Glossary · SearchOffshore
What Is a Trust?
A trust is a legal arrangement under which one person (the settlor) transfers assets to another person or entity (the trustee), who holds and manages those assets for the benefit of defined individuals or purposes (the beneficiaries). The trustee has legal ownership of the assets but is bound by fiduciary duties to manage them in the interests of the beneficiaries.
How Trusts Work
The Three Parties to a Trust
Settlor
The person who creates the trust and transfers assets into it. The settlor sets out the terms of the trust in the trust deed, including who the beneficiaries are and how the trustee should exercise their powers. Once assets are transferred, the settlor relinquishes legal ownership — though may retain influence through a letter of wishes or in certain reserved-power trust structures.
Trustee
The person or entity that holds legal title to the trust assets and manages them in accordance with the trust deed and fiduciary duties. Professional trustees (licensed trust companies) are used in offshore jurisdictions. Trustees owe duties of loyalty, prudence, impartiality and disclosure to the beneficiaries. Browse Fiduciary Providers →
Beneficiaries
The individuals or classes of person who benefit from the trust — either through fixed entitlements (fixed trust) or subject to the trustee's discretion (discretionary trust). In a discretionary trust, beneficiaries have no fixed right to any particular distribution — protecting assets from their creditors.
Protector (Optional)
An additional party appointed to oversee the trustee — often a trusted advisor or family member. The protector may have powers to remove and replace the trustee, veto certain decisions or give consent to distributions. The protector role is common in offshore discretionary trusts.
Types of Trust
Common Offshore Trust Structures
| Trust Type | How It Works | Primary Use | Key Jurisdictions |
|---|---|---|---|
| Discretionary Trust | Trustee has discretion over who receives distributions and when — no fixed entitlements for beneficiaries | Family wealth, succession, asset protection | Jersey, Guernsey, Cayman, BVI |
| Fixed Interest Trust | Beneficiaries have defined, fixed entitlements to income or capital | Simple succession structures, annuities | All common law jurisdictions |
| Purpose Trust | Established for defined purposes rather than for identified beneficiaries — enforced by an appointed enforcer | Structured finance, SPV orphaning, philanthropy | Cayman (STAR), BVI, Jersey |
| VISTA Trust (BVI) | Discretionary trust holding BVI company shares — limits trustee interference in company management | Family business succession | BVI exclusively |
| Charitable Trust | Established for defined charitable purposes; perpetual existence possible | Philanthropy, family giving vehicles | Jersey, Guernsey, Cayman, UK |
| Private Trust Company (PTC) | A company acts as trustee of the family trust, with family/advisors on the PTC board | UHNW families wanting governance oversight | Jersey, Guernsey, Cayman, BVI |
Why Offshore Trusts Are Used
Common Uses in Private Wealth Planning
- Succession planning — passing wealth to the next generation outside of the probate process, on terms set by the settlor in the trust deed
- Asset protection — discretionary trusts protect assets from future creditors of beneficiaries who have no fixed entitlement
- Forced heirship protection — where a settlor's home country imposes forced heirship rules, an offshore trust in a jurisdiction that does not recognise forced heirship can provide protection (subject to applicable conflict of laws analysis)
- Confidentiality — trusts are generally private documents; there is no public register of trust documents in most offshore jurisdictions
- Investment management — the trustee can hold and manage a diversified portfolio of assets across multiple asset classes and jurisdictions
- Philanthropy — charitable trusts provide a vehicle for structured giving, potentially with perpetual existence
Offshore Jurisdictions
Leading Trust Jurisdictions Compared
| Jurisdiction | Trust Legislation | Key Strengths | Typical Client Base |
|---|---|---|---|
| Jersey | Trusts (Jersey) Law 1984 (as amended) | Deep trustee market, strong asset protection, VISTA equivalent, foundations available | European, Middle Eastern, African UHNW |
| Guernsey | Trusts (Guernsey) Law 2007 | Strong trustee ecosystem, PE-linked structures, foundations available | European institutional, Channel Islands-connected |
| Cayman Islands | Trusts Act (as revised); STAR Trusts Act | STAR purpose trusts, strong asset protection, institutional depth | Institutional, US-connected, global UHNW |
| BVI | Trustee Act; VISTA (Virgin Islands Special Trusts Act 2003) | VISTA trust regime — unique for holding company shares long-term | Family business owners, entrepreneurial families |
| Nevis | Nevis International Exempt Trust Ordinance | Very strong anti-creditor provisions; self-settled trusts | Asset protection-focused clients |
Misconceptions
Common Misunderstandings About Trusts
✗ Myth
The settlor retains control of trust assets after settling the trust.
✓ Fact
Effective trust arrangements require a genuine transfer of control to the trustee. Settlors who retain excessive control risk the trust being treated as a sham or the assets being included in their estate.
✗ Myth
Offshore trusts are secret from tax authorities.
✓ Fact
Under CRS, professional trustees report information on settlors, trustees, protectors and beneficiaries to local tax authorities, which exchange it with relevant foreign authorities.
✗ Myth
Trusts are only for very wealthy individuals.
✓ Fact
While offshore trusts typically require minimum assets to justify professional trustee costs, trusts are used across a wide range of wealth levels for succession, estate and asset protection planning.
FAQ
Trusts — Common Questions
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