WHAT YOU SHOULD KNOW ABOUT OFFSHORE TRUSTS AND OFFSHORE PERSONAL HOLDING COMPANIES
Introduction
In recent years, an increasing number of families have established Offshore Trusts and Offshore Personal Holding Companies (OPHC) to make their investments in United States Stocks, Bonds, Securities, Real Estate and other U.S. Assets. Their objective in using these structures is to:
- Minimize Taxation
- Provide Confidentiality
- Retain Authority
- Protection Against Confiscation of Property
- Protection from Forced Heirship, and
- Transmission of Wealth
LAWS OF THE UNITED STATES
U.S. Estate Tax
The United States imposes an Estate Tax on the value of U.S. properties held by an International Investor (non U.S. Domiciliary). The kinds of property subject to U.S. Tax include shares of Stocks, Bonds, Notes and other Securities issued by U. S. Corporations, Bonds issued by the United States and it's Political Subdivisions, Real and Tangible Property located in the United States.
The U.S. Estate Tax is imposed at progressive rates up to 55% on the fair market value of the United States Property owned by the International Investor. Shares of stock issued by a corporation organized outside the United States are not subject to U. S. Estate Tax if held by an International Investor at the time of his death. The U.S. Estate Tax can be entirely avoided if where all U.S. property, otherwise subject to U.S. Estate Tax, is held by a foreign corporation rather than directly by an International Investor.
Probate Proceedings
Careful use of a foreign corporation to hold the U.S. investment of an International Investor should also eliminate the need for their heirs to begin public probate proceedings in the U.S. at the time of death to establish their right to receive the U.S. property. A probate proceeding is time consuming and costly, requires the filings of information returns with the United States Authorities, disclosing the identity of the deceased and his heirs, and may require authority be obtained from officials of the International Investor's home country, resulting in disclosure of the existence of the U.S. property to the foreign officials.
Information Disclosure
The internal records of United States Financial Institutions are subject to disclosure to the U.S. government authorities and to third parties through the judicial process. Pursuant to the provisions of most U.S. Income Tax and Exchange of Information Treaties, the U.S. government automatically sends its Treaty Partners annual information concerning payments of U.S. source dividends, interest and royalties to residence of such other countries.
OFFSHORE PERSONAL HOLDING COMPANY (OPHC)
An OPHC is an offshore corporation established for the International Investor's U.S. Assets. The International Investor owns (directly or indirectly) the stock of the OPHC and appoints the Directors and Officers of the OPHC. The corporate agent, in the offshore jurisdiction, usually acts as the director and officer of the OPHC. The International Investor, then transfers his U.S. assets to the OPHC. The OPHC can select a U.S. Brokerage Firm to invest the liquid U.S. Assets (e.g. Stocks, Bonds, Etc.) of the OPHC.
Minimize Taxation
After the transfer, the International Investor owns stock of the OPHC, which is not a U.S. Asset subject to U.S. Estate Tax.
Provide Confidentiality
The laws of most foreign jurisdictions usually require that the name of the OPHC, its local agent, its local office and its First Director be registered in the commercial registry of the foreign country. The OPHC can name its corporate agent, in the offshore jurisdiction, as its registered agent, its registered office and as its First Director. To further preserve confidentiality and if permitted by the laws of the country where the foreign corporation is organized, the shares of the OPHC could be issued in Bearer form. With such shares and with the listing of the corporate agent in the commercial registry where the OPHC is incorporated; the identity of the beneficial owner of the foreign corporation cannot be discovered.
Retained Authority
The OPHC operates pursuant to the authority conferred upon it by the International Investor. Additionally, through the issuance of a Power of Attorney from the OPHC to the International Investor; the International Investor can choose Brokerage Firms as well as the individual investments owned by the OPHC. Furthermore, the International Investor retains the authority to liquidate the OPHC and regain possession individually of all of the OPHC's Assets.
Transmission of Wealth
The OPHC does not, in and of itself, aid the International Investor in passing on wealth. For this reason we suggest that the shares of the OPHC be held by an Offshore Trust.
OFFSHORE TRUST
A Trust is a legal entity created by contract under the law of countries having the legal traditions of the English common law. The Trust is created by a document ("Trust Agreement") by which the assets are transferred by one party ("Grantor") to a second party ("Trustee") for the benefit of designated persons ("Beneficiaries"). A Trust Agreement identifies the beneficiaries, establishes the manner in which the Trustee is to hold, invest and distribute the assets; describes the responsibility of the Trustee to the Grantor and the Beneficiaries. There are Income Beneficiaries who are entitled to the income from the Trust and there are Principal Beneficiaries who are entitled to receive the principal upon the termination of the Trust. Usually, the International Investor will be the income and principal beneficiary during his lifetime.
The International Investor ("Grantor") then transfers the stock of the OPHC to the Offshore Trust. The Offshore Trust owns the stock of the OPHC and the OPHC owns the U.S. Assets.
Minimize Taxation
After the transfer, the International Investor is the Beneficiary of the Offshore Trust which owns stock of the OPHC, which is not a U.S. Asset subject to U.S. Estate Tax.
Provide Confidentiality
The laws of most foreign jurisdictions usually require that the Trust, the Trustee, the name of the OPHC, its local agent, its local office and its First Director be registered in the commercial registry of the foreign country. The OPHC can name its corporate agent, in the offshore jurisdiction, as its registered agent, its registered office and as its First Director. To further preserve confidentiality and if permitted by the laws of the country where the foreign corporation is organized, the shares of the OPHC could be issued in Bearer form. The Bearer Shares are held by the Trust. The Trustee of the Trust could also be the corporate agent. With such shares and with the listing of the corporate agent in the commercial registry, as the OPHC’s corporate agent and Trustee of the Trust; the identity of the beneficial owner of the Trust and the OPHC cannot be discovered. After the International Investor’s death, the confidentiality continues, since the trust is able to transfer its assets without any governmental probate or inheritance proceeding or approval.
Retained Authority
The OPHC operates pursuant to the authority conferred upon it by the International Investor. Additionally, through the issuance of a Power of Attorney from the OPHC to the International Investor; the International Investor can choose Brokerage Firms as well as the individual investments owned by the OPHC. Furthermore, the International Investor retains the authority to liquidate the OPHC and regain possession individually of all of the OPHC's Assets.
Protection Against Confiscation of Property
The Offshore Trust owns the shares of the OPHC and the International Investor's Creditors and other Government Agencies are thereby prevented from confiscating the shares of the OPHC.
Protection From Forced Heirship
The Offshore Trust owns the shares of the OPHC, both before and after the death of the International Investor. The shares of the OPHC or the benefits therefrom, pass according to the Grantor's wishes, which are stated in the Trust Agreement. There is no Governmental inheritance of other probate proceeding at which a forced heirship claim could be decided.
Transmission of Wealth
The Trust Agreement, which establishes the Offshore Trust, also acts as a will substitute. The Trust Agreement reflects the International Investors wishes as to who he desires to have the property which is held in trust after his death. A Trust Agreement identifies the beneficiaries, establishes the manner in which the Trustee is to hold, invest and distribute the assets; describes the responsibility of the Trustee to the Grantor and the Beneficiaries.
The Offshore Trust owns all of the assets, both before and after the International Investor’s death. It will be able to distribute its assets, according to the International Investors wishes, without any governmental proceedings or approval.
LOCATION OF THE OPHC AND THE OFFSHORE TRUST
The choice of countries in which to establish the OPHC and the Trust depend on factors including:
- Absence of local taxation,
- Availability and enforcement of bank secrecy,
- Cost of organization,
- Amount of annual franchise and registered agent fees,
- Availability of reliable and experienced management and
- The political and economic stability of the country.
Among the countries commonly used are Aruba, Bahamas, Barbados, Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, Netherlands Antilles, Panama and The Turks and Caicos Island. Each of these countries have positive and negative aspects. Based upon the above mentioned factors, the British Virgin Islands and the Cayman Islands rank the highest. Therefore, we generally recommend establishing an OPHC and/or an Offshore Trust in the British Virgin Islands or the Cayman Islands. Furthermore, as former British Colonies they have laws based upon common law, which is necessary for the operation of a trust. As between the British Virgin Islands and the Cayman Islands, the products are essentially the same however, the cost to organize an OPHC and a Trust in the BVI is much less expensive than the Cayman Islands.
ESTABLISHING AN OPHC AND AN OFFSHORE TRUST.
Marini & Associates, P.A.,
Marini & Associates, P.A., is an International and Tax Law Firm, and is available through it's Offshore Corporate Agents, to establish an OPHC or an Offshore Trust in the jurisdiction of your choice. The firm represents many international investors and multinational corporations. The attorneys at Marini & Associates, P.A. have extensive experience in structuring Offshore Investments. By requesting Marini & Associates , P.A. to establish your offshore structure, you receive all the benefits of having an experienced International Tax Law Firm structure and personalize your international investment; while having the benefit of paying a flat fee rather than an hourly rate.
Professional Investment Advisor
Professional Investment Advisor. Marini & Associates, P.A. uses professional investment advisors like Merrill Lynch, Paine Webber and Bank of America to manage your individual investments. These firms are experts in providing each client personalized investment structure especially designed for them. You will have the option of dealing with the investment advisors directly or indirectly through Marini & Associates, P. A. All of the above mentioned professional investment advisors are ranked among the top investment advisory firms in the world today. And all of these investment advisory firms have a very close relationship with Marini & Associates, P. A; affording the best investment advice to clients of Marini & Associates, P.A.
This combination of having Marini & Associates, P.A. providing legal advice and specifically designed the legal structure which maximizes each client’s investment objectives along with each client receiving professional investment advice of the highest caliber provides each client the maximum advantage of having a Law Firm establish your International Investment Structure with a Brokerage Firm and to advise you on the actual investment of your funds. An additional benefit of having Marini & Associates establish your international structure, is that they will continue to be involved in monitoring the actual performance of each client’s investment which is established with the various professional investment advisory firms.
Marini & Associates, P.A. is dedicated to providing the highest caliber of professional services on a personalized basis to each of it’s clients. With our many years of international experience, coupled with a strong tie to many of the world’s premier professional investment advisors, we have the ability to completely customize a legal and financial structure to meet your individual needs.
The attorneys at Marini & Associates, P.A. would be pleased to provide you with further information regarding how an offshore investment structure could be customized and personalized to fit your individual needs. For further information, please feel free to contact us.