Trusts

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Introducing Trusts
Your wealth is precious – it provides financial security for you and those you care for. It is, therefore, only natural that you want to do all you can to manage, protect and enhance the financial assets you accumulate, not only now but also in the future. Trusts are often wrongly perceived as complicated structures. When thoughtfully applied they can deliver a variety of important and lasting benefits, including the opportunity to help protect your assets, the comfort of knowing that your wealth is efficiently distributed according to your wishes and the potential to minimise UK inheritance tax (IHT).
That is where we can help. Pryce Warner International Group has a wealth of knowledge and experience to help grow, protect and distribute your financial assets. Our range of Trusts are designed to be easy to understand and require the minimum of documentation and administration.
When considering the substantial benefits and peace of mind that it can bring, the short time it takes to set up a Trust could very well prove to be time spent wisely.
We recommends that we carry out a review of your needs to advise you appropriately on how & whether a trust or trusts can be of use to you.

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Trusts-Inheritance Tax Guide

Here is a check list
1. What is a Trust?
2. Why consider Trusts?
3. The advantages of Guernsey
4. Selecting the appropriate Trust for you
5. Discretionary Trust
6. Discretionary Gift Trust
7. Discretionary Loan Trust
8. Discretionary Wealth Protector Trust
9. Trusts at a glance

Trusts-Protecting your wealth
Your wealth is precious – it provides financial security for you and those you care for. It is, therefore, only natural that you want to do all you can to manage, protect and enhance the financial assets you accumulate, not only now but also in the future. Trusts are often wrongly perceived as complicated structures. When thoughtfully applied they can deliver a variety of important and lasting benefits, including the opportunity to help protect yoAur assets, the comfort of knowing that your wealth is efficiently distributed according to your wishes and the potential to minimise UK inheritance tax (IHT).
That is where we can help. Pryce Warner International Group has a wealth of knowledge and experience to help grow, protect and distribute your financial assets. Our range of Trusts are designed to be easy to understand and require the minimum of documentation and administration.
When considering the substantial benefits and peace of mind that it can bring, the short time it takes to set up a Trust could very well prove to be time spent wisely.

Trusts
What will happen to your assets when you die?
This is not a strange question. You work hard to accumulate your personal wealth, so it is only natural that you want to ensure that it is distributed according to your wishes. Unless you take appropriate action, there are a number of factors that could result in your money not going to the people you want it to – even if you have made a Will.
Fortunately, with the right advice and some careful planning, you can put steps in place to help ensure that your assets are distributed according to your wishes.

Key Questions AND ANSWERS
Does my Will not stipulate who gets my money?
Not necessarily. In some circumstances your assets may not be able to go to the persons you set out, even though you have written a Will.

Who could get hold of my money then?
Well, for one, there is the taxman – Trusts can defer or, in certain circumstances, remove certain tax liabilities, including inheritance tax. Then there is what is known as ‘forced heirship’. The law in certain countries can dictate the recipients of some of your assets when you die and how they are divided. A Trust, where you can choose your Beneficiaries, may help avoid this and ensure that your assets are distributed in accordance with your wishes.

So, with a Trust I can say who gets my assets and when?
Yes. A Trust allows you to determine how your assets are distributed inA the future, something that is particularly useful if some of your intended Beneficiaries are currently minors, or if you have concerns about family circumstances.
A further advantage of putting your money into Trust is that, on death, matters can be settled quickly and delays avoided, such as those that can arise in obtaining a Grant of Probate or Letter of Administration.

What if my circumstances change or I change my mind? If your views or circumstances change you can change the Trustees, the named Beneficiaries and/or how your assets are split. With certain Trusts, you can even have access to your capital on an infrequent or regular basis.

what else do you need to know?
Choosing the right Trust There are different types of Trusts, each with their own particular features and benefits. Your Financial Adviser can help you identify which Trust vehicle is best suited to your specific needs.

Establishing your Trust
Pryce Warner International Group will discuss your circumstances with you and can help you to structure a Trust based on the individuals that you wish to benefit from the assets, which you are intending to place in the Trust. The specific type of Trust that we will recommend will depend on a number of factors, including whether you are likely to need access to your capital at any time, need an income from the investment and how much control you wish to maintain.

Maintaining flexibility
How much control and flexibility you have will depend on the particular Trust you decide on. Pryce Warner International Group will be able to help you make the right choice based on your individual circumstances.

How will inheritance tax (IHT) affect the value of your estate?

FOR UK IHT DOMICILED INVESTORS ONLY

This is a question that deserves some serious thought. The reality is that, unless you take appropriate action, the IHT net can spreadover a surprisingly wide area and seriouslyundermine the ultimate value of your legacy.
Fortunately, with the right advice and some careful forward planning, your estate’s IHT liabilities can be kept to a minimum, giving you the peace of mind that comes from knowing future generations will receive the maximum benefit from your bequeathed savings, property and other assets.

Key Questions AND ANSWERS

Because I don’t live in the UK, surely I’m not subject to UK IHT?
Even if you have worked and lived outside the UK for many years, the UK may be considered your ‘home’ country (known as your ‘domicile’). If so, the Inland Revenue will include the value of not only your UK assets but also your worldwide assets in calculating the worth of your estate for IHT purposes. By establishing a Trust, you can potentially take wealth out of your estate so that it is not included in your UK IHT calculation.

How long do I need to live abroad before I lose my UK domicile?
Unfortunately it is not as simple as that. Your domicile is determined by where you have your fixed and permanent home and to which, when you are absent, you intend to return. Only if you manage to lose your UK domicile by choice (which can be a very long and difficult process), will you be free of any UK IHT.

My estate is probably worth less than the UK IHT exemption level.
Does that not mean that my estate will be more or less IHT-free? It is very easy to under-estimate the real value of your worldwide assets. Some assets, for example property, may have dramatically increased in their value over recent years. Here is a reminder of what some of those assets may be – the total value of which should be taken into account when you start planning for IHT:
• The market value of any property you own in the UK or abroad
• The total balances of all your bank accounts
• The market value of any shares or investments you hold
• Any other assets such as motor vehicles, furniture and artworks
• The value of anAy insurance plans that would be paid on your death
Deduct any outstanding loans from this total but also take into account the fact that these may be repaid or covered by insurance.

I’m still relatively young. Can I postpone IHT planning for a few years?
It is best to start planning for IHT as soon as you can if you wish to mitigate your future IHT liability. Establishing a Trust now could allow you to make the most of the opportunities it offers, given that some IHT advantages are only fully realised after seven years have elapsed. This does not mean that your plans are fixed as Trusts can adapt to changes in your circumstances.

What else do you need to know?

Choosing the right Trust
There are different types of Trusts, each with their own particular features and benefits. Your Financial Adviser can help you identify which Trust vehicle is best suited to your specific needs to help you legitimately reduce your exposure to UK IHT.

Establishing your trust
Pryce Warner International Group will discuss your circumstances with you and can help you to structure a Trust based on the individuals that you wish to benefit from the assets, which you are intending to place in the Trust. The specific type of Trust that they will recommend will depend on a number of factors, including whether you are likely to need access to your capital at any time, need an income from the investment and how much control you wish to maintain.

Benefits that grow over time
By establishing a Trust, you know that any investment earnings in the assets underlying the Trust fall outside your estate for UK inheritance tax (IHT) purposes from the date the Trust is established. However, should you live for seven years from the date the Trust is established, it is possible that the entire value of the investment at that time will escape the IHT net.

Maintaining flexibility
How much control and flexibility you have will depend on the particular Trust you decide on. Pryce Warner International Group will be able to help you make the riAght choice based on your individual circumstances.

Summary of Terms
Settlor The individual who establishes the Trust

Trustee: Individual(s) or corporate entity(ies) that manage the Trust assets

Trust Deed: The legal document that sets out how the Trust assets are to be managed

Beneficiary: The individual(s) that may ultimately benefit from the assets within the Trust

Letter of Wishes: A document that the Settlor provides to the Trustees setting out their desires as to how they wish the Trust to be administered and the Trust assets distributed

Note: If assets in the Trust Fund(s) are distributed out of the Trust, they will form part of the estate of the Beneficiary and may be liable to tax.

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What is a Trust?

A long history
The purpose of a Trust arrangement can best be illustrated by a brief look at the history behind the concept. The origin of Trusts stretches back to the Middle Ages when English crusading noblemen would leave their possessions in the hands of ‘Trustees’ – trusted friends or senior members of the church that they felt able to rely on to protect their worldly goods. In the unfortunate event that the crusading knight failed to return, their assets would be dealt with by their ‘Trustee’ in accordance with their stated wishes.

The modern day Trust
This concept lives on in the modern day, governed by continually developing legislation. It is by separating the legal ownership of assets from the potential to enjoy the benefits they provide that forms the basis of modern international Trust law.

Elements of a Trust
The creation of a Trust relies upon the transfer of legal ownership of a person’s assets to the control of a Trustee(s), who will then manage the assets for the ultimate benefit of the chosen Beneficiaries.
The person creating a Trust is known as the Settlor. To create a Trust, a Settlor transfers legal title of specific assets (which then form the Trust Fund) to the Trustee(s), who must then hold and manage the assets in accordance with the terms of the TrusAt (set out in the ‘Trust Deed’) and the special duties imposed by law. Only the named Beneficiaries can benefit from income or ultimate ownership of the Trust assets.

The life of a Trust
An International Trust can last for a maximum of 100 years, which is known as the Trust Period. The Trust can come to an end at any time before the 100 years expires, as soon as its purpose has been satisfied. Once established, however, the Trust is irrevocable.

How a Trust works


Why consider Trusts?
Pryce Warner International Group Trust range can provide you with a number of opportunities to enhance the effectiveness of your financial planning and help to protect your wealth. It is not surprising that an increasing number of people are now taking advantage of the many benefits that such Trusts offer.

Tax mitigation
By transferring ownership of assets into a Trust, it is possible to defer or remove certain tax liabilities that would otherwise erode your wealth.

Family provision
There are many events in one’s life where financial support may be required. For example, education costs, buying a new home or financing a wedding. A Trust is an efficient way to help you plan for such events in your family’s life.

Succession planning
You want your family to be able to enjoy the benefits of your wealth and be able to determine how your money is directed. A Trust can be used in a number of ways to ensure that these wishes are met.

Forced heirship
There are countries throughout the world where, upon death, assets must be divided according to local law. A Trust, with chosen Beneficiaries, can help ensure that your assets are distributed according to your wishes.

Confidentiality
Unlike a Will, which becomes a public document at the time of death, all Trusts are private arrangements and are not required to be publicly filed. Therefore, they provide a significant level of confidentiality.

Asset protection
Trusts can safeguard assets against strategic risks sAuch as confiscation or expropriation by the state in the country of the Settlor’s domicile, residence or nationality.

Avoidance of delays
When an appropriate Trust is in place, the delays that can arise in obtaining a Grant of Probate or Letter of Administration (documents required when making a death claim) can be avoided.

Why consider Trusts?
Our Trust range can provide you with a number of opportunities to enhance the effectiveness of your financial planning and help to protect your wealth. It is not surprising that an increasing number of people are now taking advantage of the many benefits that such Trusts offer.

The advantages of Guernsey

Pryce Warner International Group has chosen Guernsey as a base for its Trusts as it is widely recognised by industry experts as being one of the foremost locations for the establishment of a Trust, based on the flexibility, protection and confidentiality that the Island’s Trusts Law provides.

Modern legislation
The Trusts (Guernsey) Law, 2007 came into force March 2008 to the acclaim of the international finance industry. This now features tighter protection for both Settlors and Trustees and establishes a foundation from which Guernsey-based Trusts can continue to provide an excellent basis for successful financial planning.

Confidentiality
A Trust based in Guernsey offers confidentiality, as there are no public registration requirements. The enhanced Trust law now increases this confidentiality by applying strict laws on who can receive information on a Trust and on how information on a Trust is requested.

Taxation
Guernsey-based Trusts are not subject to Guernsey income tax as long as the Beneficiaries under the Trust are not Guernsey resident and any income arising is from outside the Island. There are no gift, capital gains or estate taxes payable in Guernsey that might affect the value of the assets within a Trust.

Avoiding forced heirship
The Trust law has specific provisions to help avoid the potential problems caused by laws of forced heirshipA that are applicable in some countries. This specific law helps to ensure that the intentions of the Trust can be effectively delivered by the Trustees.

Protection against foreign courts
The enhanced Trust law also provides Guernsey Trusts with protection against attacks from foreign courts by barring the application of foreign law in determining validity, variation and administration of the Trust.

Reputation
Guernsey’s reputation in the fiduciary world is renowned for the quality of its Trust law and the professionalism of its Trust services. This was recently reinforced with The Society of Trust Estate Practitioners (STEP) announcing Guernsey as ‘International Financial Centre of the Year, 2008’.

Pryce Warner International Group Trust range

A focused range
There is a wide range of Trust structures available in the market that can be used to cover a multitude of circumstances. Pryce Warner International’s focused range of Trusts is designed to cover the majority of situations, providing simple, straightforward Trust solutions to bring an extra dimension to your financial planning.

In good hands
We will be more than happy to discuss the different types of Trusts available from Pryce Warner International Group and help you to determine which will best suit your needs. You can also rest assured that our formatted Trusts are offered in conjunction with Generali. Generali is part of Assicurazioni Generali S.p.A (the Generali Group), which has the benefit of over 175 years’ experience in providing savings and investment solutions for a wide variety of investment needs. The Generali Group has a truly global presence, operating in some 40 markets covering five continents. As one of the world’s top 50 companies* and a top 5 global insurer*. Pryce Warner International Group has a wealth of experienceto provide you with solutions which will give you financial peace of mind.

Your choice
Over the following pages we look at each of the four principal types of Trust that Pryce Warner International Group can offer and explain the main features and benefits they provide. Together, these should provide you with a set of financial options that will, in turn, allow you to maximise the opportunities available. The four trusts in our range, summarised below, are described in the following pages:
• Discretionary Trust offering outstanding flexibility
• Discretionary Gift Trust for greater control and UK IHT planning
• Discretionary Loan Trust with the option to enjoy capital, when required
• Discretionary Wealth Protector Trust for asset protection

Discretionary Trust

A Discretionary Trust is one of the most common and popular Trust solutions as a result of its ability to achieve a wide range of objectives, while retaining flexibility.

What is a Discretionary Trust?
One of the most versatile types of Trust available, in that it provides flexibility in terms of who can benefit from the Trust. In particular, this flexibility arises because the original Settlor can be both a Trustee and a Beneficiary under the Trust.

Main features

• The Settlor has the comfort of knowing that although the Beneficiaries are named, the Trustees have the discretion, if circumstances alter, to change the Beneficiaries or change the level of beneficial interest they may have in the Trust at any time in the future. This is often an important consideration when the Beneficiaries are young when the Trust is established.
• The Settlor can be a Trustee and a Beneficiary. You might use this Trust if…
• You are in a position to give away assets but wish to retain the option to benefit from the Trust yourself in the future.
• You want to be able to have some control over who benefits from your estate and need the flexibility to change Beneficiaries as your family circumstances change.
• You do not want your dependants to suffer delays in the distribution of your wealth, for example, as a result of onerous probate requirements on death.
• You wish to retain a higher degree of confidentiality when it comes to your personal finances.

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Trusts in action – case study

Meet John and Gail Kemp
John and Gail are in their early 40s, live in Mexico and have three small children under the age of 10. John has recently had a health scare but the prognosis for a full recovery is extremely positive. John and Gail Kemp

John and Gail’s needs
The scare has made the couple anxious to seek professional advice to ensure the best management of their finances and to put in place financial planning for their three children. They have an amount of £60,000 to invest now and believe that they will be in a position to add to this in the future.

The Trust solution
Pryce Warner International Group points out the benefits of a Discretionary Trust, which would allow them to set up their children as Beneficiaries and outline their wishes for how the contents of the Trust should be distributed to their children. As John and Gail’s requirements are very straightforward, John’s two brothers are deemed sufficiently experienced to act as Trustees, along with John and Gail, and this therefore eliminates the costs of professional Trustees. On agreeing this approach, Pryce Warner International Group recommends that they invest the £60,000 into a Portfolio Bond holding selected investments which will allow for future additional payments. John and Gail will be set up with a Portfolio Bond with their lives as lives assured. The Plan will be written subject to a Discretionary Trust.

What has been achieved?
By investing in a Choice plan and placing it in a Discretionary Trust, John and Gail can ensure that it contributes to their children as they wish it to. While still alive, funds from the plan can be used for their children if and when required and on their death the plan will pay a death benefit amount into the Trust. The information in this case study is for illustrative purposes only and should not be relied upon for decisions relating to your individualcircumstances. By giving this information, Pryce Warner International Group is not prAoviding legal or tax advice. Pryce Warner International Group l recommends that professional tax advice relating to your individual circumstances and tax position should be sought at all times.

Discretionary Gift Trust
A Discretionary Gift Trust, as its name implies, can be an excellent choice if you are ina position to gift your assets, without needing access to them in the future.

What is a Gift Trust?
A possible solution for UK inheritance tax (IHT) purposes, the Gift Trust allows the Settlor to give away wealth that will not be needed in the future. For UK domiciliaries, the assets held within this Trust have the added benefit of being outside the Settlor’s estate for UK IHT purposes after seven years, with investment earnings on those assets being outside the estate immediately. By virtue of being a Trustee, a Settlor can still have an influence over decisions related to the Trust assets. Importantly, with the Gift Trust, the Settlor is not permitted to be a Beneficiary.

Main features

• Suitable where the Settlor wishes to start IHT planning and does not need access to capital, now or in the future.
• The Trustees and Beneficiaries can be changed as circumstances change.
• The Trustees have discretion over the level and proportion of benefit each Beneficiary receives from the fund.
• The Settlor can be a Trustee.

You might use this Trust if…

• You wish to take steps to mitigate possible IHT liability for your family upon your death.
• You have assets that you will not need to use in your lifetime.
• You are not yet in a position where you wish to finalise the Beneficiaries under your Trust arrangement and the amount each is to receive.

Trusts in action – case study

Meet Bob Burrows
A 60 year old widower, Bob Burrows is currently working for a petrochemical company in Dubai. He loves his job and has no intention of retiring until he is 65. He then plans to return to England and spend his retirement in Cornwall. Bob has one child, Antonia, who lives in London with her husband, Henry, aAnd their twins, Paul and Angela. Bob had a stroke of good luck with a windfall of £500,000. As he is UK domiciled, he understands that this could create an inheritance tax (IHT) problem, as it will take his worldwide assets above the UK Nil Rate Band threshold*. He therefore consults Pryce Warner International Group.

Bob’s needs
Bob speaks to Pryce Warner International Group and he tells them that he wishes to spend £200,000 on luxuries for his retirement. As he is financially secure, he does not need access to the remainder of his windfall and wants this to be an inheritance for his family.

The Trust solution
Pryce Warner International Group recommends he invests £300,000 in a Portfolio Bond with the Portfolio Bond placed in a Discretionary Gift Trust and that Bob should be the life assured. Bob should also be co-trustee along with his two brothers.

What has been achieved?
As Bob is UK domiciled for IHT purposes, the transfer into the Discretionary Gift Trust is seen as a UK Inheritance Tax lifetime transfer. As Bob has not made any transfers in the past, he makes use of the UK Nil Rate Band threshold* and, therefore, in this case no UK IHT is payable.
Five years on… Bob turns 65 and returns to England, retiring to Cornwall as planned. Two years into his retirement he discovers that one of his grandchildren is having learning difficulties. After discussing the matter with his family and Trustees, they decide to advance capital of £20,000 to cover specialist education fees. Because the advancement is within the cumulative 5% annual withdrawal limit of an insurance bond, there is no UK tax liability on this part surrender.
Five years after retirement … Bob is delighted with the performance of the Portfolio Bond, however it has grown to a value greater than the UK Nil Rate Band threshold* for inheritance tax. As the Trust has now been in existence for 10 years, the Trustees advise that a 10 year charge† to inheritance tax is now due on the value of the Portfolio Bond over and above the UK Nil Rate BandA threshold*. The Trustees calculate the charge and make a part surrender from the Portfolio Bond to pay the tax bill.
Two years on… Bob dies. As he was the life assured on the Portfolio Bond, the proceeds are distributed to the Beneficiaries by the Trustees. Because the transfer into the Portfolio Bond happened more than seven years ago, there is no UK IHT payable as a result of Bob’s death and Bob’s designated Beneficiaries receive their inheritance. Income tax will be payable on the profit element of the Portfolio Bond and there will also be a small inheritance tax distribution charge when the proceeds are paid to the Beneficiaries, but these charges are small compared to the inheritance tax that would otherwise be payable on Bob’s death.
The information in this case study is for illustrative purposes only and should not be relied upon for decisions relating to your individual circumstances. By giving this information, Pryce Warner International Group is not providing legal or tax advice. Pryce Warner International Group recommends that professional tax advice relating to your individual circumstances and tax position should be sought at all times.

What is a Loan Trust?
Suitable for individuals seeking to do some IHT planning but who do not want to give away their capital, the Loan Trust allows the Settlor to lend an amount of capital to Trustees. The Trustees then invest the loan. The Settlor can demand repayment of the loan at any time and repayments are usually made by way of regular withdrawals. Any investment earnings on the Trust assets belong to the Trustees and are automatically outside of the Settlor’s estate for UK IHT tax purposes.

Main features

• Suitable where the Settlor is not ready to make a gift of capital but is an effective start to inheritance tax planning.
• The Settlor has full access to their capital at any time.
• The Settlor has the flexibility to start and stop loan repayments.
• The loan repayments will come back into the client’s estate and can be spent or gifted withinA annual allowances to reduce the Settlor’s estate.
You might use this Trust if…

• You wish to start inheritance planning that will help to mitigate IHT liability on your death.
• You may need to have access to your capital at some time in the foreseeable future.
• You may wish to have a regular income from the Trust, either to spend or gift.

Discretionary Loan Trust
A Discretionary Loan Trust, in contrast to the Discretionary Gift Trust, is an ideal way to establish effective UK Inheritance Tax (IHT) planning but without giving up the ability to enjoy access to your capital if and when you need it.

What is a Loan Trust?
Suitable for individuals seeking to do some IHT planning but who do not want to give away their capital, the Loan Trust allows the Settlor to lend an amount of capital to Trustees. The Trustees then invest the loan. The Settlor can demand repayment of the loan at any time and repayments are usually made by way of regular withdrawals. Any investment earnings on the Trust assets belong to the Trustees and are automatically outside of the Settlor’s estate for UK IHT tax purposes.

Main features

• Suitable where the Settlor is not ready to make a gift of capital but it is an effective start to inheritance tax planning.
• The Settlor has full access to their capital at any time.
• The Settlor has the flexibility to start and stop loan repayments.
• The loan repayments will come back into the client’s estate and can be spent or gifted within annual allowances to reduce the Settlor’s estate. You might use this Trust if…

• You wish to start inheritance planning that will help to mitigate IHT liability on your death.
• You may need to have access to your capital at some time in the foreseeable future.
• You may wish to have a regular income from the Trust, either to spend or gift.

Trusts in action – case study

Meet Jill Thompson Jill Thompson is 60 and just about to retire from her job as a Senior Manager with a multi-national company Kong. Jill is very active and is looking forward to travelling and reigniting her passion for sailing. Jill owns a holiday home in her native Bognor Regis, in England, in which she intends to spend six months of every so that she can be close to her two daughters, Lorraine and Mary. Her daughters have two children each.

Jill’s needs
Jill will have a pension in payment of £60,000 p.a. However, because of her active lifestyle and costly interests, she estimates that it will take another £10,000 p.a. for her to be comfortable in her retirement. Jill also has £200,000 in her bank account and realises that this, combined with the properties she owns, will create a potential UK inheritance tax (IHT) issue that she would like to avoid. Jill also wants to make sure her grandchildren are well looked after later in life.

The Trust solution
Following a discussion with Pryce Warner International Group, Jill decides that she should start inheritance tax planning as soon as possible but, as she needs additional income over the next few years to support her active lifestyle, she cannot afford to give all of her savings away immediately.
Pryce Warner International Group recommends that her £200,000 be invested in an International Portfolio Bond written subject to a Discretionary Loan Trust.
Pryce Warner International Group set up the Discretionary Loan Trust with professional Trustees. Her grandchildren are to be Beneficiaries of the Trust. Jill lends the Trustees £200,000 to invest in an International Portfolio Bond and she is to be the sole life assured. Jill requests that the loan is interest free and she requires repayment of the loan at 5% of the original £200,000 loan per annum.

What has been achieved?
The loan repayments from the the International Portfolio Bond provide Jill with the additional annual income of £10,000 she needs and, as they equal 5% of the loan amount, no UK tax is paid on the withdrawal in the UK.
If Jill lives to the age of 80 (i.e. 20 years at 5% per annum), the loan will be fully repaid, no UK tax will have been paid and theA remaining value of the Portfolio Bond will be completely outside her estate for UK tax purposes.If, on the other hand, Jill dies before the loan has been repaid, the value of the outstanding loan is added to the value of her estate and not the total value of the Portfolio Bond. This means that any growth in the Portfolio Bond is automatically outside Jill’s estate for UK tax purposes and is, therefore, free of UK IHT.
Jill also has comfort in the fact that she knows that her grandchildren will be well looked after later in life.

The information in this case study is for illustrative purposes only and should not be relied upon for decisions relating to your individual circumstances. By giving this information, Pryce Warner International Group is not providing legal or tax advice. Pryce Warner International Group recommendsthat professional tax advice relating to your individual circumstances and tax position should be sought at all times.

Wealth Protector Trust
The effect of this Trust is to remove your assets from your estate. By taking this step, you can gain control and security as a result of the legal title to your wealth being held outside your country of residence.

What is a Discretionary Wealth Protector Trust?
The Discretionary Wealth Protector Trust makes use of the Trusts(Guernsey) Law, 2007 to help strengthen the Trust by excluding foreign law on decisions relating to its validity. By transferring your assets to a Discretionary Wealth Protector Trust, you can potentially remove these assets from your estate, giving a number of possible benefits in terms of the protection and eventual distribution of your wealth.

Main features
In addition to other benefits of a Discretionary Trust, a Discretionary Wealth Protector Trust offers the following:
• The Settlor can make use of asset protection laws in Guernsey, which can help to protect one’s assets.
• The Settlor can make use of the Guernsey laws that prevent forced heirship from outside jurisdictions.
• A BeneficAiary’s interest in the Trust Fund is automatically removed if that Beneficiary becomes bankrupt. You might use this Trust if…
• You wish to do all you can to protect your assets for your family to enjoy.
• You reside in a country where local laws can dictate how your estate is distributed on your death.
• You wish to take your assets outside a politically volatile region.
• You wish to keep your options open as far as possible as to who will benefit from your trust.

Trusts in action – case study

Meet Tom Anderson
Tom Anderson is 48 and, although UK domiciled for IHT purposes, he now lives in Kenya. He married at 21 and, within four years, owned his own company. By the age of 27 he had two children and had amassed a personal fortune of £8,000,000. However, his subsequent divorce cost him 50% of what he had previously considered to be his hard-earned personal wealth.

The Trust solution
Pryce Warner International Group recommends establishing a Trust governed by Guernsey law. Guernsey Trust law significantly enhances the defence of a Guernsey Trust against foreign law based attacks on the validity of the Trust. Pryce Warner International Group suggests setting up an International Portfolio Bond* written subject to a Discretionary Wealth Protector Trust for the benefit of his children. Tom himself is not to be a Beneficiary. The Trust is established with professional Trustees in Guernsey to manage it.

What has been achieved?
Ten years on, Tom remarries. Unfortunately, after a period of time, this marriage also fails and Tom goes through another divorce.
However, because he had transferred money into the Discretionary Wealth Protector Trust for the benefit of his children well before he met his second wife, and because Guernsey law excludes the application of foreign law to Guernsey Trusts, he successfully protected the International Portfolio Bond for the benefit of his children.
The information in this case study is for illustrative purposes only and should not be relied upon for decisions relatingA to your individual circumstances. By giving this information, Pryce Warner International Group is not providing legal or tax advice. Pryce Warner International Group recommends that professional tax advice relating to your individual circumstances and tax position should be sought at all times.

Trusts at a glance

Choosing the Trust that’s right for you

Can the Settlor be a Beneficiary of the Trust? Yes
Flexibility to change Beneficiaries? Yes
Flexibility to change Beneficiaries’ share of the Trust? Yes
Ability to dictate use of assets? Yes (if also a Trustee)
Potential to take assets outside UK IHT net after seven years? Yes
Potential to take growth of assets outside UK IHT net immediately? Yes
Access for Settlor to capital? Yes (as a Beneficiary)
Is beneficial interest removed in case of creditors? No
Is the transfer of assets unconditional? Yes

Main uses Succession planning. Confidentiality. Avoiding probate delays. Other potential benefits IHT planning. *Transfer of assets is a loan, not a gift.

Please note: This brochure is only a guide and the terms of each Trust may differ depending on an individual’s circumstances – advice should always be sought from Pryce Warner International Group. Full details on each of the Trust options are provided in the relevant Trust Deeds.


Trusts at a glance

Feature	Discretionary Trust	Discretionary Gift Trust	Discretionary Loan trust	Discretionary Wealth trust
Can Settlor be Beneficiary of the Trust?	Yes	No	No	Yes
Flexibility to change Beneficiaries?	Yes	Yes	Yes	Yes
Flexibility to change Beneficiaries' share of the Trust?	Yes	Yes	Yes	Yes
Ability to dictate use of assets?	Yes (if also a Trustee)	Yes (if also a Trustee)	No	No
Potential to take assets outside UK IHT net after seven years?	Yes	Yes	No	Yes
Potential to take growth of assets outside UK IHT net immediately?	Yes	Yes	Yes	Yes
Access for Settlor to capital?	Yes (as a Beneficiary)	No	Yes*	Yes (as a Beneficiary)
Is beneficial interest removed in case of creditors?	No	No	No	Yes
Is the transfer of assets unconditional?	Yes	Yes	No**	Yes
Main uses	Succession planning. Confidentiality. Avoiding probate delays.	IHT planning. Succession planning.	IHT planning. Regular Income. Make sure capital growth is outside of settlor for UK IHT purposes.	Asset protection. Guard against forced heirship.
Other potential benefits	IHT planning.	Confidentiality. Avoiding probade dealys. Make sure capital growth is outside of settlor for UK IHT purposes.	Confidentiality.	Succession planning.IHT planning.

*Transfer of assets is a loan, not a gift.
**Conditions attached to original loan.

General Information

Trusts are normally created for the protection of assets, deferment or mitigation of tax, creation/maintaining anonymity and inheritance planning.

A Trust is a legal relationship created by means of a Trust Settlement or Agreement, which is evidenced by a written document and established under the Laws of the relevant jurisdiction. The ‘settlor’ of the trust would transfer ownership of assets to the trustees. Trustees are appointed in terms of the Trust Settlement to administer the assets of the trust for and on behalf of ‘beneficiaries’.

A Trust protector may be appointed to represent the beneficiaAries and to guide the trustees in the exercise of their discretion and in accordance with the Trust Settlement. There is no legal requirement in certain jurisdictions to register Trusts. Thus the identity of the Trust, its settlor and beneficiaries remain intact.

In most circumstances, a Trust is not liable to any form of taxation provided all the beneficiaries are not resident where the Trust is located.

What assets may be transferred into a trust?
Stocks and shares in quoted and unquoted companies
Investment portfolios
Real and intellectual property
Bank deposits
Property
Life assurance policies

Offshore trusts offer many advantages, and some of their more common uses are:

Tax mitigation
Trusts are very efficient in reducing taxes arising on the assets placed in the Trust and provide an effective shield between the settlor, the beneficiaries and the Trust assets.

Protection of assets
The legal ownership of the assets are vested in the trustee and not the settlor and/or beneficiaries. This is particularly useful where the social and political climate can easily become unstable in the home country of the settlor and he or she wishes to place the ownership of his or her assets in a safe and stable jurisdiction.

Preservation of family wealth
Trusts are useful for preserving wealth and passing it intact through generations whilst at the same time allowing nominated beneficiaries to enjoy the benefits of that wealth. This is particularly important with assets that may not be easily divided between beneficiaries without losing some of their value, such as farming land.

Forced heirship
Some countries have punitive legislation dictating the manner of wealth distribution on the death of the owner. If the legal requirements conflict with the wishes of the owner of those assets, most assets could be transferred into a Trust to protect those assets.

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Foundations

The foundation - a perfect instrument for asset protection.

The word foundation is generally automatically perceived as a charitable or non-profit making organization. In fact only a small percentage of all foundations are charitable. Most foundations are set up for the protection of the founders' assets and as a tax benefit.

The actual legalities of a foundation determine that there is no obligation to be a charitable organisation. The speciality of a foundation is that it has no actual owners but only a board of officers. This fact seems to be a minor juridical issue but actually it is of utmost importance. Once assets have been placed into the foundation the founder does not legally own them or have a requirement to declare them. Neither does he own the foundation. This is of particular interest in cases of bankruptcy, divorce or third party claims. All types of assets can be owned by a foundation such as bonds, stocks, real estate and even patents or rights. Using a regular company structure there would always be a beneficial owner in the background and relatives or third parties could be informed about this. With a foundation there is legally no owner and even if somebody should be aware of a connection between the founder and the foundation , they can not access the property of the foundation. Due to the fact that a foundation is a corporate body it allows for easy controlling. The term of the foundation is unlimited and certain requirements or specifications may be fixed in the articles. These specifications can not be altered or revoked at any time, even after the death of the founder. This ensures that the founders funds are only ever granted to whom he states.

A foundation is not formed in order to conduct business. It is made to manage and protect it's own assets. However it is a very common and useful structure to have a foundation as owner of an offshore corporation. The profit of the corporation is regularly transferred to the foundation but should a bankruptcy of the corporation occur, it would not affect the foundation at all.

Advantages in forming a foundation

- The Founder can transfer assets into the foundation and legally declare he does not own them
- No assets that belong to the foundation can be seized
- Potential inheritors can not make claims against the foundation
- Foundations are free from taxation
- Foundations are not required to be charitable or non-profit making organizations