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Offshore Trust Formation The phrase “offshore trust formation” refers to the creation of an offshore trust. To be “offshore” the trust must be created outside of your home country. A trust is a document outlining how specific assets are to be managed by a third party known as a “trustee”. An offshore trust formation is generally set up to benefit named individuals who are known as “beneficiaries”. The person who creates the offshore trust is known as the “creator” or settler”. In many countries the offshore trust actually owns the assets. In other countries the offshore trust holds and manages the creator’s assets “in trust”. An offshore trust formation can include an offshore bank account or an offshore brokerage account to be involved with investments. Global estate planning can be one purpose for doing an offshore trust formation. The assets are being held for the heirs of the creator and when he or she passes away the trustee continues to manage the assets for the beneficiaries. Some offshore trusts could be set up to cease upon the creator’s death where title to the assets will be transferred to the beneficiaries according to the directions in the trust document. Other offshore trusts can become perpetual so that the heirs of the beneficiaries become the next beneficiaries and the trustee continues to manage he assets for the new beneficiaries as the others pass away. Asset protection is another reason for an offshore trust formation. This means that the creator’s assets are held on behalf of or outright owned by the offshore trust to shield the creator from losing the assets due to being sued in a court of law or from seizure by the creator’s creditors to pay off his or her debts. If the offshore trust owns the assets then it cannot be involved with a seizure by a court order or government agency’s powers aimed at the creator and his or her assets. Lowering income taxes is another reason for an offshore trust formation. By choosing a country which does not impose income taxes on bank account interest or investment profits the offshore trust formation can save the creator a lot of money. Some countries, like Belize, have specific laws protecting the assets of their offshore trusts and allow the trust to make an income outside of the country totally income tax free. Countries with specific laws protecting offshore trusts make it very difficult for any of the creator’s creditors to seize the offshore trust’s assets. It would usually require proving the offshore trust formation was based on the commission of a criminal act like terrorism or illegal money laundering to challenge the validity of the offshore trust formation in these countries. To summarize, an offshore trust formation involves writing up a trust document which describes how specific assets will be managed on behalf of the named beneficiaries. People get involved with offshore trust formation to lower their income taxes, or for worldwide estate planning, and/or for asset protection reasons. For free information about Asset Protection visit this Panama law firm's website: http://www.panama-offshore-services.com/ © COPYRIGHT 2013 Steven Rich, MBA
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