Home Knowledge Other Jurisdictions Trusts and Foundations Introduction of British Virgin Islands Trusts
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Succession planning The Trustee can hold the trust assets and distribute the trust assets to the beneficiaries in accordance with the terms of the Trust Deed. The Settlor may give a letter of wishes as a guidance regarding the timing, amount and manner of distribution to the Trustee. The Trustee can hold the shares of a family business for concentration of shareholding of family business and to ensure that the family business can pass to future generations. |
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Asset protection By transferring the assets to the trust, the Settlor segregating the trust assets with his own assets, protect the trust assets from creditor’s claims provided that the intention of setting up a trust is not to defraud creditors and the Settlor does not reserve to himself unrestricted powers to revoke the trust, a trust can serve as an important asset protection functions. In addition, the trustee can appoint the spouses of the descendants as excluded persons of the trust who cannot benefit from the trust. The Trustee may cease to make distribution to the beneficiaries who have the risk of divorce. |
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Avoidance of probate Assets owned by an individual usually pass on death in accordance with the terms of a will. If the assets are held in a wide variety of countries, it may be necessary to obtain a grant of probate with respect to the will in each country where assets are located. This can be an onerous, lengthy and costly process which can last between six months to two years. Moreover, there may be estate duties and taxes payable before the estate can be settled and the assets distributed to the heirs of the deceased. If such assets are settled on trust, the trust can enable the trust assets to be passed on future generations smoothly and according to the wishes of the settlor. |
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Tax planning During the existence of the trust, under the current tax regulations of Hong Kong, Singapore, Cayman Islands, British Virgin Islands, and Jersey, there is no tax reporting obligation for the income generated by the trust assets. However, when a beneficiary receives a trust distribution, there may be tax reporting obligations depending on the tax residency status of that beneficiary. Trust can be used to protect or exclude property settlements for UK inheritance tax purposes and foreign grantor trusts for US tax purposes. |
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Avoidance of forced heirship rules To guarantee that the trust assets can be distributed to the beneficiaries according to the wishes of the Settlor. An individual from a country with rigid legal or religious inheritance laws may implement a scheme of distribution of assets among his heirs that differs from that prescribed by his domiciliary law. By establishing a trust in common law jurisdictions such as Hong Kong, Cayman Islands, British Virgin Islands, Jersey and Guernsey, the desired distribution plan can often be implemented. |
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Confidentiality A trust does not need to be registered and it is a private legal arrangement between the Settlor and the Trustee. The information relating to the trust is not accessible by the general public. |
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Philanthropy A trust can be set up for charitable purpose in which the beneficiary of a trust can includes charitable organizations or for charitable purposes. |
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Commercial uses Such as Employee Benefits Trust. |
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Discretionary Trust A discretionary trust is the most common type of trusts which gives the trustees wide powers to administer the assets and to distribute the assets to the discretionary beneficiaries at their discretion. The trustees will usually be guided by a non-legally binding letter of wishes from the settlor setting out wishes of the settlor regarding the manner in which the trust fund is to be administered and distributed. The letter of wishes can be updated from time to time. A BVI Trust can exist for 360 years under BVI Law. |
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VISTA Trust The Virgin Islands Special Trusts Act 2003 created a special trust known as “VISTA Trust”. The VISTA Trust used purely for holding the shares in a British Virgin Islands International Business Company, the key features of a VISTA Trust are:- (a) The Trust may only hold shares of an underlying BVI company; (b) The Company is not restricted to the type of investments it invests in; (c) The Trustee is not under a duty to diversify or monitor the Trust Fund and investments, which are the normal basic duty of the trustee of a standard trust; (d) The director has the power of investment and asset management of the assets held by that company. The sale of shares by the trustee of a VISTA Trust requires the approval of the directors of that company; (e) The Trustee cannot act as a director of the underlying company. The Trustee can impose some restrictions on the number of directors they appoint, who to appoint as director and the tenure of the appointment of the director; (f) At least one of the trustees must be a designated trustee which is either a BVI licensed trust company or a BVI private trust company; and (g) The Trustee has the fiduciary responsibility for the distribution of assets to beneficiaries and preparing the trust’s financial accounts. |
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