EDGE Magazine | Q3 2011
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any individuals seeking to
establish an offshore trust know little or nothing about the basic trust principles, compliance and management; the role of the trustee as a fiduciary and the impact of having settled assets into trust. Most of all, they know nothing about
the laws of the country where the trust is settled. In the worse cases, settlors don't know or are ill advised on how to settle or grant assets into the trust.
Professional independent trustee services are not free but they are less dire than at a larger trust company or bank.
Setlors can be extremely distrusting and hope for significant control; this is stoked by past trustee abuses - although significantly less today,
which have been widely covered in the media. Charlatans roam the Internet and many offshore trust service providers reside far away from the settlor. Although a trust was his best option, a client once cried: "I just don't trust anyone, not my wife, not my father, not God." I suggested the client should avoid the offshore environment and seek traditional, onshore services but he presented a couple more objections: "It's too expensive and onshore
services can impact confidentiality adversely." While the personal knowledge of the settlor is instrumental in creating a trust that will anticipate his intentions, desires, and most importantly satisfy the purposes of the trust, a properly managed trust will not give the settlor any control.
Trust Management Options
Truth be told, banks offer great trust services. Most private banks add a personal touch and can offer a-one- stop service by placing the assets with their investment arm at the bank. However, private bank trustee
services may not always be cost effective and the investment growth may be eroded by the trust management fees. Larger privately managed trust corporations have also developed their own asset management arms giving the client more of a say but the trust management fees may nosh on the assets under management, until the fund may not be interesting enough for the trustee. Herein, a final objection: impersonality.
Without the motivation to manage a poor trust asset, service becomes impersonal and restricted to that pesky client access area which is now ever present in most trust
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company websites. Did you forget your password? There is also the issue with employee rotation; it is nearly impossible to have a long-term relationship with any one individual in a trust company or private bank, it seems 2 years is their shelf life.
Using a Private Trust Company (PTC) is a good option for the distrusting. After all, it is only natural to distrust a complete stranger who sits in an unknown country. The Private Trust Company can act as the trustee over a group of related trusts and its concept is easier to understand by non-professionals. It may be easily integrated into a family office or commercial arrangement. The PTC can keep trustee charges in check and can help maintain confidentiality. The B.V.I. offers the most popular PTC structure allowing various trusts to be overseen by one PTC as long as they are related; even if they are not from the same jurisdiction. However, all of the company's trust business must be 'unremunerated trust business' or 'related trust business'. In most cases, a company will conduct 'unremunerated trust business' because it will manage its own related trusts and no fees are paid to the company or anyone associated with it.
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