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Trusts and Funds

Traditionally trust is one of the tools for tax optimization, as means of securing assets. International evolution of legislation and law enforcement has led to different interpretations of the concept of different systems of law.

The countries that adopt the British system of common law (of which include Cyprus, the British Virgin Islands, Belize, New Zealand, Panama) become a founder of the concept of trust and mutually recognize trusts of each other.

On the contrary the countries of continental legal systems do not have trust notion at all with few exceptions.
For example, some European states (eg, Luxembourg, Austria, Liechtenstein), as a result of convergence of legal systems, not only recognize the trust created in common law countries, but also consolidate the possibility of regulatory agencies in their territory as a proper trust and legal persons, dubbed the funds - original derivatives Trusts. The object of ownership trust can be any property, except as prohibited in some countries.

Typical scheme of a trust is as follows: Founder of the Trust - transfers its assets (Trust Fund - an isolated part of the property Settler) to another person - trust manager or trustee (Trustee) - so that the latter holds assets, as well as to deal with these assets for the benefit of the settler or any other person (the beneficiary), said the founder, or for any purpose specified in the Trust.

a trust is a relationship whereby property (including real, tangible and intangible) is managed by one person (or persons, or organizations) for the benefit of another. A trust is created by a settlor (or feoffor to uses), who entrusts some or all of their property to people of their choice (the trustees). The trustees hold legal title to the trust property (or trust corpus), but they are obliged to hold the property for the benefit of one or more individuals or organizations (the beneficiary, cestui que use, or cestui que trust), usually specified by the settlor, who hold equitable title. The trustees owe a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property.

Making a decision on the establishment of trust is important to understand that in this case the control of the property transferred in trust can be lost. On the other hand, trust agreement which does not make possible for the founder to dissolve it unilaterally, could hardly be recognized fictitious by the court. This substantially increases the degree of assets security from the claims of creditors.

Advantages of trusts:

1. Asset protection, since the property transferred in trust, cannot be addressed claims of creditors and third parties.
2. Working and legal schemes of tax optimization both for individuals and legal entities. In many countries property managed by a trust is protected from several taxes (notably on inheritance, capital gains, property tax).
3. Anonymity and security of the founders and information about them. In countries where it is allowed to own property through a trust, information is usually not disclosed on their grantors and beneficiaries. It also helps to save the property from creditors;
4. Pension and insurance schemes of long-term motivation of staff. A significant number of companies, often large and famous, use the scheme of property ownership through the trust as a method of long-term motivation of staff (through the provision of various schemes of additional remuneration, which is accumulated in a trust and then paid to the employee). The most popular scheme of additional corporate pension arrangements, which allow a trust to accumulate retirement savings of employees;
5. Owning property jointly with other owners. Trust is a convenient mechanism for co-ownership and property management, which also often helps to minimize problems and disagreements among the owners in the division of property;
6. Inheritance and security of property until a certain age to inherit. As in medieval England, trusts are still popular as a scheme of succession, when the heirs are not able to dissipate assets too early;

Trust, like most organizational and legal forms of property ownership, have some drawbacks:

1. The owner, in most cases loses control over the assets, although only formally. The existing judicial practice demonstrates that there are cases where the trustee of trust is ineffective or maliciously administers entrusted to him property management;
2. In many countries, particularly in the U.S.A., there is legislation restricting the right of its citizens to transfer property in trust. Upon transfer of property in trust founder is obliged to pay a significant tax or fee.
3. In some countries the law does not recognize as legitimate trust arrangements (eg, Russia), it can cause certain difficulties in case the assets managed by the trust in such jurisdictions.
Specialists of West Union Group will be pleased to offer you a qualified personal consultation on issues related to registration and maintenance trusts, including the structure of international holdings. We can offer you advice and registration of trusts in the most popular countries:

• Liechtenstein (in the form of Trust company, fund or institution). 
• New Zealand (in the form nonresident trust).
• British Virgin Islands (including in the form of the most profitable forms - according to the law «The Virgin Islands Special Trusts Act» - VISTA).
• Panama (in the form of an ordinary trust)
• Cyprus (in the form of resident, offshore trusts or international).