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The terms Settlor and Grantor are used interchangeably.
This person is the one who settles certain assets upon the trust. S/he is usually the
initiator of the trust and the one who transfers the initial assets to the trust. The
Protector is the person who has a voice in the operation of the trust and is a watchdog for
the beneficiaries. He assumes many of the functions of the Settlor or Grantor in his
absence or after his death. S/he may communicate with the trustee(s) through letters of
wishes or orally if s/he so chooses. Written communication is the best, since it leaves
a record.
The Trustee is the one who administers the affairs of the trust, receives the transfers of
assets to the trust and invests its funds judiciously. The assets transferred to the
trust are sometimes referred to as the "corpus" of the trust. The Trustee has
absolute discretion as to the investments to be made, the disposal of assets and their
distribution to beneficiaries in accordance with the wishes of the Grantor or upon the death
of the Grantor.
In theory, the Trustee is in complete control. In practice, the trustee adheres closely
to the wishes of the Grantor and in his/her absence or upon his/her demise, to those of the
Protector. This makes sense in a jurisdiction such as St. Vincent & the Grenadines,
where the law allows a Grantor to change the Trustee and even to move the trust to another
jurisdiction.
A bank account in the name of the trust is legally owned by the trustee(s). However, the
trustee may appoint any person s/he chooses to be a Manager of such an account. The bank
account of a trust can be in St. Vincent, the US, Europe or any part of the world and there
may be any number of such accounts. .
You may transfer any kind of asset you choose to your trust. This may take the form of
land, house, apartment building, other rental property, works of art, automobile, boat, etc.
This is done by a deed of conveyance. You will have to report such a transfer to
the IRS. It may be better to have your trust purchase such property. If you
propose to live in the property, it might be wise to make rental payments to the trust, so
that you could not be accused of having beneficial use of the property without charge.
The rent you pay goes indirectly back into your pocket.
An IBC that is owned by a trust is also legally owned by the Trustee in the same way that the
Trustee owns the trust. A Grantor may be appointed a Consulting Director or Manager of
this IBC and thus entitled to a consultation fee or salary. As a Manager, s/he can be
issued with a "revocable" Power of Attorney. It must be revocable, because if
it were "irrevocable" he would have a measure of control over the IBC which is a
subsidiary of the trust that would make the trust an "alter ego", an extension of
himself/herself, i. e. a sham. The U. S. Internal Revenue Code would treat
its earnings as those of a Proprietorship or Partnership.
Great care is to be exercised in choosing a Trustee, especially when both Grantor and
Beneficiary are offshore companies controlled by the same Trustee. This is a trust
relationship and not one easily undertaken with your life's earnings.
Our business is to provide information and not to give advice. Such advice is best
obtained from licensed practitioners in your own jurisdiction, notably tax attorneys and
Certified Public Accountants.
A trust may have any number of IBC's tied to it. This could be a particularly useful
strategy where you wish to purchase several properties or to conduct several businesses and
want to spread liability. A trust may also have several sub-trusts. Such
sub-trusts could be used to settle property on various members of your family before your
death, so that there are no family quarrels after you pass on. It helps to preserve
family harmony for succeeding generations.
The question we asked in the first paragraph was which structure should one use for privacy,
asset protection, and credit enhancement. The best arrangement is a trust that owns one
or more IBC's. If you have to choose between an IBC and a Trust, because the funds were
not sufficient to offer maximum protection, then the Trust has an edge over the IBC. If
maintenance of personal control over your assets is of paramount importance, then the IBC is
the more suitable of the two. Our conclusion then is that it is best to have both a
Trust and an IBC, with the IBC owned by the Trust.
Advantages of an Offshore Trust
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Offshore trusts provide greater protection against
lawsuits than domestic trusts |
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Creditors are less likely to sue if your assets are
owned by an offshore entity |
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Attorneys attempting to sue offshore are confronted by a
different legal system |
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A properly structured offshore Trust can provide income
and probate tax savings |
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Control of present and future ownership |
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Provides for education, health care and maintenance of
beneficiaries |
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Assets are protected from spendthrift beneficiaries |
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Property may be held to benefit minors and bankrupt and
incapacitated persons |
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Strict confidentiality |
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Smooth transfer of wealth |
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Efficient tax planning |
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Protection of assets against potential creditors |
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Some assets are better owned by an Offshore Trust than
by a Limited Partnership
e.g. The home mortgage deduction of interest is retained, if eligible property is placed in
an Offshore Trust, but not if placed in a Limited Partnership. The Subchapter S election is
retained if S corporation stock is transferred to an Offshore Trust, but not if transferred to a
Limited Partnership |
Benefits of a St. Vincent Trust
Trust laws of St. Vincent and the Grenadines are far more specific and protective than
domestic trust laws. Assets held in a St.Vincent Trust will not be subject to local
income taxes, capital gains taxes, profit taxes, corporate taxes, withholding taxes,
succession taxes or any similar taxes |
