EDGE Magazine | Q3 2011


Daniel Martineau, Executive Director of Summit Trust International SA in Geneva Switzerland and a


Part I - How Relevant are Offshore Trusts in the Modern World?


With mounting pressures on banks, trust companies and insurance companies which have business in offshore locations and their clients, one might wonder about the continued relevance of trusts in the modern world.


In order to consider the question, I think we need to consider the question in its parts: first, the relevance of trusts; then of offshore financial centres; then together.


In a simpler world, I'm afraid that the true, historical use of trusts had been somewhat distorted or at least de- emphasized by some. I am sure that there were many responsible trust professionals who for many years harboured the thought that the confidentiality aspects of trusts had been over accentuated and in some cases abused. In many ways trusts were just another product to be sold and if the client wanted confidentiality,


founder of the Swiss Association of Trust Companies. It has been argued that the pressures on the offshore world have come about because of tax-starved nations which are seeking every possible alternative to assess and collect taxes; even better if they can assess additional back-taxes and have the benefit of driving the capital back into their domestic markets. This is undeniably true, but it is not the only reason. I would suggest that the desire to tax hidden funds and drive capital back onshore is not a new phenomenon. It has been true for many decades - at least as long as the offshore world has been around since the mid 1930s.


then so be it. It is an undeniable, and not necessarily nefarious attribute of a trust that it does have the effect of an enhanced level of confidentiality as the disposition of assets by a settlor into a trust, does, legitimately, distance the maker of the fortune from the fortune itself. The settlor of the trust has, after all, gifted away the assets and he therefore ceases to be the owner of them. Ownership has its benefits, but it also has its obligations and disadvantages. Creating a trust alleviates the settler of some of the burdens of ownership while retaining the benefit of the property for himself or his family who would typically be the beneficiaries of the trust property.


If, for the "wrong reasons" enhanced confidentiality was sought by a client, it may have been suggested to him that a trust would help in his objective of hiding assets from prying eyes. This is the type of trust that no responsible practitioner would condone and for that reason is not a sustainable structure for the client and not the basis of a sustainable business model for the trust industry.


20 The new factor in the modern


equation is technology. It is not impossible, in fact quite probable, now that if a sophisticated taxing jurisdiction takes an unhealthy interest in one of their citizens, they have means of gathering compromising material through banking records that are readily available, or if not, by way of computer data bases that are more and more often now downloaded, stolen and sold to countries for the use of denunciation.


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