There are various types of trust which it is possible to create but, generally speaking, the greatest tax advantage and flexibility will accrue to the beneficiaries of a discretionary trust. Under this type of trust the trustees have the discretion as to the amount and the timing of any distribution of trust income or capital. This allows the trustees to make distribution only when it seems appropriate or necessary and otherwise to accumulate both income and capital. This can have substantial advantages in that it allows the trustees to take account of any changes in the situation of a given beneficiary and to plan distribution from the Trust in such a way as to minimise tax liabilities of the settlor & income accruing on assets given to trust by the settlor.
As mentioned, the trustees do have an absolute discretion as to the amount of distribution they make and when to make distributions but it is normal for the settlor of the trust to indicate to the Trustees what would be his wishes in relation to the trust assets by writing a formal "Letter of Wishes" to the trustees. The trustees are not legally bound to follow the wishes of the settlor but would normally do so unless, for example, a change in circumstances led them to believe that following those wishes would have undesirable implication for the beneficiaries. The letter of wishes can be amended and updated as often as required during the lifetime of the settlor.
Either an individual or a corporation may act as the trustee of a trust but it is becoming increasingly common to use a corporate trustee as this avoids problems which might result from the death, illness or retirement of an individual trustee and provides for continuity of administration.
Trustees can however, nominate directors and grant management powers of the trust to nominee of the settlor.
Under a discretionary trust we have seen that the trustees control the trust funds and have a high degree of discretion over what happens to those funds. If the settlor attempted to retain some control over the trust funds then this may result in the trust being declared invalid and/or the trust being considered as resident in the jurisdiction within which the settlor is resident. Both these consequences may have serious tax implications for the trust itself and the beneficiaries. Certain safeguards for the settlor may be found by appointing a protector. Typically the protector / enforcer would be a family friend, relative or trusted advisor who has powers under the trust deed and to enforse the terms of the trust deed. However if directors are appointed to manage trust, the protector need not be appointed since all powers will be vested in the director esp. controlling the underlying BVI Co.
A BVI Vista trust is not liable to any taxes if the trust beneficiaries are not BVI residents.
It is possible that the setting up of the trust will result in tax consequences for the Settlor and also possible that, although no tax would be payable in BVI, there may be ongoing tax consequences for the Settlor and/or the Beneficiaries in their Country of residence. These possible tax consequences will depend upon the domicile and tax residency of the Settlor and Beneficiaries and therefore local advice should be sought on these matters.
Renewal of BVI Trust, to be paid on anniversary date of incorporation. Failure to do so results in penalties.
Latest valid passport copy and recent utility bill for address proof of protector and beneficiaries are required to be submitted at every renewal as a part of enhanced due diligence.
Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal, tax or other professional advice. We do not accept any responsibility, legal or otherwise, for any errors or omissions.