Offshore Trust Planning on the Isle of Man.

A crucial issue for any wealthy individual is to ensure their descendants a legacy. That’s where succession planning takes place.

There are many mechanisms to deal with succession planning. In this article, we will talk about trusts. Also, we will give you details about the Isle of Man, a leading offshore jurisdiction for trusts.

In recent years, trusts have become vital financial instruments for wealthy families and individuals. These tools can provide robust asset protection, tax efficiency, and wealth management for people with more money than they can manage.

Continue reading, and we will deepen the details of setting up a trust in the Isle of Man.

What is a Trust?

In a nutshell, a trust is a legal arrangement where person A (the settlor)transfers the ownership of their assets (such as cash, real estate, arts, etc.) to person B (the “trustee”), who is usually a trust company or a small group of people. The trustee will hold and manage the assets for the benefit of third parties.

This scheme provides flexibility to the beneficiaries, as it sets out the terms on how and when the patrimony may be distributed while relieving the beneficiaries of the responsibility of abruptly managing a fortune after the settlor’s death, as the trustees will do the management job.

In the Isle of Man, trusts are created to achieve many objectives, such as:­

● Business succession planning

● Charity

● Tax optimisation

● Asset protection against personal liability

● Wealth preservation

The trust concept has been used since the 12th in Europe. It is commonly set up by a wealthy individual or family that wants to secure its patrimony from potential lawsuits. However, it is also used as a tool for succession planning.

Some of the functions of a trust are:

● Control of your wealth: Many successful individuals may amass fortunes at some point. These fortunes often have more money than they can spend and manage. A trust may figure out this problem by specifying precisely the trust.

● Protection of your inheritance: A trust can also help to protect your assets from any potential lawsuits or tax liabilities that may arise in the future.

● Succession planning: Setting up a trust can ensure that your sons and grandsons will inherit a specific part of your inheritance once you pass away.

Why should you create a trust?

We live on a planet where instability is the rule. Just see the events that have happened in the last three years:

● A pandemic

● The Ukraine war, the first war on European soil since 1945

● The assault of the US Congress

These events have caused cataclysmic changes to international relationships, distortions of global supply chains, and other consequences we are unaware of.

In this context of chronic instability, it is crucial to protect the inheritance and ensure your descendant’s access to your legacy. Here’s where a trust comes up as a solution, as it is an optimal way to protect your inheritance for decades and even centuries.

Why the Isle of Man?

The Isle of Man is a stable financial centre in the British Isles. Even though it is under the reign of King Charles, it is not part of the United Kingdom. Its political and economic stability, among other favourable conditions, has attracted foreign investors in recent years. It ensures a high-standard regulatory framework and world-class services for offshore companies and individuals.

We will summarise the benefits of creating trust in the Isle of Man.

● Non-resident trusts are not susceptible to income tax. There are also no capital gains, inheritance, or estate tax.

● Isle of Man trusts doesn’t have restrictions on income accumulation.

● Local legislation ensures privacy and confidentiality, as trusts are not required to provide information on public records. This tightens confidentiality for the beneficiaries and Trust settlors.

● It is possible to appoint a protector (some professional advisor) to provide a high level of oversight for the settlor if required.

It is important to stress that the Isle of Man has pro-business policies and extreme political stability that ensures a friendly investment climate.

Types of trusts in the Isle of Man

Discretionary Trusts

This is the most used type of trust in the Isle of Man. Here, the trust deed grants the trustees broad discretion to administer the assets and decide which beneficiaries will benefit and how much they will receive from the trust.

The settlor may guide the trustees about which beneficiaries will benefit from the income. However, they cannot bind the trustees.

Life interest trusts

In this type of trust, beneficiaries have a right to receive a fixed share of the income from trust assets for a specified time.

Purpose trusts

The Isle’s legislation regulates these types of trusts under the Purpose Trust Act of 1996. The purpose may be of any kind provided they are specific and possible and are not unlawful, contrary to public policy, or immoral.

Employee Benefit and Pension Trusts

These types of trusts are designed to motivate employees by providing benefits regarding performance and settling the benefits in a trust or a house pension fund.

Charitable Trusts

It is possible to create trusts for charitable purposes in the Isle of Man. Trusts will fall under this category if their purpose relates to the relief of poverty, advancement of education, or other purposes beneficial to the community.

About us

We are Sandstone Tax, an advisory firm with many years of experience dealing with tax and financial planning matters in the United Kingdom, the Isle of Man, and other international jurisdictions.

Our experts specialise in tax planning for a diverse range of companies and individuals who seek to protect their wealth, offering a wide range of services for high-net-worth individuals and family offices seeking expertise in terms of wealth management.

Regarding Offshore Trust Planning, we distinguish by operating in high-standard jurisdictions, granting the continuity of the legal entity after the Settlors or Founders pass away, and protecting the beneficiaries from any tax liabilities or conflicts of interest that may arise.

Would you trust your wealth to a personal but inexperienced friend or an impartial expert that will only protect your interests? If you choose the second option, then we can help you. Request a consultation today!