Creating an offshore trust in Bermuda
This information describes in detail what the trust in Bermuda is, how it is created and what benefits it provides.
A trust in Bermuda is basically an agreement between the founder of trust (who transfers his assets / personal fortune to trust) and the trustee (who is appointed by the trust manager and is responsible for his activities). The purpose of the trust is to provide benefit to the beneficiary. The trustee must be of full legal age in his right mind and conscientiously implement the provisions of the declaration of trust. The founder can also have a guarantor, whose main task is to control the activities of the trust and ensure its compliance with the trust declaration (go to the trust agreement).
The difference between non-offshore and offshore trusts is due to the fact that the assets are stored in another country (offshore), and the trust is created according to the legislation of offshore jurisdiction. The trustee manages the trust on behalf of the founder of the trust management (who transfers the assets to the trust) in the interests of the beneficiaries appointed by him.
Why create an offshore trust in Bermuda?
The law on special provisions of trusts in Bermuda, 1989 came into force on January 31, 1990. This law is highly favorable for creating trusts in Bermuda and is a simple and advantageous means of protecting the assets of all offshore founders of trusts.
The Law on Special Provisions of Trusts in Bermuda 1989 clearly states that a court in Bermuda cannot annul or change a trust created in Bermuda, and also provides a high level of protection of trusts and the founder’s anonymity. The history of creating and regulating trusts in Bermuda encourages offshore investors to create trusts, since the state functions professionally and legally, which gives the founders confidence that their personal status in this country will be protected. The Trustees Act in Bermuda, 1975, is based mainly on the English Trustees Act, 1925, and provides the Bermudas with a solid legal foundation, making this country one of the leading jurisdictions in creating offshore trusts.
What is trust in Bermuda?
A trust in Bermuda can take a variety of assets, including property, stocks, bonds, and any other financial instruments. According to the legislation on trusts of Bermuda, the property of the trust may belong to the family of the founder or the trust may be created specifically for this purpose. Usually, private trusts are created in the Bermudas, since in them the founder has the opportunity to exercise more close control over his assets, despite the fact that he has no right to either dismiss or appoint trustees.
The Trust Law (Special Provisions) of 1989 introduces mandatory conditions for creating a trust, one of which is the disclosure of the names and addresses of the beneficial owners (in the case of a private trust) to the monetary authority and exchange control. Although disclosure of such information is necessary, it remains strictly confidential, so that anonymity is respected. When creating a trust in Bermuda, there is no requirement that the trustee is a Bermuda resident, although stamp duty may apply.
Trusts are mainly used by rich people who have the opportunity to plan their financial affairs and provide for their descendants and future generations. In this regard, an attractive feature of the trust is that potential heirs cannot sue the trust and that the assets of the trust cannot be seized. The rule of compulsory hereditary mass in trusts in Bermuda does not apply, which allows the founder to choose to whom and in what amount he wishes to distribute his assets. Many people want to protect their assets and become founders of trust. As a founder, you have the right to transfer any assets to the trust and legally declare that you do not own them.
The most commonly used types of trusts in Bermuda
– A discretionary trust is the most commonly used trust in Bermuda, its main feature is that the beneficiaries of the trust cannot legally forcibly seize the property of the trust.
– Private Trust – Under Bermuda law, a private trust can act as a trustee in a trust to protect assets.
– A trust for asset protection — created to avoid currency regulation and taxation. Read more at https://offshorecitizen.net/asset-protection/.
– Insurance trust – is created by private individuals and consists of life insurance policies or life annuity policies.
– Charitable trusts – are created in order to protect the environment, combat poverty and ensure fundamental freedoms.
– Funds of no charity nature.
Advantages of offshore trusts in Bermuda
– A trust in Bermuda benefits from the absence of a tax on profits, income or dividends.
– In trusts in Bermuda, there is no capital gains tax.
– In pension funds and funds where property not located in Bermuda is stored, stamp duty is no longer charged.
– The minimum amount of capital to create a trust is not set.
– Effective tax planning.
– A high degree of asset protection as a result of the fact that courts in Bermuda cannot regulate trusts.
– Ownership of trust by foreigners is permitted.
– Ensured a high level of anonymity, despite the requirement to disclose the names and addresses of the beneficial owners.
– Avoidance of the rule on compulsory share in the mass of hereditary.
– Avoiding checks.
– Lack of currency regulation.
– High degree of asset protection and condition management.
Creating an offshore fund in Bermuda
What is a foundation in Bermuda?
The Bermuda Foundation funds are a corporate alternative to trust. Funds can be created for various purposes, but the main feature of a fund in Bermuda is to acquire the status of a legal entity immediately after its creation. To create a foundation, a founder is needed who is the person/organization creating the fund, the guarantor necessary to ensure the conformity of the fund management, as is the case with trusts, the beneficiary, the person or group of people who benefit from the fund, and finally advice. There is no shareholder requirement.
As mentioned earlier, the foundation in Bermuda becomes a legal entity after its creation. As a result, the fund owns all the property contributed to it. Funds can own many companies and assets, issue instructions that are subject to execution, as in the case of trusts. Such instructions are included in the registration document of the foundation and in its charter.
Why create a foundation in Bermuda?
Bermuda is a dependency of the United Kingdom and is governed by a person appointed by the British government. Since Bermuda common law is based mainly on English common law, the similarity of the political and legal infrastructures of the United Kingdom and Bermuda makes Bermuda an attractive jurisdiction for offshore founders. Bermuda is considered one of the most “profitable” jurisdictions of the world, it has a reliable financial system, which has an offshore status and allows tax planning. Bermuda is a tax haven for offshore investors.
Types of funds in Bermuda
– Public fund – created by families, groups, etc.
– Private foundation – created by private individuals
– State Fund
– Mixed Fund – can be created by any of the above.
Purpose of offshore funds in Bermuda
– Private goals – the requirements of the founder are not public.
– Protecting personal status from financial and political instability in your jurisdiction.
– Management of inheritance – the ability to plan and distribute fund assets through a centralized management system.
– Tax planning of inherited assets.
– The separation of voting and obtaining economic benefits.
– Employee participation in profits and retirement plans.
What assets can be in an offshore fund in Bermuda?
There are several types of assets that may be located in an offshore fund in Bermuda:
– Shares and securities of private and state companies
– Bank deposits
– Life insurance policies
– Investment portfolios
– Real Estate
– Personal stock values
– Property in lifetime possession
– Intellectual property
– Personal property
– Assets of private funds.
Benefits of funds in Bermuda
– Funds in Bermuda are exempt from income tax
– Tax haven for offshore investors
– Foundations in Bermuda avoid company tax
– Very high level of confidentiality and anonymity under Bermuda legislation.
– Favorable geographic location conducive to the development of international relations and access to other jurisdictions around the world
– Funds in Bermuda are an excellent means of protecting the assets of companies
– Ability to own many companies and assets without limiting their nature
– Payment of reasonable compensation for your services to the fund
– Forced execution of instructions, as is the case in trusts
– No capital gains tax or corporate income tax.