Many people these days believe that with the Unified Reporting Standard, international tax agreements, and transparency, trusts are no longer a valuable or effective tool for asset protection. However, properly organized trusts remain the “Fort Knox” of asset protection for the wealthiest families in the world. For 800 years, no one has found anything better.
If the wealthiest families in the world use them, it’s highly unlikely that anything will change in the near future, or at least in the next 100 years or so.
Nevertheless, the OECD has indeed pressured many jurisdictions to “review” their trusts using judicial remedies to ensure fairness. At least one jurisdiction that we will discuss below has been able to withstand this pressure.
In this article, we will explain what a real trust is for and why it is necessary for every wealthy individual. You will also understand why protecting your assets through trusts is one of the best options for families and individuals.
What Does a Trust Do?
If a trust is properly structured and located in the right jurisdiction, the following will certainly happen:
- No creditor, including a tax collector, bankruptcy successor, and of course, no lawful or extramarital wife, girlfriend, child, or anyone else can file a claim against the trust.
- A trust can exist indefinitely (when properly set up with the possibility of transforming into new trusts).
- Beneficiaries can utilize the assets of the trust through various mechanisms, such as loans, to lead a normal lifestyle, so that yachts, mansions, bank accounts, and businesses that it effectively controls belong to the trust, but in such a way that legally it does not own them. As Rockefeller said, “Control everything, own nothing.”
Which Jurisdiction is Best?
A key factor in choosing the best jurisdiction is ensuring that the court in the location of the trust and trustees (the place or jurisdiction of the trust) practically has no authority to annul the trust, regardless of how unfair it may be to anyone else.
Currently, for most courts and for most people who follow socialist or communist philosophies, a trust is the most immoral tool on earth.
Imagine that you have a trust created 20 years ago, before you got married, and it has $1 billion in it, while your wife bears you children, dedicating her entire life to you, cooking and cleaning, and suddenly you find a younger wife and kick the former out of the house owned by the trust. In the end, she is starving on the streets of Guatemala, Peru, or somewhere else with children, and she turns to the court because her child needs cancer surgery.
Sounds terrible, doesn’t it? Indeed, any judge would be tempted to do something to at least annul the trust or satisfy her claims for a portion of your income from the trust.
No matter how unfair it may seem, if the trust is in the right jurisdiction, the judge can do nothing, absolutely nothing, even if he or she wants to.
We provided a shocking example that has actually occurred in the world many times. The philosophy underpinning modern legislation is that what you do with your assets is a moral issue, not a legal one, where we can draw the line.
So, which jurisdictions are best for trusts? I can say that while many territories recognize trusts, very few actually empower the court with minimal authority to annul a trust. These include Saint Kitts and Nevis, the Cook Islands, and Belize.
We chose Nevis for this article because after detailed research of trust territories worldwide, we found that Nevis is not only one of the best (if not the best) places to keep your assets safe, but also provides high profitability.
Even the Cook Islands, known for their ability to ignore foreign courts, allowed one of their trusts to be dismantled, but Nevis has never done this. We can confidently say that Nevis offers the best asset protection structure in the world.
Why Trusts in Saint Kitts and Nevis?
Nevis is a small island in the middle of the Caribbean Sea, with nothing particularly special about it, except that it has the best trust legislation anywhere else.
In fact, in the 1970s, the U.S. tax service filed a series of lawsuits attempting to annul trusts whose beneficiaries allegedly defrauded the government. The U.S. government failed and has not taken any action since. Frankly, they also failed due to similar legislation in the Cook Islands.
The legislative act specifically designed to ensure reliable asset protection was the International Tax-Exempt Trust Act of 1994, which was later amended in 2020. Some of its main provisions include:
- Restrictions regarding perpetual ownership do not apply.
- Exemption from taxes and currency control (only if specified transactions are conducted with non-residents).
- An International Tax-Exempt Trust (IET) will be valid even if it is declared invalid under the laws of the grantor’s residence or current registration location.
- Exemption from mandatory inheritance share rules.
- Data required for registration includes only the name of the trust and the name of the trustee, as well as the office address.
- You can be both the grantor and the beneficiary, even the protector.
- The trustee can be an offshore Nevis company or a licensed trust company.
- Charitable trusts are allowed.
- If grounds for a lawsuit against the trust arise, it will not be considered fraudulent if it was created two years before this date.
- In case of allegations of fraud, the creditor must provide evidence that must be deemed clear and convincing.
One requirement for trusts in Saint Kitts and Nevis is to have net assets of at least 540,000 Eastern Caribbean dollars (200,000 USD), which is a condition set by the Financial Services Ordinance of 1997. This applies to candidates who want to have a trust for both unrestricted and restricted businesses (in the latter case, the required amount is 54,000 Eastern Caribbean dollars or 20,000 USD).
Additionally, a bond of 100,000 USD is required to file a claim against the trust’s property. Previously, it was 25,000 USD, but it was increased by the 2009 amendment to the Nevis International Tax-Exempt Trust Act. Keep in mind that the IET must pay an annual registration fee of 220 USD.
Summarizing the Benefits in Simple Terms
- Nevis does not recognize foreign court decisions against the trust, so you will have to come to Nevis.
- When you arrive in Nevis, if the trust was established two years before the lawsuit was filed, the judge will be unable to do anything, and you will be left with nothing.
- If the trust was created less than two years ago, you must post a bond of 100,000 USD and have absolutely clear evidence that the trust was created to defraud that specific creditor, and be prepared to argue your case according to Nevis law. Good luck!