This week we put a slightly different slant on our property blog. For investors in property such as landlords and even property fund managers, you need to consider the best way to protect your assets from tax, including income tax and even inheritance tax. In this post we want to talk about tax efficient ways to manage your property portfolio by using an offshore trust.
The concept of an offshore asset protection trust is, as the name suggests, to protect your assets, providing a shield against creditors and making it harder for them to find your assets and/or take them away. It is a financial agreement between a “trustee” who is someone who wants to keep their assets safe, and their chosen group of people to take care of them. This agreement basically means that the offshore trust would hold title to all the assets, funds and property, so the family owning it can have some distance from their assets but still knowing they are protected and private. A lot of families create an offshore trust and put their property assets and money in it so that they pay less inheritance tax when they die, it shields their assets from scrutiny, tax and civil legislation, and it is a lot safer than onshore.
Owning property in England and having a trust situated in Isle of Man is safer than an onshore trust, but also convenient because it’s still very close. A good example of a trust company like this is Sanctuary Trust.
Trusts are often used for estate planning to ensure the people the assets are meant to go to, they go to. A lot of trusts ignore the forced heirship rule so it can be re-set up. This means, if your partner re-marries, usually your assets would go to them, but you can change it so it goes to your children instead, or whoever you want it to go to.
There are many specific advantages of an offshore trust, such as minimum formalities for incorporation, there is a means for safeguarding assets from the impact of litigation, and there are minimum formalities for incorporation. They can also be used for dubious purposes such as tax evasion and money-laundering.
They can protect your assets in many different ways too, like when you die your assets will be kept private to protect you and your descendants. Furthermore, assets left to many members of that person’s family can be structured with an offshore trust to ensure that these members receive what they are supposed to. Also, any properties held within an offshore trust are protected from, the complicated process after death.
As long as you are continuing to pay all taxes that are due in the UK, there is nothing illegal about protecting your business, family wealth or other assets through an offshore trust, and in fact is an option that everyone should consider. An onshore trust has downfalls such as it is easy to unwind a domestic trust transfer online in offshore protective jurisdictions, and there are various “look back” provisions under local bankruptcy laws which offshore asset protection jurisdictions do not recognise. Basically, onshore is just a false sense of security, whereas like traditional trusts, offshore involves trust deeds which legally binds the agreement, and make sure the person’s exact wishes concerning their assets are seen to after they die, so their assets are used appropriately.