Trusts

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

Revocable - This can be changed anytime by the appointor.
Irrevocable - This can only be changed by the beneficiaries.

KEY REQUIREMENTS. A Trust needs:

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.

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.

BENEFITS OF TRUSTS

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.

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