With dozens of jurisdictions to choose from around the world, finding the one that will best meet your trust needs can be a challenge – but there are five key factors that can help with the decision, says director Ada Ling.
Over the decades, trusts have built an enviable reputation around the world as a key strategic tool for asset protection and succession planning. In their many forms – from Singapore’s private family trusts to Jersey’s discretionary trusts – they offer parties the benefit of flexibility, sound financial planning and the potential for smooth generation-to-generation succession. ‘other.
In light of the Covid pandemic and the current economic and geopolitical uncertainty, these are particularly attractive features for people who want to protect their wealth, now and for the future.
However, choosing the best jurisdiction to establish a trust can be a challenge – the Society of Trust and Estate Practitioners (STEP) reports on over 60 jurisdictions worldwide. That means it takes a lot of thought – and time – to decide which one to use.
This topic was explored in our recent webinar titled “How to Choose the Right Jurisdiction for Your Trust”. This is a critical question for anyone setting up a trust, as well as those advising clients on where to invest their wealth.
While any final choice depends on the personal circumstances and priorities of the trust settlor, here are five key factors that panelists said should be considered when selecting a location for a trust.
Flexible and robust trust legislation
Anyone placing their assets in a trust will need to be reassured that the jurisdiction’s trust laws are robust enough to protect their interests, but flexible enough to keep pace with their changing needs.
“Not all jurisdictions include the special provisions that are included in places like Jersey and Cayman,” said Andrew Miller, partner at Bedell Cristin in the Cayman Islands. “These include the ability to reserve powers to the settlor or another person, such as a protector; control over things like income and capital; adding and removing beneficiaries; and, indeed, if one becomes dissatisfied with his fiduciary, the removal and replacement of the curator.”
Miller also pointed out how, in Cayman Islands for example, there is specific legislation dealing with protection from creditors – the Fraudulent Dispositions Act – which prevents claims once assets are transferred into a trust or other similar structure. . It is these types of jurisdiction-specific advantages that settlors (and advisors) should look for when choosing where to establish a trust.
A stable and reliable legal system
People place assets in trusts for several reasons. Whatever the motive, however, continuity often plays a key role – settlers want their wealth to be passed down safely through the generations.
It is therefore important to choose an autonomous jurisdiction with a strong and stable legal system. Cayman, Singapore and Jersey, for example, all have highly developed legal and judicial systems rooted in English common law.
Webinar speaker Mike Tan, Executive Director of JP Morgan Private Banking Asia’s Wealth Advisory Group, highlighted the effectiveness of Singapore’s stable and transparent legal system in handling disputes. He noted that, despite the impact of Covid, the resolution rate of cases at the Supreme Court of Singapore in 2020 was actually 96%.
“It indicates the efficiency and effectiveness of Singapore’s legal system. It is very important in the event that there are any disputes or resolutions needed, and the court system is called upon to make a decision on the matter.”
Regulation and compliance
The right jurisdiction will have a highly developed regulatory compliance framework in areas such as anti-money laundering and know your customer, striking the balance, as places like Cayman and Jersey do, between appropriate protection and freedom to operate, and between confidentiality and reputation. .
Global tax authorities and regulators, as well as the general public, have placed wealthy individuals under increased scrutiny since the 2008 financial crisis. “No one wants to trust a jurisdiction that is becoming some sort of international pariah,” Miller said. .
Depth of expertise
A strong trust jurisdiction offers a host of high quality service providers, with people experienced and skilled in key areas such as trusts, law, philanthropy and beyond.
Nancy Chien, partner and head of international private clients at Bedell Cristin in Jersey, pointed out that of the 100,000 people living in Jersey, around 15,000 work in financial services.
“These experienced professionals will have rich relationships with other qualified parties in the broader financial world,” she said. “This means they will be able to connect to a host of local ancillary services, from top accountants and major law firms to corporate and fiduciary providers and major international banks.”
Conrad Proud, Client Director with Ocorian’s Trust Services team in the Cayman Islands, explained how this network can be essential when choosing a jurisdiction. “For planners and advisers, it is ultimately their reputation with clients that is at stake when seeking to engage trusted professionals,” he said. “It is therefore important to choose both the right jurisdiction and the right trustee.”
The ease of doing business
Trusts are long-term agreements, so dealing with trustees should be simple and convenient. Consider the language of doing business, for example. While English is spoken in places like Jersey, Cayman, and Singapore, the latter is a multilingual jurisdiction where Mandarin and other Asian languages are also widely spoken.
Then there is the issue of time zones. While the one in Singapore may be the most convenient for customers based in Asia, it’s worth considering how easy collaboration can happen around the world. Jersey’s central time zone, almost equally behind Asia and ahead of the United States, makes it easy to deal with intermediaries on the island.
And while Jersey is physically very close to London and European markets, Cayman is well connected to the US and Canada, and just over an hour’s flight from Miami. These are all practical considerations when setting up a trust.
The right jurisdiction for your trust already exists
Since the choice of potential trust jurisdictions is so vast, the right jurisdiction – a politically and legally stable, tax-compliant jurisdiction with deep professional expertise and robust, flexible trust laws – is certainly there.
Take the time to think about which jurisdiction best meets your needs or those of your clients. This way, you (or they) can take full advantage of the wide range of estate benefits offered by trusts.
Watch the “How to Choose the Right Jurisdiction for Your Trust” webinar here.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.