We would say at the outset that, unlike in relation to IBC's (which are normally very “standardised” and we can incorporate usually same day), Trusts are more complex and generally involve more time in the formation process. Similarly, for us to do the job properly (and again unlike for IBC's where we can work with “minimal” details), we need comprehensive formation instructions and also relevant client details.

There are some so-called Trust companies that we tell you they can form a Trust without any specific instructions and on a “standardised” basis. However, if any such Trusts are ever challenged in a Court (ex. a future action by a creditor of the client, etc) in many cases those Trusts would simply not stand up and would be held unenforceable as “shams”. Consequently, any assets held by the invalid Trust would be deemed to be the personal assets of the client / settler and any claimant creditor of the client could levy against such assets to satisfy any due debts, etc.

A Trust is a legal arrangement where the owner of property or other assets (usually called the Settlor) transfers those assets to a Trustee/s to hold and administer under the terms of the Trust for the benefit of another party (the Beneficiaries).

Trusts are a versatile and highly useful tool for tax and estate planning, risk management, etc - because of the transfer in legal ownership (to the Trustee) and beneficial ownership (to the Beneficiaries) of property along with the Settlor's wide ability to facilitate distribution of property in accord with his or her wishes (for example, among various family members and/or between “income” and “capital” beneficiaries, upon or prior to the death of the Settlor, etc).

The person/s establishing the Trust (the “Settlor”), needs to give us clear instructions on how we are to set up the Trust and who is to benefit from the Trust. People who are intended to benefit from the Trust are called “Beneficiaries”. These people might be the client's children, spouse, other family members or third parties, and, under a discretionary Trust, may be changed at a later time if appropriate. Unless we receive contrary written

instructions from the Settlor client, the type of offshore Trust that we form for clients is what is commonly known as an irrevocable discretionary Trust. However, we always recommend for clients to take advices on their specific circumstances from a tax expert where they reside.

Our Seychelles office will act as licensed Trustee of the new Trust. All Seychelles offshore Trusts are required by law to have a Trustee who is duly licensed in Seychelles. Nevertheless, if the client wishes they may also appoint a non-resident co-trustee. However, for tax reasons it may be inadvisable to appoint an “on-shore” based co-trustee, and expert tax advice should be sought if the client intends to appoint a co-trustee.

While it is not mandatory, some clients like to appoint a “Protector” (often a professional advisor known to the Settlor) to oversee operation of the Trust. While a Protector should not “control” a Trust, the Trust Deed can provide that the Trustee must obtain the Protector's prior permission in respect of certain trust decisions, such as in respect of addition or exclusion of a Beneficiary by the Trustee. A Protector may be a co-signatory and may be given power to remove or appoint Trustees.

It may well be that in reality the client wishes to be a Beneficiary under the Trust (the Settlor, can be a Beneficiary, but not a sole Beneficiary). Additionally or alternatively, the client may have family members who they wish to be Beneficiaries who could benefit, for example, upon the client's death, or before that in certain situations (e.g. a distribution to a child to assist with university education, etc).

To preserve anonymity some clients prefer to name a charity (such as the Red Cross) as a Beneficiary together with a written expression of wishes that the Trustee will add or remove certain Beneficiaries at a later time. However, if, for example, a third party creditor is pursuing a client Settlor personally for a debt they could conceivably argue that such a trust is but a “sham” vehicle for the Settlor in which case the Trust could be liable to be set aside. In the event of a setting aside order, the Trust assets would then be regarded as the Settlor's personal property and liable to attack from his or her creditors. Practicably speaking though, it would be very difficult for a third party (who is not privy to the trust documents, etc) to link the Settlor to the Trust and/or to challenge his or her intentions with regard to any named charitable Beneficiary. To seek to avoid any argument that the Settlor never really intended the named charity to benefit, if a charity is included as a Beneficiary, the client should consider requesting the Trustee via a written expression of wishes to make periodic (albeit insubstantial) payments to the charity from the Trust fund.

Given the broad discretion that a discretionary Trust vests in the Trustee, it is important that we clarify the client Settlor's "wishes" as to use of the Trust and application of assets, etc. This is done by us obtaining a written expression or letter of “wishes” from the Settlor client - via the Settlor's detailed answer to the applicable question in our Trust Formation Form.

An expression/letter of wishes acts as a guide to the Trustee on how the client envisages Trust assets to be administered and eventually distributed. The written expression of wishes will vary from case to case, and we are happy to help you with preparation of this if you need assistance.

Instead of a single Trust, clients would be well advised to consider establishing an IBC and Trust Combo (i.e. where the IBC is the active entity, and the Trust is passive in that its main role is to hold and own the shares in the IBC - with the IBC owning any property, funds or other assets/investments). This dual structure is very commonly recommended and deployed in the offshore investment area, particularly because of additional tax planning, privacy and asset protection features.

The dual structure also gives the client more flexibility in that (unlike with a sole Trust where we would normally have to be a bank account signatory) clients could control the IBC bank account - preferably upon being appointed as, for example, “investment consultant” to the IBC.