Wealth creation through INTERNATIONAL TRUST

VINOD JAIN, FCA, FCS, FCWA, LLB, DISA GLOBAL

MOBILE : - 9811040004

objective

The objective for all individuals regardless of what country they reside in is to create an international planning

structure outside of their home country Wealth is created/ owned/Invested No Income tax/wealth tax on the

beneficiaries /Settlor Control on Money

objective

Flexibility Meet needs of money

confidentially/without regulatory compliance

Inheritance Plan

Trust …..A Solution

Trust is created to own an international structure

Wealth is created/ owned in the trust structure. Invested by the trust No Income in the hands of the beneficiaries Trustees Directed by Settlor Trust could be Revocable Trustees and Trust are outside India Formal Agreement with trustees

Case study

CASE STUDY 1STANDARD TRUST

A standard trust is an estate planning cum investment solution that allows an individual to structure wealth effectively, for the benefit of both current and future generations.

HOW A STANDARD TRUST IS STRUCTURED

SETTLOR Original Owner of the Assets and creator of

the Trust

SETTLOR Original Owner of the Assets and creator of

the Trust

TRUST DEED The Trust Agreement that sets out the terms of

the Trust

TRUST DEED The Trust Agreement that sets out the terms of

the Trust

INVESTMENT COMPANY A Cayman Island Company set up specifically to hold the

Assets

INVESTMENT COMPANY A Cayman Island Company set up specifically to hold the

Assets

TRUST ACCOUNTS The Trust assets are held in one or more accounts specified by the Settlor which are opened in the

name of the investment company

TRUST ACCOUNTS The Trust assets are held in one or more accounts specified by the Settlor which are opened in the

name of the investment company

BENEFICIARIES Persons Designated by the Settlor in the Trust Deed to benefit from the Assets held

in the Trust

BENEFICIARIES Persons Designated by the Settlor in the Trust Deed to benefit from the Assets held

in the Trust

TRUSTEEBank owned Trust

Company

TRUSTEEBank owned Trust

Company

ULTIMATE BENEFICIARIES

ULTIMATE BENEFICIARIES

SECONDARY BENEFICIARYSECONDARY BENEFICIARY

SETTLORSETTLOR

DESCRIPTION OF STANDARD TRUST STRUCTURE

The term of the Trust are set out in a trust Agreement between settlor and the trustee.

Trustee is the person(s) who holds the legal title to the trust fund and who is obligated to administer the trust for the benefit of the beneficiaries. The trustee can be a company if it has the corporate capacity to act as a trustee. The trustee stands in a fiduciary position vis-à-vis the beneficiaries.

Trust assets are held in the accounts specified by the settlor which are opened in the name of the Investment Company.

DESCRIPTION OF STANDARD TRUST STRUCTURE

During the settlor’s life time, the settlor may manage the assets and received distributions from the trust.

The settlor may name a secondary beneficiary, who may be entitled to receive the income of the trust or the capital upon the death of the settlor.

Settlor may also name one or more ultimate beneficiaries, to whom the trust assets are distributed upon the death of the settlor and the secondary beneficiary, if any.

DESCRIPTION OF INVESTMENT COMPANY

Investment Company is Owned by Trust in a Tax Friendly Jurisdiction “B”

Accounts are Maintained in jurisdiction “C”

Board Members Professionals/ company outside host country

Asset Management company/Investment Banker could be mandated to manage wealth

INVESTMENT

Asset Management company/Investment Banker/ INMACS could be mandated to manage wealth

Investment in Mutual Funds Hedge Funds Debt Funds Private equity Funds Corporates

Directed Investment in FII schemes/ Participatory Notes

Bank Deposits with Guaranteed return Direct investment for acquiring businesses Lending Money Real estate/ REITs

Target

Investment in US$ Denomination/ Multiple currency

Inflationary losses Avoided Transfer Pricing…… Own Independent structures

to undertake related party transactions Multiple Trust structures/ Guchha Company

Technology to use Purchase existing investments through Mauritius

route Real estate investment without capital gain tax Confidential legal transactions in downstream

corporates

CUSTOMISATION: CONCEPT OF PROTECTOR

SETTLOR Original Owner of the Assets and creator of

the Trust

SETTLOR Original Owner of the Assets and creator of

the Trust

TRUST DEED The Trust Agreement that sets out the terms of

the Trust

TRUST DEED The Trust Agreement that sets out the terms of

the Trust

INVESTMENT COMPANYA British Virgin Island Company set up specifically to hold the

Assets

INVESTMENT COMPANYA British Virgin Island Company set up specifically to hold the

Assets

TRUST ACCOUNTS The Trust assets are held in one or more accounts specified by the Settlor which are opened in the

name of the investment company

TRUST ACCOUNTS The Trust assets are held in one or more accounts specified by the Settlor which are opened in the

name of the investment company

BENEFICIARIES Persons Designated by the Settlor in the Trust Deed to benefit from the Assets held

in the Trust

BENEFICIARIES Persons Designated by the Settlor in the Trust Deed to benefit from the Assets held

in the Trust

TRUSTEETrust Company

TRUSTEETrust Company

ULTIMATE BENEFICIARIES

ULTIMATE BENEFICIARIES

SECONDARY BENEFICIARYSECONDARY BENEFICIARY

FIRST BENEFICIARY

FIRST BENEFICIARY

PROTECTOR Appointed to

protect the interest of the

Beneficiary

PROTECTOR Appointed to

protect the interest of the

Beneficiary

Protector is usually a person who is a friend or advisor of the settlor. The inclusion of a protector is not mandatory for the creation of a trust but can balance the wide discretionary and fiduciary powers often given to the trustee under the trust.

Typically, the protector (which may be an individual or committee of individuals or a company) is appointed to ensure the wishes of the settler are carried out by the trustees.

CUSTOMISATION: CONCEPT OF PROTECTOR

FAVOURABLE INTERNATIONAL JURISDICTIONS

British Virgin British Virgin IslandsIslands

Caymen IslandCaymen Island

BermudaBermuda

MauritiusMauritius

CyprusCyprus

Isle of ManIsle of Man

St LuciaSt LuciaBelizeBelize

BahamaBahama

Comparison of Holding Companies in Different Tax Havens

TRUST FORMATION IN INTERNATIONAL JURISDICTIONS

TRUST DEED - CLAUSES

Clause 1Clause 1

Clause 2Clause 2

Clause 3Clause 3

Clause 4Clause 4

Clause 5Clause 5

Clause 6Clause 6

Clause 7Clause 7

Clause 8Clause 8

Clause 9Clause 9

Clause 10Clause 10

Dispositive Provisions

Dealings with the Trust Fund and Powers of Trustee

Trust Property

Accounts

Compensation and Indemnity of Trustee

Change of Trustee

Protector

Governing Law

Written Instruments and Communications

Interpretation

British Virgin Islands

There are no no Income tax, capital gains tax, Wealth tax, Withholding tax, gift tax or inheritance tax

in the BVI on non-residents. A BVI trust will not be liable to tax in the BVI

except for stamp duty, annual application and licence fees for a company engaged in trustee or

banking activities

Trustees have a duty of confidentialityduty of confidentiality as regards information pertaining to the trust, its existence, terms and parties.

Further, there are special rules relating to the disclosure of evidence in criminal proceedings connected with indictable offences including suspected drug trafficking and money laundering.

British Virgin Islands

Mauritius – Trust Formation

Mauritius Trusts are governed by The Trusts Act 2001.

It can be formed by a resident or non resident of the Island.

There is no requirement to register the trust with any registrar and no need for any disclosure of beneficial owner to any authority .

It can have a Protector and a purpose trust must have an Enforcer.

It can have a managing trustee in Mauritius and a custodian trustee in another jurisdiction.

The forced heirship rules of other states will not be enforced by Courts in Mauritius.

Mauritius – Trust Formation

There is no register of trusts in Mauritius nor is there any need for any disclosure of beneficial owner to any authority.

A trustee is required under the Act to keep confidential all information concerning the trust.

Under exceptional circumstances, a trustee may be required to give confidential information to authorised persons under anti-money laundering, prevention of terrorism or prevention of corruption legislation or under the Financial Services Act 2007.

Mauritius – Tax Planning

Trusts with non resident settlors and beneficiaries are exempt from tax if election is made or,

if no election is made, at an effective rate of 3% of their net income after deductions for expenses

Tax paying trusts enjoy the benefits of Mauritius’s many favourable tax treaties.

Trusts for residents are taxable at 15% on their net income after deductions for expenses.

United States – Disclaimer Trust

"Disclaimer Trust", is a flexible estate planning tool to benefit married couples whose combined estates are approaching or exceed the lifetime exemption amount for federal estate tax.

There is currently nono federal estate tax in 20102010, and in 20112011, the exemption amount will be $1 million, $1 million, tax rate being 55%. 55%.

In 2009, In 2009, threshold was $3.5 million $3.5 million and tax rate was 45%. 45%.

The Disclaimer Will is a standard Will with a trust provision that a surviving spouse can elect to utilize if he/she believes that his/her estate could be subject to federal estate tax upon his/her death.

United States – Disclaimer Trust

The Disclaimer Will provides for an outright marital deduction bequest of the entire residuary estate to the surviving spouse, and

It will further provide that if the surviving spouse wishes to disclaim the bequest (in whole or in part), the disclaimed property will be passed into a trust for the benefit of the surviving spouse.

The trust will shelter the exemption equivalent $1 million (in 2011) from estate tax.

JERSEY

A Jersey trust will not be liable to Jersey taxation provided it can be demonstrated that :- None of the beneficiaries is resident in the

island. The trust has no income arising from sources

within Jersey other than bank interest. These provisions mean that a Jersey trust can

accumulate income from differing sources tax free.

There is no requirement to formally register its existence.

Case study

Case study- 2

Wealth Creation without disclosing the identity of the ultimate beneficiaries

Case study

100% 100% shareholdingshareholding

100% subsidiary100% subsidiary

CASE STUDY

An International Business Company (IBC) is set up in British Virgin Islands

The entire shareholding will be held by the trust specially created for that purpose.

The Directors of said BVI will be a company in Hong Kong/ CAYMAN/ISLE OF MAN.

A Trust is set up in BVI Trustees will be Hong Kong Company.

A Company is set up in UAE/ Tax friendly jurisdiction

For R&D purposes The entire share holding of the Dubai Company will be

held by the IBC Company. Dubai Co. shall open the representative Office in

HONGKONG Appointment of local person as Manager.

THANK YOU