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.
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
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:
- Trust deeds are registered in a confidential government Trust Registry, whereupon an official Certificate of ‘Registration is issued to the Settler/Grantor;
- 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;
- The traditional rule against perpetuities and the rule against accumulations are modifies and clarified;
- Purpose trusts, which are created for a specific purpose but without named beneficiaries, are allowed and statutorily prescribed;
- The role and duties of protectors are specifically set out and clarified to account for recent case law;
- Choice-of-law and conflicts-of-laws issues are anticipated and resolved in favor of the provisions of the International Trust Act;
- 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;
- Actions against registered international trusts must be commenced within two years from date of creation of the trust;
- 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;
- Traditional fraudulent conveyance laws (Statute of Elizabeth) are not applicable to registered international trust;
- The bankruptcy or insolvency of the settler/grantor under the laws of his residence or domicile will not affect a registered international trust;
An international trust may own one or more Saint Vincent International Business Companies.
It is required, that a Trust be registered with the Belize Trust Registry In Belmopan for a fee of US$100, in exchange for which the Registrar issues a Certificate of Registration to the Trust Agent The Register of Trusts cannot be revealed as to that trust without the specific, written consent of the Trustee.
A Trust can only be registered by a licenced (one who is registered with the Belize International Financial services Commission) approved Trust Agent.
Trusts may be formed either orally or by written declaration, with no mandatory declarations and only a few statutory requirements, with the exception of unit trusts or trusts which relate to Belize property (these must be formed by formal written documents).
It is possible to draft the trust and specify that particular parts will be governed by the laws of other jurisdictions, and it is possible to specify that in the event of changes in a designated jurisdiction’s laws that yet another jurisdiction’s laws will apply. This provision can be important for “international” trusts insofar as a change of law in a designated jurisdiction may operate to void an important provision of the trust; in that case, the designation of the alternative jurisdiction will help ensure that the trust will be enforced according to the wishes of the settlor. However normally the Laws Of Belize will apply to all Belize Trusts.
Abolition of the Rule against Perpetuities
Belize has abolished the Rule Against Perpetuities as it relates to Belizean trusts. A trust may be created for a maximum of 120 years without regard to whether proper beneficiaries have been identified or not. Charitable trusts, as defined under the statute, may be established with unlimited duration.
Belizean courts cannot vary or set aside a Belizean Trusts. Belizean courts also are prohibited from recognizing foreign judgments against a Belizean trust or against Belizean trust property, in respect to marriage or divorce, succession of heirs, or claims by creditors (including foreign bankruptcy courts). The Belizean trust companies claim that a Belizean trust has never been compromised, and that Belizean trust assets are completely insulated from all creditors, unhappy heirs, and mad ex-spouses which attempt to use fraudulent conveyance laws and bankruptcy orders to penetrate the trusts. The Belize Trust Act also provides that an asset transfer has protection from fraudulent conveyance allegations as of the date of the transfer.
Settlors, Beneficiaries and Purposes
The settlor (creator) of a trust may be any person having the capacity to own and transfer property. Because of the abolition of the Rule Against Perpetuities as to trusts, virtually any person, entity, or thing may be a beneficiary, and it is possible to create broad classes of potential beneficiaries or leave the designation of beneficiaries to the trustees (i.e., “discretionary” trusts are allowed).
Both settlors and beneficiaries may give the trustees “Letters of Wishes” which are non-binding guidelines as to how the trust should be administered. The Trustees are not legally bound to recognize or follow these letters, but in practice they almost always do.
Trustees and Protectors
Belizean trusts must have at least one trustee and may not have more than four trustees, which the exception of charitable trusts which may have an unlimited number of trustees. A Trustee may also be a settlor and a beneficiary of the trust.
All Trustees are held to a very high standard of conduct and faithfulness to the trust. In addition to most typical trustee powers, a trustee of a Belizean trust is empowered by the Trust Act to advance moneys to potential beneficiaries of the trust even before their interests in the trust have vested. Trustees who are engaged in a profession or business which supplies services to a trust are entitled to have the reasonable fees and charges for such services paid by the trust.
The Belize Trust Act specifically allows for (and, for some types of trusts, requires) the appointment of a “Protector” who individually owes fiduciary duties to the trust beneficiaries. While the Protector has the power to remove and appoint trustees, the Protector is not considered to be a trustee. The Protector can also be the settlor, trustee, or beneficiary of the trust.
Breach of Trust
In the event of a breach of trust, trustees are personally liable for the loss or depreciation of the trust assets (but directors of a corporate trustee or trust company do not become personally liable). Further, any who receives trust property with knowledge of the breach of trust become constructive trustees of the trust. For a breach of trust, Belizean law allows for the “tracing” of assets and no Statute of Limitation will apply.