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International Trusts

Trusts have been used for many centuries as a legitimate means of protecting assets, whether hard assets or cash and cash instruments.

Each trust contains the following:

    •  Settlor or Grantor
    •  Protector
    •  Trustee(s)
    •  Beneficiary(s)

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.

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.

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Advantages of an International Trust

    •  International Trusts provide greater protection against lawsuits than domestic trusts
    •  Creditors are less likely to sue if your assets are owned by an offshore entity
    •  Attorneys attempting to sue offshore are confronted by a different legal system
    •  A properly structured offshore Trust can provide income and probate tax savings
    •  Control of present and future ownership
    •  Provides for education, health care and maintenance of beneficiaries
    •  Assets are protected from spendthrift beneficiaries
    •  Property may be held to benefit minors and bankrupt and incapacitated persons
    •  Strict confidentiality
    •  Smooth transfer of wealth
    •  Efficient tax planning
    •  Protection of assets against potential creditors
    •  Some assets are better owned by an International Trust than by a Limited Partnership
    e.g. The home mortgage deduction of interest is retained, if eligible property is placed in an International Trust, but not if placed in a Limited Partnership. The Subchapter S election is retained if S corporation stock is transferred to an International 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.

Some of the benefits of St. Vincent International Trusts are:

  1. Trust deeds are registered in a confidential government Trust Registry, whereupon an official Certificate of 'Registration is issued to the Settler/Grantor;
  2. A duly registered trust will not be rendered unenforceable because it was invalid under the laws of the Settler/Grantor's domicile or residence. Thus, forced heirship law and community property regimes can be avoided;
  3. The traditional rule against perpetuities and the rule against accumulations are modifies and clarified;
  4. Purpose trusts, which are created for a specific purpose but without named beneficiaries, are allowed and statutorily prescribed;
  5. The role and duties of protectors are specifically set out and clarified to account for recent case law;
  6. Choice-of-law and conflicts-of-laws issues are anticipated and resolved in favor of the provisions of the International Trust Act;
  7. A foreign (non-Vincentian) judgment against a registered International Trust (or its settler or beneficiaries) is not enforceable in Saint Vincent if the judgment was based on law inconsistent with the International Trust Act, 1996;
  8. Actions against registered international trusts must be commenced within two years from date of creation of the trust;
  9. A complaining creditor may satisfy his claim against the property of a registered international trust only if that creditor can show both that the settlor/grantor's principal interest in creating the trust was to defraud him, that the disposition of property to the trust rendered the settler/grantor insolvent;
  10. Traditional fraudulent conveyance laws (Statute of Elizabeth) are not applicable to registered international trust;
  11. The bankruptcy or insolvency of the settler/grantor under the laws of his residence or domicile will not affect a registered international trust;
  12. An international trust may own one or more Saint Vincent International Business Companies;
  13. Registered trustees fall within the definition of 'financial institutions' of the Proceeds of Crime Money Laundering Prevention Act 2001 and are thereby subject to its anti money laundering requirements.