Offshore asset protection trusts are excellent solutions for protecting wealth from future lawsuits and potential creditors. When a trust is established under the laws of a foreign country and the trust assets are located outside the settlor’s home country, it is almost impossible for a domestic court to reach any trust assets.
That means the plaintiff would have to try his case in the courts of a foreign and unfamiliar jurisdiction, which is a daunting and prohibitively expensive task for most plaintiffs. This is the key factor that separates offshore trusts from many other asset protection alternatives and makes them so remarkable.
There are several countries around the world that serve as centers for international asset protection trusts. The nation of Belize, a Caribbean country located in the north of Central America, is generally regarded as one of the best offshore jurisdictions for trusts.
Belize is a former British colony that became an independent country in 1981. As such, the nation’s legal system is modeled on the common law of England, including its laws on trusts. The Belize International Trust Law is based on that from the island of Guernsey, a British Crown Dependency located in the English Channel. Further amendments to its laws have made Belize a more competitive jurisdiction for international trusts.
What is a Belize Trust?
Following the introduction of the Belize Trusts Acts in 1992, Belize has become one of the most popular centers for Offshore asset protection trusts. It offers unparalleled advantages in terms of protection and security from all forms of potential creditors and other litigation, as well as a high degree of confidentiality.
A Belize Trust is an offshore asset protection trust established under the laws of Belize and administered by a trustee within the country. An asset protection trust aims to separate the ownership of a certain assets with the rights to control, use, and enjoy such assets.
The trust itself is a contract between the person who establishes the trust, known as the settlor, the manager or trustee, and the beneficiaries who are expected to receive the trust assets. The trust laws in Belize provide a high degree of protection, privacy, and flexibility. In addition to its favorable trust legislation, Belize has a streamlined trust formation process, and has low fees and taxes imposed on foreign trusts.
Assets that are usually held in trust are:
- Real and intellectual property
- Bank deposits
- Investment portfolios
- Shares and stocks in both quoted and unquoted companies
- Life assurance policies issued on the life of the settlor
- Most other types of assets
Advantages Of Belize Trusts
Belize’s laws provide a very high degree of asset protection to its offshore trusts. Trust assets are generally safe against foreign civil judgments, including creditor claims, bankruptcy proceedings, and divorces. Compared to many other offshore jurisdictions, Belize has a larger population and economy, which provides higher political stability and lower jurisdictional risk.
The costs of establishing and maintaining an offshore trust in Belize are also generally lower than other locations.
One of the major advantages of a Belize Offshore Trust is that it offers immediate asset protection upon funding a trust. Normally it takes two or more years from the date the assets were transferred to the trust to be safe from fraudulent transaction claims.
Since the country decided to exclude the application of its fraudulent transfer statute to international trusts established in Belize, it is one of the few countries in the world that offers immediate asset protection. Provided the trust was created for a lawful purpose, the courts in Belize will not consider claims of fraudulent conveyance.
As such, there is no minimum period of time in which proceedings against fraudulent conveyance can be brought against the settlor. This makes Belize a smart choice for anyone looking to get their asset protection plan running as soon as possible.
In addition to protection against fraudulent transfer claims, Belize Trusts are also immune against Mareva injunctions. Mareva injunctions take their name from a 1975 case from the U.K., and they essentially petition the court to freeze trust assets until the court issues its determination on the case.
The Supreme Court in Belize has ruled that the asset protection trust statutes in the country supersede a petition for a Mareva injunction. That means trust funds could potentially be used to pay for a legal defense without the risk of being made unavailable in the middle of litigation.
Some main advantages of the Belize Trust are:
- Asset protection provisions are very strong.
- Settlors may create protective trust in their own favor.
- Flexible appointment and removal provisions of a trustee, possibility to appoint sole trustee.
- Simplified legal provisions regarding the Trust Deed.
- Trusts are tailored to individual, specific requirements.
- Recognized in all common law jurisdictions.
- Recognition of other types of trusts such as Islamic Waqf and the Chinese Family Settlement.
- Recognition in many civil law jurisdictions.
- An important tool in international income, capital gains, and estate tax planning.
Requirements In Establishing a Belize Trust
To qualify under the Belize Trusts Act, the settlor, beneficiaries, and trust assets must all be located beyond the borders of Belize, and the purpose of the trust is to be implemented outside of the country as well. For U.S. clients, this is generally not a concern since very few have any assets located in Belize proper or plan to move their funds there.
It is much more common to establish a bank account in Switzerland or other established banking centers.
The Belize Trust is established under Belize’s laws and a local fiduciary must serve as trustee. In order to comply with the legal requirements, the trustee in Belize must retain the following:
|Name of the trust.||Name of settlor/trustor.|
|Date of trust settlement.||Initial funds settled.|
|Date of trust registration.||Additional funds settled.|
|Name of the trustee.||Names and addresses of all beneficiaries.|
|Any changes of the beneficiaries.||Name of the trust protector (if any).|
|Any changes of trust protector.||Original trust document and any amendments.|
The settlor is the person who creates the trust by placing assets into the trust by transferring assets to the trustee along with clear instructions that the assets should be held for the benefit of a third party. To qualify as an international trust, the settlor must always be “non-resident” in Belize. The settlor may be an individual or a legal entity.
The trustee is the person who holds the assets for the benefit of the beneficiary. While in control of the trust assets, the trustee is under a legal obligation to maintain the trust property in the best possible manner for the benefit of the beneficiaries. The trustee is legally precluded from using the trust asset for his own ends.
The beneficiary is the third party for whose benefit and profit the trust asset is held and managed by the trustee. The beneficiary or beneficiaries may be either specifically named in the trust deed or may be a sufficiently defined group of persons (for example “all children and grandchildren”). The settlor of a trust may also be named as the beneficiary.
The protector is not a mandatory party to the trust, but one may be appointed by the settlor. The function of the protector is to supervise the trustee, thus providing additional assurances to the settlor that the trust assets are properly managed. The protector may also remove or replace the trustee.
How To Setup a Belize Offshore Trust
Establishment of an international trust in the Belize is regulated by The Trusts Act, with substantial amendments in regards to international trusts introduced by the latest Belize Trusts (Amendment) Act. An international trust is registered under the Trusts Act of Belize by a licensed trustee resident in Belize.
To establish your own Belize Offshore Trust, you will need to select a trustee in Belize who will be in charge of acting as legal administrator of the trust and hold title to any trust assets. Generally, a respected professional fiduciary company will fill this role.
Thanks to our contacts in the offshore asset protection world, we can put you in contact with fiduciary companies so you can learn more about their services. In addition, you may decide to appoint a trust protector. A trust protector has the authority to supervise trust operations and remove or change a trustee if needed.
Then you will need the actual trust document itself. The provisions of the trust detail the safeguarding, management, investment decisions, and distribution of trust assets. This is the contract that binds you as the settlor and the trustee, who will be responsible of managing the trust in accordance with the terms of the trust.
If you are working with an experienced offshore asset protection law firm, your attorney can review your situation to make sure the trust document matches your needs and wishes. At any rate, you should read the trust document carefully and ask any questions before signing. While it is generally possible to change or amend a trust document after signing, it is much more efficient and cost effective to have the document finalized at the outset.
In 2007, Belize created the International Trusts Registry, and it requires all international trusts to be registered with this government body. In order to protect the confidentiality of the information contained, the registry does not need to receive a complete copy of the trust document, but it does require all trust to be in writing. Notably, the registry does not reveal any details about the settlors and beneficiaries of the trust, nor any information about the trust assets.
Finally, the initial registration fee needs to be paid and the government will issue a numbered certificate of registration for your Belize Trust.
The timeline for setting up a Belize Trust is highly dependent on how quickly and properly the application forms and other required documents are provided. In general, trusts can be established in around two weeks.
Taxes On Belize Trust
Belize is one of the most attractive offshore jurisdictions offering a tax-free environment for international trusts. A Belize International Trust, and its trust property, is permanently exempt from income and business tax, estate, inheritance, succession or gift tax and all instruments relating to the trust property or to transactions carried out by the trustee on behalf of the trust.
The trustees of a Belize International Trust are regarded as non-residents in Belize and are exempt from exchange controls regarding the trust property and transactions carried out on behalf of the Trust.
The government of Belize has no foreign exchange controls, and its tax laws impose no gift, estate, or income taxes on Belize Offshore Trusts. There is a license fee of $1,250 to maintain the trust registration and a flat annual tax of $850 imposed on international trusts that needs to be paid in Belize.
While the costs imposed by Belize are very competitive when compared to other offshore trust jurisdictions, citizens and/or residents of the United States should also be aware of increased reporting requirements imposed by the IRS regarding offshore assets and bank accounts. An experienced tax attorney or accountant can help you better understand how to fulfill the IRS requirements with regards to an offshore trust.
What A Belize Trust Can’t Do
Offshore asset protection trusts in Belize and elsewhere can only protect against future liability and do not work to further any illegitimate transactions. It is an unfortunate misconception that high-net-worth-individuals can avoid paying income taxes in their home countries by stashing money offshore.
A Belize Offshore Trust, or for that matter any other legitimate asset protection solution, is not intended to conceal assets or income from tax authorities, evade tax liabilities, or discharge you from existing claims or creditors.
A Belize Trust is also not ideal for protecting real estate located in the U.S. By its nature, real estate cannot be physically removed from its location, so there is a risk a court could obtain jurisdiction over U.S. real estate even if the title is ostensibly held by an offshore trustee. While offshore asset protection trusts can be used to protect U.S. real estate, this can be done best in combination with a process known as equity stripping.
The Cost of a Belize Trust cost
In addition to the government fees discussed above, a Belize Trust will need to pay the yearly trustee fees owed to the company for its work in managing the trust. These fees are generally about $1,000 per year, but can vary depending on how much work is required from the trustee each year.
When you are in the process of selecting a trustee, the fiduciary companies can provide more details regarding their fee schedules to help you compare and decide. As for the legal fees for drafting and setting up the trust, you can schedule a consultation with an experienced attorney to discuss your situation and obtain a fee proposal with no obligation on your part.
We offer competitive flat rates for legal services, so you have a clear understanding of all the costs from the beginning of the representation.
Is a Belize Trust the right choice for you?
- If you are looking to preserve your wealth from legal threats in a timely manner.
- If you want to transfer your wealth to your heirs in a tax-efficient manner.
- If you want to plan your estate by maximizing benefits of your wealth for family members and others.
- If you want to consolidate the ownership of the assets you owe throughout the world in one location.
Hiring An Estate Planning Attorney
Unfortunately, the American legal system leaves many individuals feeling badly exposed to the risk of a potential lawsuit or claim. Thanks in part to the use of offshore asset protection trusts, people have options to protect themselves before a legal problem arises.
People in the U.S. can now take advantage of more favorable governments and legal systems abroad. If you would like to learn more about Belize Trusts, offshore asset protection trusts, or other asset protection solutions, contact Blake Harris Law and schedule a free consultation today. Our attorneys can evaluate your situation and design an asset protection plan that fits your needs.