SETTING up an offshore trust can be fraught with pitfalls but, if structured correctly, it can provide many benefits, ranging from estate planning to tax relief. One problem Hong Kong high-net-worth clients face when drawing up and selecting an offshore trust is understanding the complex terminology. Although there are many avenues investors can take to get top-quality advice, Credit Suisse has published a user-friendly book on managing personal wealth. Understanding how an offshore trust worked, its role in protecting wealth and how to design it to offer a range of benefits, are covered in the guide which has been available at selected bookstores since January. 'The world of offshore trusts is sprinkled with many 'buzzwords', ' said Douglas Moore, a lawyer who heads business development at Credit Suisse. 'It is important the person who establishes the trust, called the settlor, understands this jargon before signing a contract. 'It can be confusing, as the phrase offshore trust is used to refer to a wide variety of structures, some of which do not qualify as 'trusts'. ' A trust was created when a settlor signed a legal agreement transferring assets to a trustee or a person who would hold legal title. Under most agreements, the settlor stipulated who would benefit from the assets being held by the trustee and how assets would be distributed. Another word which often confused people was 'offshore'. 'It has a number of connotations but it does indicate there are a number of jurisdictions involved,' Mr Moore said. 'For example, beneficiaries may live in a different country to the trustee. 'The fund could be in a different country to the trustee and the beneficiaries and the word offshore is often equated with 'tax haven' .' However, the word 'offshore' also implied tax burdens would be reduced and the offshore party, usually the trustee, would be in a better tax environment than the 'on-shore' party, he said. The diverse needs of local high-net-worth clients and consultants' 'fertile imaginations' created a range of trusts, European solutions and offshore holding companies, Mr Moore said. Anglo Saxon trusts were popular with rich Hong Kong people, as they were governed by British law and were widely accepted in common-law jurisdictions. They also appealed to investors globally because most tax authorities and other regulatory bodies had developed rules for them. For those more comfortable with civil law, a variety of continental European trusts were available, Mr Moore said. Places such as Switzerland and the principality of Liechtenstein gave a high degree of control over assets. Trusts in these areas were governed by the law in the jurisdiction of the beneficiaries' country, even though the principality, which is between Switzerland and Austria, was a tax haven. Only a handful of high-net-worth Hong Kong people used the jurisdiction for trusts, which could be structured to govern a complex array of requirements. Liechtenstein trusts would be tailored for private banking clients in Hong Kong and could not be bought 'off the shelf'.
