The purpose of this paper is to review the use of offshore trusts and to highlight the main reasons for using them, some of the pitfalls to be avoided and some of the dangers that lie ahead. There are many reasons for using an offshore trust. For most people, the reason which springs instantly to mind is tax planning of one sort or another. While it is true that the origins of the trust lie in the avoidance of feudal dues and therefore, from the earliest days, were concerned with tax mitigation, there are many other, possibly stronger, reasons for using trusts. What follows next is a discussion of the main reasons for using trusts.
Most wealthy people prefer to decide for themselves how their assets are to pass on death.
For example, a wealthy individual will normally wish to provide for a source of income for his spouse, for the education of his children and perhaps also safeguards for any children or other relatives who suffer from disabilities. Such a person will probably wish to make gifts not only to relatives but also to charities and for other public purposes. Arrangements of this kind are best made before death even though they are intended to continue to have effect after death. While a will can achieve some of these objectives, a trust involving the transfer of ownership of assets to trustees with defined objectives as to how and for whose benefit the assets are to be held and administered provides a confidential and flexible basis for asset planning. There may also be special problems for certain individuals governed by laws which dictate how assets are to pass to relatives at death.