The most common and flexible type of offshore asset protection trust is the discretionary trust and it is used in wealth protection and tax planning.
The discretionary asset protection trust is commonly used when, at the time the trust is established, no decision has been taken as to
what portion of the trust’s income and capital should be reserved for each beneficiary, and when it is desirable to maintain flexibility in that respect.
Under the provisions of a discretionary trust, the trustees are given the power to select
• which person or persons are to receive a benefit from the trust and
• The extent of such benefit.
• They may also have the power to decide whether to distribute income or accumulate it.
• The trustees very often have the power to add or remove beneficiaries and this gives considerable flexibility to the trust.
Whilst the trustees of the discretionary trust will usually have the power to determine the beneficiaries of both the capital and income of the trust, and the amounts which they are to receive, the Settlor will have given the trustees guidance as to how they should administer the trust, both
• during the settlor’s lifetime and
• after his death; which will be set out in the
• “Letter of wishes”. This letter can be varied from time to time during the settlor’s lifetime to meet changing circumstances.
A discretionary trust can also include:
Extensive investment powers to meet the requirements of international clients and it can hold all manner of assets both esoteric and otherwise. As this type of trust is very often used in combination with a Global Business Company(ies), there will be power for the trustees to:
- establish wholly-owned companies, not withstanding this,
- The terms of the trust may provide that the trustees do not need to interfere in the management of such companies.
