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Trusts

Trusts come in many different forms, depending on what is required to be achieved. To begin, trusts fall into 2 main categories.

  1. Revocable - This can be changed anytime by the appointor.

  2. Irrevocable - This can only be changed by the beneficiaries.

 

KEY REQUIREMENTS. A Trust needs:

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  • A Trustee: This is the “legal owner” of the trust assets and may be a company,   natural person or both.

  • An Appointor or Controller: These ultimately determine who the Trustee will be and may even have power to remove a Trustee at any time. In Vanuatu the Trustee and Appointor may be the same person or company.

  • Beneficiaries: These are the “equitable” or real owners of the assets of the trust. Depending on the trust type there may be one person/company/trust/charity or numerous persons etc. These may receive fixed payments or only receive a benefit as determined by the Trustee (such as a discretionary trust used in family situations). They may have “units” given to the beneficiaries. There are many other types and situations requiring careful planning.

  • A Settlor: This is the person who establishes the trust and “transfers” the property to the Trustees  to use as required under the trust deed.

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As different countries have different taxation laws, we recommend that a Vanuatu trust only hold assets in Vanuatu. For example, New Zealand looks to the residence of the settlor not Trustee for tax purposes, meaning there could be a massive tax bill to be paid if the settlor is a NZ tax resident. However provided that there is a NZ sourced income and distributions, there is no tax. While Australia operates under different tax laws, income derived by beneficiaries under a foreign trust may be taxable.

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BENEFITS OF TRUSTS

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  • Easy to set up.

  • No registration is required, meaning the identity of the beneficiaries is private.

  • Protects beneficiaries assets.

  • Allows a Trustee in Vanuatu to “ignore” a ruling of a foreign court that assets be handed over, (subject to laws), on a jurisdictional basis.

  • No audits.

  • Can hold assets, buy and sell, borrow and so forth.

  • May employ others to administer.

  • In the case of discretionary trusts, allows for effective tax distributions.

  • Beneficiaries do not need to be aware of their trust benefit.

  • Trust Deed can be easily varied, amended or revoked.

  • Can be set up to come into existence only at death, meaning the giver has use of the assets while alive.

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If you want to establish a trust, or get more information on how different forms of trust can help you, please contact us. 

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