For individuals looking to protect their assets against legal action or seizure, offshore trusts can be an excellent option because these trusts operate under the laws of their offshore country, meaning that local courts typically have limited power to intervene or force the repatriation of trust assets. Puai Wichman, an expert in wealth management, particularly wealth protection, explains it can provide an additional layer of security, particularly for those with large amounts of wealth at stake. But offshore trusts can do more than protect assets. They can also be used as part of a wider wealth management strategy, optimizing tax obligations, increasing investment returns, and upholding financial privacy.
The Purpose and Benefits of Offshore Trust
- Asset Protection
Setting up an offshore trust is an excellent way to achieve this goal. Offshore asset protection trusts are widely used by those who are looking for a highly secure financial structure. Asset protection attorneys typically recommend these trusts as trustworthy tools for safeguarding one’s assets. With an offshore trust, you can protect your assets while enjoying the peace of mind that comes with knowing your financial security is in safe hands. Trusts can be complex, but asset protection attorneys can provide all the guidance and support you need to set one up.
- Tax Reduction
Offshore trusts have gained popularity as they offer great tax incentives and the potential to reduce your overall tax liability if structured correctly. Puai Wichman mentions these financial vehicles provide a way for individuals to manage their assets and investments outside of their home country, often in tax havens and international financial centers (IFCs). The benefits of these trusts can be significant as they are not usually subject to any income or capital gains taxes in the local jurisdiction. However, it is important to note that this does not guarantee tax avoidance. Depending on your home country’s tax laws, you may still be liable to pay taxes on repatriated assets and other income sources. Therefore, it is crucial to ensure that offshore trusts are structured correctly and in compliance with all relevant tax regulations.
- Financial Privacy
The Cook Islands and Belize are two well-known havens that offer financial privacy and security for offshore trusts. In these locations, trust owners can rest easy knowing that their assets are being well-protected and shielded from unwanted attention. One of the biggest benefits of these offshore trusts is the difficulty in discovering their existence in the first place because there are no public records of the trust owners, and there are no requirements to file accounts or conduct regular audits.
- Estate Planning and Avoidance of Probate
Estate planning can be a complex yet necessary area to navigate in order to ensure the protection and distribution of your assets. Traditionally, trusts have been one of the primary vehicles for facilitating this process. However, with the rise of offshore trusts, the benefits and options for estate planning have expanded. While typically focused on personal asset protection and privacy, offshore trusts can also be used effectively for estate planning. By avoiding lengthy and costly probate proceedings and potentially lowering or eliminating estate taxes, offshore trusts offer a range of flexible structures to dictate how your assets will be distributed to your beneficiaries.
- Greater Investment Freedom
For US citizens, making investments can be a tricky business, especially when it comes to international investments. The restrictions and limitations that the government places on what citizens can invest in can feel stifling. According to Puai Wichman, offshore trusts are a valuable tool for investors because they are seen as a separate legal entity from the settlor and often operate in more liberal foreign jurisdictions. They may provide the freedom to invest in a wider range of assets. For example, US citizens face limitations when investing in cryptocurrency, but an offshore trust can allow them to overcome this and invest in a wider range of coins. With an offshore trust, investors can take advantage of greater investment opportunities and flexibility.
Puai Wichman is the founder and CEO of Ora Partners, an international trust provider and wealth management firm dedicated to helping families and individuals protect personal and corporate wealth.
