The trust is a fiduciary document where there is a settlor (the client) that transfers the asset to the trustee (the fiduciary) and that asset is held for the future beneficiaries. Usually the client is the first beneficiary and the family members are the second beneficiaries after the death of the first beneficiaries. The trusts are usually revocable or amendable at any time prior to the death or incapacity of the settlor. The trust is an excellent form of succession planning for the shares of an offshore or domestic company because the trust avoids the necessity of probate in the country where the assets are located. This avoids legal costs and delay in getting the asset to the beneficiaries. If the asset is shares in a BVI company we have 3 options available as explained below.
A. VISTA TRUST
VISTA trusts are unique to the British Virgin Islands. The VISTA regime was introduced as a solution to what is commonly referred to as ‘the prudent investor problem’: a) the shares will be held indefinitely; b) the trustee is not intended, other than in special and defined circumstances, to intervene in the conduct of the affairs of the underlying company or companies.
The trustee must be licensed in the BVI as a trust company. Thus, there is more compliance requirements than a Private or Florida trust.
Advantages of Vista Trust
• The directors, who may be the settlor or his designee, shall have the exclusive right to manage the company;
• Authorizes the removal of the trustee’s monitoring and intervention obligations;
• Allow for the establishment of rules so that the settlor and not the trustee are in the position of appointing directors of their own choosing;
• Gives both beneficiaries and directors the right to apply to the court if the trustees fail to comply with the requirements for non-intervention or the requirements for director appointment and removal;
• Prohibits the sale of trust assets without director’s approval.
B. PRIVATE FLORIDA TRUST
Ordinarily, in the offshore world, the settlor cannot be the trustee and first beneficiary. This is permitted in the state of Florida. However, to be a valid Florida trust there must be some connection with the State. Either the settlor, the trustee, or the property being held must be located in Florida. Thus, in the case that we set up a Florida trust by a non resident of Florida to hold shares of an offshore company, we suggest that the trust open a bank account in Florida to meet the minimum connection requirements under state law.
Advantages of Florida Trust
The client may be the settlor, trustee, and first beneficiary. Thus, there are no annual trust fees and compliance requirements that exist in the offshore world. the trust is revocable so it can be amended or revoked at any time by the settlor and the client is in full control of the asset while alive and with capacity to act. Upon death or incapacity, a successor trustee takes over the distributes the trust assets in accordance with the requirements of the trust.