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Offshore Trusts – Options for HNWIs

With world economies in trouble in the wake of the Covid-19 pandemic, high-net-worth individuals and their advisors may be seeking new wealth management vehicles and opportunities. Bermuda, the Cayman Islands and the British Virgin Islands offer a range of trust structures suitable for a wide range of situations and purposes, ranging from estate planning and philanthropy to commercial applications.

As British Overseas Territories, the islands’ legal systems are based on that of England, with final appeal to the Privy Council of the House of Lords in the UK. Each jurisdiction offers modern and flexible trust law based on the English model. Below are a few of the trust options available.

Bermuda private trust companies and purpose trusts

Bermuda was at the forefront of offshore jurisdictions to introduce modern and flexible legislation on private trust companies and legislation permitting non-charitable purpose trusts. Bermuda private trust companies (PTCs) are established specifically to act as trustee for one trust or a group of related trusts, for example for trusts established for the benefit of a particular family. The PTC structure offers a host of benefits to private clients and their families including enabling family members or trusted advisers to be involved in the decision making process and integrating easily with a family office or an operating company.  Purpose trusts are created for the fulfilment of a non-charitable purpose, not for the benefit of a person. They can hold assets for a variety of purposes, for example holding shares in a private trust company.

British Virgin Islands VISTA trusts

A BVI VISTA trust is designed to hold shares in a BVI incorporated company, and has the effect of removing the trustee’s duty to monitor and intervene in the conduct of the directors and the management of the trust’s underlying BVI company, notwithstanding that his trust shareholding gives him a controlling interest in the company. VISTA trusts can be useful in effective succession planning, the preservation of family wealth and continuity of family business.

Cayman Islands STAR trusts

A Cayman STAR trust is an alternative form of trust with a number of special features that do not apply to ordinary trusts. One of the key features of a STAR trust is that it facilitates separation of the right to benefit under a trust from the right to enforce the terms of the trust. This means that a beneficiary will not be able to sue the trustee or obtain information concerning the trust. Instead, the only people who can do so are those appointed as “enforcers” under the trust deed or by order of the court. A STAR trust can be an effective family business succession vehicle and may also be useful as a substitute for a charitable trust in some circumstances.

 


Karen A. Corless
Director

Bermuda   +1 441 298 7880


Robert Lindley
Partner, Head of Cayman & BVI Private Client & Trust

British Virgin Islands, Cayman Islands   +1 345 814 7360


This article was originally published in Abode2.

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