A trust is a legal arrangement. It is an agreement between the settlor (the party that settles the trust) and the trustee (the legal appointee in charge of the settlor’s assets) to manage the settlors’ assets for the benefit of the beneficiaries of the trust.
After the trust is created, the settlor is no longer in charge of the assets gifted to the professional trustee. The trustee is legally bound to manage these assets for the sole benefit of the beneficiaries of the trust.
More importantly as you continue to spend more time in the UK, you will continue to lose your international advantages and characteristics, but your international family or a commercial trust will not.
You will need to explore available offshore solutions with international trust and tax experts like myself. You can get in touch with me here.
12 Reasons Why an International Trust is an Important Wealth Management Tool
1. Holding Property for Minors or Individuals who have no Legal Capacity
All persons need to have a legal capacity to enter into contracts. For example, minors do not have such legal capacity due to their age. Therefore, buying real estate through the legal mechanism of trust allows the minors to benefit from the property managed in their best interest.
The minors cannot be named on the property deeds by virtue of their age. However, they can be identified as beneficiaries of the trust as legal ownership is vested in the trustees who have the legal capacity to own the property.
Similar considerations apply to savings and investments bank accounts. These assets may be held in a trust for a minor instead.
2. Making Legal Wealth Arrangements Private
The main strength of using a trust is to make and ensure that arrangements remain private and protected. Trustees benefit the interests only of the identifiable beneficiaries and not wider members of the public or family.
A good example is when there is friction in the family. The settlor is likely to favour their own daughter and her children over the son-in-law. A trust allows the exclusion of the son-in-law from the list of beneficiaries of the trust.
3. Tool for Planning Family Succession
Leaving assets in trust allows to protect family succession. This can go beyond a single generation within the family and encompass several generations. Some of the trust arrangements are in use for more than a hundred years.
Once the trust is created it also helps to protect the family’s property from the beneficiary’s creditors even when one becomes bankrupt.
A trust arrangement allows you to make gifts in the future. For instance, you want your daughter to benefit from certain assets at a certain age. You are afraid that you are no longer around when this time comes.
6. Minimise the Burden of Taxation
Creating a trust early on before becoming a UK tax resident allows you to preserve non-dom characteristics of the assets for longer. These types of trusts are marketed as excluded property trusts, especially for UK Inheritance Tax purposes.
The creation of a floating charge (debenture) which attaches itself to specific assets of the company at any given time, which allows it to raise capital from investors not only based on companies’ stock, but also other companies’ assets that are not publicly traded.
Not only humans may be beneficiaries of the trust, but these can be parks, specific plots of land and charity causes such as environmental protection or education in relation to specific species.
The mechanism allows the creation of specific funds for specific objectives. One example is reclamation of land. For example, a trust is created to collect payments from companies and individuals to make investments, so that there are investment funds in the future to reclaim the land to be used in a more sustainable way and not to abandon it once valuable resources are extracted.
Currently, there is a lot of emphasis on the necessity to rely on private pension funds instead of the public one. A number of such private pension funds are formed in the shape of the trust to help create, administer and distribute private pensions.
The beneficiaries are not only people, but causes and things. It allows the creation and facilitates a number of investment funds, creating and raising capital.
As you plan your next big investment or property in the UK or elsewhere you need to sit down with an international trust and tax expert like myself to find the next best step for you in your wealth creation journey.
If you are an international person, an offshore international trust helps you to preserve your international characteristics for longer even when your own tax residence status changes with time.
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Saule Voluckyte, M.A.E.S, LL.B, FAIA
I have been working exclusively with UHNWI in Mayfair, London since January 2008. I built specialist knowledge and expertise required to serve ultra high net worth individuals investing, operating and relocating to the UK or Switzerland.
Within the industry, I am the single adviser who is able to traverse the different areas of expertise and bring a comprehensive approach across: global structuring, UK immigration, international taxation and FOREX to develop their global wealth strategy, while they build, grow and expand their wealth worldwide.
Previous experience as one of the senior advisors for the government, made me a go-to person when delicate and uncomfortable scenarios involving heads of state need to be handled with care and preserve privacy.