Advantages and disadvantages of an offshore trust
Produced in partnership with Mourant Ozannes
Advantages and disadvantages of an offshore trust

The following Private Client guidance note Produced in partnership with Mourant Ozannes provides comprehensive and up to date legal information covering:

  • Advantages and disadvantages of an offshore trust
  • Confidentiality
  • Powers of control
  • Protection/freedom from onshore rules
  • Tax advantages
  • Succession planning
  • Disadvantages and common pitfalls

This Practice Note was originally written by Milestone International Tax Partners LLP but is now maintained by Mourant Ozannes.

An offshore trust is a trust where the trustees are resident in a low or zero tax jurisdiction. Offshore trusts are, therefore, often associated with the tax advantages they can provide, although the tax position of the settlor and/or beneficiaries has to be considered.

There are also other advantages which are not related to tax planning.

Confidentiality

Trustees have a duty under common law to keep the affairs of the trust confidential. This is similar to the duty owed by a bank to its customer and is an English trust law concept applied in the offshore jurisdictions. It is reflected, for example, in the Code of Conduct for Trust Service Providers issued in Guernsey by the Financial Services Commission.

This common law duty has been considered in a number of cases, often relating to the release of information to beneficiaries, or requests from international regulators. These have established that the duty is not absolute, but the courts of the offshore jurisdictions have an inherent supervisory jurisdiction over the administration of trusts and are generally unwilling to sanction the disclosure of information otherwise than to avoid potential injustice or harm.

Powers of control

Many jurisdictions allow the reservation by the settlor of powers to