home, works of art or shares in the family business can be protected through a trust mechanism.

To Avoid any problems with Probate.

Where assets are held under trust the settlor no longer owns these assets and, therefore, they are outside the estate for probate purposes. This means there would be no probate delays regarding the trust property on the death of the settlor.

Emergencies.

Trusts can be set up on the happening of a particular event, such as incapacity or even kidnapping. The trustees will then manage the trust for the benefit of the beneficiaries, ensuring your family is provided for financially.

Confidentiality.

A  Minerva trust is a confidential arrangement between the settlor and the trustees, with minimal or no reporting requirements. In many cases the beneficiaries of the trust are unaware of its very existence under which they have been granted an interest.

Off Shore Trusts

The primary benefit of an offshore trust is the protection it offers in keeping your assets out of the reach of creditors and judgments. Typically, offshore jurisdictions have strong privacy laws and are not affected by laws of foreign lands; any litigation would be costly and would need to originate in the country of the trustees. An offshore trust is located overseas in jurisdictions where the legal system is founded on English common law or which has adopted it as applicable to trusts with the express intention of providing a faithful offshore trust service.

Careful selection of a trustee is of paramount importance due to the stringent responsibilities placed upon them, offshore trusts are incredibly complex and require legal expertise. Some of the strongest offshore trust jurisdictions are the Cook Islands, Nevis and Belize. Foy Wealth Ltd has selected Belize, and Bay Trust International Limited, since they have a demonstrated track record of providing successful and diligent trust management to ensure trust security, viability and ability to operate for the beneficiaries. However, our clients may choose any trustee or jurisdiction. Other jurisdictions with historical solid bases for offshore trusts include: Australia, Britain, Canada, Channel Islands, China & Hong Kong, Finland, Isle of Man, Luxembourg, Mauritius, Seychelles, Singapore and Switzerland - but this list is not exhaustive.

Assets that may be transferred into trusts offshore include, but are not limited to, cash, real estate, securities, businesses, art and gold. Once the assets are transferred into the trust they will be held under the name of the offshore trustees. As the protector of the trust you will have the ultimate power to change trustees whenever you wish. However, in essence, trustees exercise their discretion for the benefit of the beneficiaries. Specialist advice should be taken to ensure that the trust is properly established to protect your assets. The ongoing costs of the trustees are dependent upon what you require them to do.

Memorandum of Wishes

This maintains the trust structure and gives the trustees ongoing requests for them to consider. 

Why a Minerva Offshore Trust Works

Transferring your wealth offshore changes the environment in which that wealth is held and, therefore, changes the rules which affect that wealth. This means that the wealth will also grow differently and be transferred to beneficiaries in different ways. The trust will also allow you to have more control and greater access over your wealth and be passed onto your beneficiaries who will maintain the same rights of access and control over the trust funds. The physical assets, land, cash, investments etc. do not need to be physically transferred offshore,; it is only the right of ownership that is being transferred offshore.

Statutory reliefs are used to transfer assets from the UK tax environment to offshore trusts through tried and tested legal and safe processes and strategies. The courts have historically supported trusts in their decisions and in MacDonald (Inspector of Taxes) v Dextra Accessories Ltd and Others (2003) the High Court of Justice ruled that the use of Remuneration Trusts does not constitute tax avoidance. This sets a precedent and is, therefore, binding in law and accepted by HMRC.

Buckingham Wealth Ltd will assist you in dealing with HMRC enquiries relating to the Minerva Trusts. Since there is full disclosure, no penalties can be charged by HMRC. In the unlikely event that a Minerva plan was found in court to be defective or incorrectly implemented then the outstanding tax plus any interest would be payable. However, this is highly unlikely since the Minerva plans are developed based on existing legal decisions and Statute.

Wealth that may be held in Offshore Trusts

  • Personal and Corporate Assets
  • Cash
  • Property such as Cars, Yachts, Planes.
  • Investment and Commercial Properties and Property developments.
  • Other investments such as share portfolios, company shares.

The various types of wealth require different routes into different types of trusts to comply with specific legislation which may be applicable. This will be explained by our specialist legal team at Buckingham Wealth Ltd.

Taxation

Offshore:

One of the unique features of a breakthrough Minerva trust is the peculiar effects on taxation.

Correctly transferring assets into the offshore Minerva trusts does not trigger taxation. Once the assets are within the protected offshore trust environment, the assets can be sold free of capital gains tax and will be free of all taxes on future growth or income.

Expert Professional Advice

These products and processes are of a highly technical nature and expert professional advice must always be taken. Every client case is unique and depends on the assets held on the balance sheet, the profits generated, how shareholder income is taken and your intentions for the future sale of the business etc. However, in most cases we are able to transfer all the assets (and future income and gain) into a protected Minerva trust.  Included in the fees, our Wealth Strategy Firm provides comprehensive written advice.

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