Trust Investment Services
Trust is an effective option for tax planning, asset protection and conveyance by inheritance. The trust is a product of the legal system and it appears to be difficult for clients to understand its mechanism of action. The main misconception is that the trust is perceived as a legal entity, that is, a specific type of company. In fact, a trust is a special form of property contractual relationship.
Trust structure
In the process of creating and further functioning of the trust, three main parties are usually involved:
- Settlor is a person who establishes a trust and transfers some of its assets to it. After the trust creation, the settlor completely loses control over it. If the settlor reserves the right to withdraw assets from the trust, change the terms of the trust agreement or control the actions of the Trustee, then such a trust may be considered fictitious.
- Trustee is a person who owns and manages the assets of the trust in favor of the Beneficiary or to achieve a specific goal. He carries out his actions in accordance with the trust agreement, as well as the principles of morality, justice and business ethics. The trustee is not entitled to receive direct benefits from the assets of the trust. The trustee most often acts as an individual. However, it may be a specialized private or public trust company.
- Beneficiary – a person who is entitled to receive benefits from the assets of the trust, and, subject to certain conditions, the assets themselves. There may be several beneficiaries in a trust. Any Beneficiary has the right to demand from the Trustee the proper performance of the duties to manage the trust and, if necessary, may initiate appropriate legal claims.
In order to better safeguard the interests of the Beneficiary, another element may be provided for in the trust – the Protector.
Protector is a person appointed by the Settor to control the actions of the Trustee. The notion of Protector is defined in trust law and judicial precedents. The main language terms for the Protector are:
- Protector (the most widely used);
- Appointor;
- Committee;
- Enforcer;
- Guardian;
- Nominator;
- Surrogate.
Typical Trustee duties
- Dismiss and appoint a new Trustee;
- Pre-approve, control and / or veto the actions of the Trustee;
- Amend the trust agreement;
- Change the composition of the Beneficiaries of the trust;
- Change the legal domicile of the trust (the law governing the trust, as well as the judicial jurisdiction in which disputes can be considered);
- Receive information from the Trustee on the assets of the trust.
Keep in mind that too broad powers of the Trustee may lead to the fact that he will be recognized as the actual owner of the assets of the trust.
Trust law for offshore jurisdictions allows you to designate almost anyone as a Trustee. In particular, it may be:
- Settlor;
- one of the beneficiaries;
- any authorized representative of the Settlor, including one of his family members;
- any legal entity.
Despite this freedom of choice, one should approach this issue with caution. Granting the control powers of the Settlor or Beneficiary is undesirable, as this can lead to legal problems. It is better to appoint an independent trustee of the Settlor to the position of Trustee – a personal accountant, legal consultant or adviser. In addition, recently many public trust companies offer professional trustee services. Using this service can be a good solution.
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