About Trust

As you invest, do business or relocate to the UK, one of the first things that your financial advisor, lawyer or a public accountant will suggest is forming an international trust.

A concept of trust is an unfamiliar concept if you are coming from outside English common law jurisdictions, such as countries that are civil or Sharia law jurisdictions. 

Let’s look at this legal concept closer.

What is a trust?

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.

Why do you Need to Consider an International Trust?

As an international person with intended assets across different jurisdictions, an international trust is an important wealth management tool.

There is no advantage to creating a will or utilising onshore English trust if you are an international person and do not have real connection to the UK.

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

Most real estate in the UK is held in a trust. This is usually done so that minors or individuals who have no legal capacity could legally own the property.

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.

For instance, it is often sought to favour some of the potential beneficiaries and exclude the others.

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.

4. Protect Family Property from Being Wasted

Ability to favour some beneficiaries and exclude others allows to make sure that the family property is preserved and not wasted.

There are some patterns within the family where some members of the family are perceived as being too wasteful in order to be able to care for and preserve the property long-term.

The trust mechanism allows to exclude such wasteful persons.

Once the trust is created it also helps to protect the family’s property from the beneficiary’s creditors even when one becomes bankrupt.

5. Make a Gift in the Future

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.

Therefore, utilising a trust allows you to make such arrangements now with the future in mind.

6. Minimise the Burden of Taxation

A lot of tax planning involves the consideration of trust. This is particularly true about the persons arriving to the UK and wanting to protect their assets for longer from possible UK 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.

Trust is also used when considering different taxpayer rates when a higher rate taxpayer transfers property to a lower rate taxpayer.

7. To Enable More Persons to Own the Property

There are usually legal restrictions on how many persons can be listed on a property deed or how many names there can be associated with one asset or another.

Utilising trusts allows multiple persons to beneficially own a single asset.

8. To Facilitate Investments Through Unit Trusts and Investment Trusts

Unit trusts and investment trusts make it possible for smaller investors to invest and protect their interests.

9. Enables Companies to Raise Finance  From Investors on Security of Debentures and Bonds

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.

10. To Make Provisions for Non-Human Objects

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.

11. Create Investment Funds for Specific Objectives

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.

12. Create, Administer and Distribute Pension Funds

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.

Trust is a Powerful International Wealth Management Tool

A trust is continued to be utilised for many different purposes be it private or public. It may be confined to family succession planning  or purely commercial purposes.

It allows to single out persons as beneficiaries for whose benefit the legal wealth arrangements are being made. Single items of wealth can be owned collectively.

These arrangements remain private that may encompass a few or multitude of beneficiaries.

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.

The gifts may be made in the future and protected from creditors.

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.

Book a call with me to discuss your Global Wealth Strategy and necessary onshore and offshore legal arrangements to protect your global wealth. You may submit your enquiry here.

You will be first guided to a payment page when you choose “book a call” option. After making the payment, you will be able to choose the most convenient date and time for our Zoom meeting. You can report a payment issue here.

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.