How to protect property with a trust

How to protect property with a trust

Opening a trust in 2022 is a reliable way to protect your estate from sanctions, creditors, and reduce your tax burden. The essence of the procedure is to conclude an agreement under which the owner (the founder of the trust) transfers his/her assets to a trustee (manager) to manage them, respecting the interests of the beneficiary (a third party). As a result, the owner ceases to own the assets and the assets cannot be confiscated.

How a trust works

The trustee is the legal owner of the property, but cannot use it as personal property. His/her job is to act in the interests of the beneficiaries. Therefore, s/he disposes of the assets in strict compliance with the rules that are spelled out in the agreement.

The manager divides the profits from the assets among the beneficiaries and is paid for her/his work. The agreement is made for a fixed term, after which the assets are distributed in a predetermined way (e.g., returned to the settlor of the trust or gone to the beneficiary).

Why create trust structures

Experts highlight the benefits of a trust to protect assets such as:

  • Privacy. A trust structure is beneficial to an offshore company because the laws of many offshore jurisdictions permit the non-disclosure of information about the founders and beneficiaries to the tax services of their states and other authorities;
  • Protection of the beneficiary if the beneficiary is mentally incompetent or unable to manage assets independently;
  • Protection of assets in bankruptcy or divorce, from law enforcement. A trust prevents the party who makes the claim from taking possession of the property or dividing it;
  • Protection of the beneficiary when the trust structure acts as a counterpart to a gift or will. For example, the beneficiary is a minor, so he or she cannot dispose of the assets on his or her own. Another option is that the owner wants more flexibility, to give the assets even to grandchildren who were not yet born at the time of the contract;
  • Tax abatement. The property that is transferred to the administrator under the contract ceases to be part of the owner's estate upon death. Thus, inheritance tax is reduced, and the assets will still go to the owner's heirs after some time;
  • Another plus is that the trust allows the settler to hide income. Under the contract, he or she is deprived of assets, which allows him or her to ask for a reduced tax rate, to receive benefits from the state.

Where to open trust structures

It is better to open a trust in the offshore, the laws of which reliably protect such structures. All that is required for the owner in this case is to write the clauses of the agreement competently. Any mistakes in the documents are fraught with problems.

The best places to open an offshore trust:

  • Cook Islands - according to experts, the strongest fortune protection is developed here. The property is beyond the reach of creditors, and foreign court judgments are invalid. A claim to the local court can be filed within 2 years, later on accepted. The settler who opened a trust in Cook Islands in 2022 gets other perks. For example, trust transactions are not publicly recorded, which allows for confidentiality;
  • Belize - the jurisdiction boasts detailed laws on trusts. A settler who decides to open a trust in Belize in 2022, gets reliable protection from litigation. In addition, there is no income tax, as well as on business, gift or inheritance. There are no exchange controls over trust assets and related transactions;
  • Luxembourg is an ideal option for a settler who works in Europe. To open a trust in Luxembourg in 2022 means to conclude a contract in one of the largest financial centers in the world. The transaction does not need to be registered with the state authorities, which keeps it confidential. Non-residents are completely exempt from tax charges on any property outside the country.

How to protect assets through a trust

If you want to protect assets through a trust structure, contact the IT-OFFSHORE experts and we'll help you.

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