Within the types of Trusts, there are several different Trust categories. Trusts are differentiated depending on when they are set up, who the beneficiaries are, the purposes for the Trust, the power given to Trustees, and assets held in the trust.
Trusts can also be differentiated by:
| Categories of Trusts | |
|---|---|
| Where they are held |
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| How flexible they are |
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| Their ultimate purpose |
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| How sophisticated they are |
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* StateTrust does not provide fiduciary or trustee services, nor does it act as a fiduciary or trustee. StateTrust only serves as an intermediary in providing introductions to legal counsel and licensed trust companies that can provide fiduciary and trust services. Our services consist of managing the assets held in such trusts and legal entities.
Onshore Trusts
The principal objectives of constituting and holding an Onshore Trust are:
- Asset protection. This is the main objective in setting up any trust – Trusts offer an excellent vehicle to protect your assets in the future.
- Tax benefits. Assets held in Onshore Trusts may be protected from estate and inheritance taxes.
- Estate planning. Trusts are an important tool in estate planning. They are especially effective even when the grantor does not have a will (that is, the grantor dies intestate). Personal and company assets are preserved because these are not exposed to estate taxes.
Some advantages offered by Onshore Trusts are:
- Onshore Trusts have all the estate planning and tax advantages associated with Trusts.
- Assets are protected because they are established with regulated United States institutions.
- Onshore Trusts have different choices of investment vehicles than Offshore Trusts.
- Certain U.S. States have incentives for you to set up your Trust in that particular state.
- United States-based Trusts have fewer risks associated with political insurrection and instability.
- Children, grandparents and other elderly persons, and disabled individuals can be protected and provided for.
The disadvantages of Onshore Trusts are:
- Subject to more restrictive laws than Offshore Trusts.
- Less flexibility, privacy and asset protection than Offshore Trusts.
* StateTrust does not provide fiduciary or trustee services, nor does it act as a fiduciary or trustee. StateTrust only serves as an intermediary in providing introductions to legal counsel and licensed trust companies that can provide fiduciary and trust services. Our services consist of managing the assets held in such trusts and legal entities.
Offshore Trusts
Essentially, an Offshore Trust (sometimes called a foreign situs trust or asset protection trust) is a type of Trust where your property is held outside of your own country. Offshore Trusts are solid, legal and financial structures designed to help you protect your assets while maintaining a high degree of privacy for you and your beneficiaries. These Trusts are created under the laws of a foreign jurisdiction to accomplish certain goals not available to you domestically. They are an effective tool for tax planning purposes.
The principal objectives of holding an Offshore Trust are:
Asset Protection. Assets are protected because when you transfer property to the offshore trust they are no longer part of your property and cannot be seized by creditors should you face a bankruptcy, lawsuit, or divorce.
Tax Benefits. Assets in an offshore trust are not considered part of your estate – and the income and capital gains that those trusts generate belong solely to the trustees. Those monies are taxed in accordance to the laws of the country where the offshore trust is held. In some cases, inheritance tax may be completely eliminated.
Estate Planning. With an offshore trust, the family estate that is held there will not be affected when the grantor dies. Trusts are effective even when there is no will (that is, the grantor dies intestate). Personal and company assets are preserved because these are not exposed to estate taxes.
* StateTrust does not provide fiduciary or trustee services, nor does it act as a fiduciary or trustee. StateTrust only serves as an intermediary in providing introductions to legal counsel and licensed trust companies that can provide fiduciary and trust services. Our services consist of managing the assets held in such trusts and legal entities.
The following table summarizes the principal issues of Offshore Trusts:
| Advantages of Offshore Trusts | Disadvantages of Offshore Trusts |
|---|---|
| Greater asset protection and protection from excessive taxation. | Civil law jurisdiction may cause some practical difficulties. |
| Effective mechanism for distributing income. | Trusts may be more difficult to administer. |
| Confidentiality and a greater degree of anonymity. | The grantor's country of citizenship may have specific laws about offshore trusts. |
| Access to international investment options. | |
| Greater flexibility and efficiency for the transfer of family wealth. | |
| Minimization of inheritance taxes. | |
| Family assets are protected from immature or irresponsible beneficiaries (avoiding forced heirship rules). | |
| Usually, does not have to be registered—it remains a private document. | |
| When family members are residents and/or citizens of many countries, Offshore Trusts may provide the best alternative. |
* StateTrust does not provide fiduciary or trustee services, nor does it act as a fiduciary or trustee. StateTrust only serves as an intermediary in providing introductions to legal counsel and licensed trust companies that can provide fiduciary and trust services. Our services consist of managing the assets held in such trusts and legal entities.
Revocable Trusts
A Revocable Trust (also known as a Revocable Living Trust), allows you as the Grantor to revoke or cancel the Trust Agreement and recover the property allotted to the Trust at any point in time. A Revocable Trust can be also changed as your needs and situation changes. For instance there are events that affect the very structure of your family: you or your beneficiaries may get married, give birth or go through a divorce. If you are concerned about potential life changes, you may choose a Revocable Trust. Essentially, in a Revocable Trust the Grantor retains his or her powers over the Trust.
The principal advantages of Revocable Trusts are:
- More planning flexibility for the grantor.
- Revocable Trust property is not subject to probate.
- Grantor retains more distribution rights.
- If Grantor dies, the Trust continues in operation.
The main disadvantage as compared to an Irrevocable Trust is the loss of some tax savings, because the property remains part of grantor's estate under United States Internal Revenue Service law. Additionally, there may be some additional administration and management fees that are charged by the Trustee.
* StateTrust does not provide fiduciary or trustee services, nor does it act as a fiduciary or trustee. StateTrust only serves as an intermediary in providing introductions to legal counsel and licensed trust companies that can provide fiduciary and trust services. Our services consist of managing the assets held in such trusts and legal entities.
Irrevocable Trusts
An Irrevocable trust is the opposite of a Revocable Trust – it cannot be canceled or controlled in any way by the Grantor. If you set up an irrevocable trust, you give up the right to terminate the trust, change who the beneficiaries are or garner income from the trust. In fact, you (as the Grantor) completely give up the rights to the Trust property. Irrevocable Trusts provide many of the same estate planning advantages as Revocable Trusts.
One mandatory feature of Irrevocable Trusts is that all income generated must be distributed currently to its beneficiaries. The Trust does not pay income tax on that income but the beneficiaries do, on their individual tax returns, under the laws governing them.
The principal advantages of an Irrevocable Trust are:
- Tax dilution benefits: upon the grantor's death, the assets of the trust go directly to the beneficiary's estate, without income or death taxes.
- You are relieved of having to make decisions continuously. Once decided, an irrevocable trust is basically set in stone. Trustees can now do all the work!
Some disadvantages of an Irrevocable Trust are:
- Lack of flexibility and control once the trust is established.
- Inability to change the trust even if there is a major change in grantor's situation.
* StateTrust does not provide fiduciary or trustee services, nor does it act as a fiduciary or trustee. StateTrust only serves as an intermediary in providing introductions to legal counsel and licensed trust companies that can provide fiduciary and trust services. Our services consist of managing the assets held in such trusts and legal entities.
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