Companies on the other hand are taxed at 50% of the capital gain at the company tax rate. Taxpayers will qualify for the exemption on the first RIm of the gain attributable to the primary residence.
ADDITIONAL EXAMPLES OF THE POWER OF TRUSTS
THE NATURE OF TRUSTS
WHAT IS A TRUST?
This document describes the trust and details how it will be administered and for whose benefit. I. at a specific lifetime for a trust) and will allow beneficiaries not to be named and left to the discretion of the Trustees (see next section).
TYPES OF TRUSTS
- BENEFICIAL TRUSTS
- DISCRETIONARY TRUSTS
These are arrangements where the actual beneficiaries of the fund are at the complete discretion of the trustees. Since no specific beneficiaries are named in the trust document, the tax authorities (cannot) tax potential beneficiaries, as there is no way to know when or even if they will benefit from the trust, although tax is (theoretically) paid on the receipt of the trust's income beneficiary.
TRUST STRUCTURE AND ADMINISTRATION
The named person, individuals or company appointed by the settlor to administer his wishes under the Deed of Trust. In this case, (and we can't immediately think of one), the administrator would return to the Settlor for instructions.
DEFINITIONS
- RIGHTS OF THE BENEFICIARIES
- THE FOUNDER
- THE TRUST INSTRUMENT
- DONATION
- TRUSTEES
- TAXATION OF TRUST
- SECTION 2S(B)
- SECTION 7(1)
- CONDUIT PRINCIPLE
- SECTION 7(3)
- DONATION, SETTLEMENT OR OTHER DISPOSITION
- SECTION 7(5)
- EVENT
- DONATION TAX AND TRUSTS
- EXEMPTIONS
- REVOCATION OF A TRUST AND RENUNCIATION BY BENEFICIARIES
Each beneficiary has the right to obtain a copy of the instrument of the trust and the accounts of the administration of the trustee. If the grant is not irrevocable, the settlor cannot revoke or amend the trust without the consent of the trustee. The trustee may terminate the trusteeship if the beneficiaries are of legal age and immediately entitled to the corpus of the trust property.
In the case of a discretionary trust where the trustee is given discretionary power in terms of the trust deed, agreement or will to distribute income, the beneficiary acquires a vested right to the income. The deemed expenses rule authorizes a designation of expenses incurred by the trustee between the income of the trust and the income of the beneficiary. The surplus returns to the trust and is considered income as a deduction or deduction that can be taken in determining the trust's taxable income.
The use of the word assigned to a trust instrument does not conclusively prove that the income is the beneficiary. Any income that is exempt from tax under the law will be available to the ultimate recipient of the income. Therefore, the dividends received would be exempt in terms of S 10(1)(k)(l) in the hands of the recipient.
Therefore, if the Commissioner can prove that the donation, settlement or other disposition is responsible for accruing income to the minor child, such income will then be taxed in the hands of the donor. This subsection will ensure that the income will be taxed in the hands of the taxpayer who cedes his rights to income.
OFFSHORE TRUSTS - ASSET PROTECTION TRUSTS
JURISDICTIONS
A Settlor might decide to use a suitable offshore jurisdiction, as physically distant as possible, to put another barrier, albeit psychological, between himself and his creditors. Many Settlors will face their creditors and rely on the legal strength of their Trust and say, "This is where my assets are kept, and these are the laws that protect them. Either way, you need to be sure that the jurisdiction in which your Trust is administered will not reveal any details about your Trust arrangements to anyone.
What if I move or need to change the jurisdiction of my Trust for any reason. Although it is unlikely that you will ever need to change the jurisdiction of your Trust, you should ensure that if the need arises, you can do so. Such opportunities may be beyond your direct control, such as change of government in the jurisdiction of the Trust, which then shows signs of becoming "friendly" with your home country and friendly with your local courts.
There are also several smaller but never less equally important questions to ask yourself:-. What are the legal and financial support services (important if you connect your fund with a company abroad). There is so much mystery surrounding OAPTs that it may come as a surprise to many to learn that while the do-it-yourself approach is fraught with potential pitfalls, there are a number of organisations, usually based overseas, who are more than willing to help.
THE OFFSHORE TRUSTEE
- INTRODUCTION
- FACTORS TO CONSIDER WHEN SELECTING A TRUSTEE
- DUE DILIGENCE AND LEGAL LIABILITY OF TRUSTEES
- CONCLUSION
Is the administrator subject to an annual audit by an internationally recognized audit firm. The management of trust assets must also be explained to the beneficiaries from time to time. The trust document should set out a procedure that describes the manner in which information is to be provided to the beneficiaries.
The trustee company was not represented on the board and two assets were sold without their knowledge. It was the trustee's duty to conduct the affairs with the care of a reasonably prudent businessman conducting his own affairs. Trustees must take great care to ensure that beneficiaries are not harmed or suffer loss.
If the trustee buys the beneficial interest of a beneficiary, the sale is void, unless the trustee did not derive any benefit from his position as trustee. In both cases, the trustee can sue and be sued, so great care must be exercised in the performance of his duties. A professional trustee will undoubtedly provide peace of mind, but is unlikely to have a personal relationship with either the Settlor or beneficiaries.
TAXATION OF OFFSHORE TRUSTS
- INTRODUCTION
- RESIDENCE
- COMPANIES
- DOMICILE
- INDIVIDUALS
- THE BENEFICIARIES
- TAX IMPLICATIONS OF TRUSTS SITUATED IN T AX HAVEN
- BAHAMAS
- THE CAYMAN ISLAND
- GUERNSEY
- ISLE OF MAN
- JERSEY
- CONCLUSION
Trusts are treated similarly, except that trusts are equipped with "carry-over" provisions purporting to extrapolate the domicile and residence of an existing trust to another territory. For income tax purposes, the residence and domicile of the Settlor will be relevant in determining the extent to which the anti-avoidance provisions, where applicable, will cause the income of the offshore trust to be assessed on the Settlor. Beneficiaries' residence and domicile are relevant to determine the extent to which they are liable for income tax and share capital taxation.
There is no income, capital gains or inheritance or succession tax in the Cayman Islands. Income tax at a rate of 20% is payable and apart from that no other tax is payable. Non-Guernsey income and Guernsey bank interest accruing to trusts which have no Guernsey beneficiary are not subject to Guernsey income tax.
Income tax at a rate of 20% is payable and VAT is collected jointly with the UK, the Isle of Man being a separate administrative territory. Where there are no Jersey resident beneficiaries, the trustees will only be liable to pay Jersey income tax on trust income, arising in the island, with Jersey bank interest exempt. If there are one or more beneficiaries resident in Jersey, trustees will be liable to pay Jersey income tax on the income to which the resident beneficiaries are entitled.
THE HAGUE CONVENTION ON TRUSTS AND THE STATUTE OF ELIZABETH
- INTRODUCTION
- DEFINITION OF TRUST
- ARTICLES
- ARTICLE 7
- ARTICLES
- ARTICLES 11-14
- CONCLUSION
- STATUTE OF ELIZABETH
34;Refers to the legal relationship created - inter vivos or on death - by a person, the settlor, when assets have been placed under the trustee's control for the benefit of a beneficiary or for a specific purpose." the trust assets are in the trustee's name or in the name of another person on behalf of the trustee; the trustee has the power and duty for which he is responsible to manage, employ or dispose of the property in accordance with the terms of the trust and the special duties imposed on him by law.
Article 4 therefore only applies to the trust itself and not to preliminary issues (eg form, capacity, the validity of the will, deed of conveyance etc.). The nature of the trust; its assets and purpose will often easily show which of these elements should be given the most weight. 34; The laws specified by section 6 or 7 shall regulate the validity of the trust, its construction, its effect and the administration of the trust.
This would avoid excessive legal costs and any possibility of the trustees being protected from mismanagement of the fund. Many of these provisions have been incorporated into South Africa's Trust Property Control Act, providing protection to beneficiaries against the trustees' personal creditors. The impact of the Hague Fund Convention is not limited to its concrete application in the countries that are parties to it.
A RECENT U.S. PERSPECTIVE
- INTRODUCTION
- THE BASIC PREMISE OF OFFSHORE ASSET PROTECTION
- FRAUDULENT TRANSFERS
- ACTUAL INTENT TRANSFERS
- CONSTRUCTION INTENT TRANSFERS
- CONCLUSION
By using the laws of the asset protection jurisdiction, the theory goes, the investor became judgment-proof (ie, his assets were placed beyond the reach of his creditors). Creating an offshore asset protection trust does not provide much legal protection against determined creditors. The major disadvantage of offshore asset protection planning is the mindset of the typical client who wants to transfer assets outside the US.
Armed with this information, the receiver is able to undo the asset protection scheme and reclaim the assets from the creditors. The basic premise of off-shore asset protection - that the laws of the foreign jurisdiction (which are contrary to well-settled trust law principles) will be enforced to "protect" it. Another requirement made in favor of asset protection is that the foreign country will not enforce a U.S.
A transfer of property to a foreign asset protection trust may constitute a fraudulent transfer under the Uniform Fraudulent Transfer Act. Clearly, an advisor's participation in establishing an asset protection trust to evade US involvement in fraudulent asset protection schemes may also violate the Racketeer Influenced and Corrupt Organizations ("RICO") Act.
BIBLIOGRAPHY
