The British Virgin Islands (BVI) has always been the jurisdiction of choice by corporations and individuals around the globe when it comes to setting up offshore holding structures for international business and private wealth management.
The BVI is known as an international financial center for both its rock-solid stability and business-friendly environment. Trustees in the BVI and their clients are also supported by a world-class infrastructure and professional services on the islands.
As a leading jurisdiction in offshore trust structuring, the BVI has a reputation as a pioneer who has come up with various innovative legislations to meet the complex needs of businesses and individuals in the modern world, while at the same time enjoying the English common law.
Today, in addition to the traditional fixed and discretionary trust, the BVI offers settlor reserved power trusts and VISTA trusts that promote flexibility in the management of trust assets. The BVI's private purpose trusts can be set up for any lawful purposes, and while they are purpose trusts, they can benefit beneficiaries. Settlors can also set up charitable trusts in the BVI for their philanthropical needs. Additionally, the BVI has a robust PTC regime to meet the needs of those who prefer to have their own trustee.
Now, why do people want to set up a BVI trust?
Confidentiality
A trust is a private arrangement by nature. The trust instrument is a private document between parties that established the trust (e.g. the settlor and the trustee). In the BVI, there is no registry for trusts and no requirement to disclose a trust's existence or details to the general public.
However, it is important to note that the BVI participates in the exchange of information regimes such as FATCA and CRS, thus making the British Virgin Islands a fully compliant jurisdiction. The settlor of, and in some circumstances also others involved in a trust managed by a BVI professional trustee, are typically subject to AEOI reporting in the BVI depending on the jurisdiction they are from.
Asset protection
Asset protection is particularly effective in multiple situations, such as when the marital status is a source of concern, when children are not self-confident, immature or addicted to alcohol and/or substances, or when family governance is not straightforward and lean.
For example, if substantial family assets are gifted to a child directly, and the child would have a failed marriage, the child's spouse may potentially have a claim on the assets. To avoid that, wealthy parents can name the child as a beneficiary of a discretionary trust instead of gifting family assets to the child.
Since the child's interest in the trust is not fixed, in the event of a failed relationship, the child's spouse will not have a claim on the trust assets. The parents may even consider specifically excluding their child's spouse from benefiting from the trust or stipulating in the trust instrument that the trust assets will not form part of the child's community properties.
Tax Planning
Taxwise, the British Virgin Islands is an ideal trust jurisdiction as it does not have income, capital gains or gift tax. Income and gains derived from trust assets held by a BVI trustee are not taxed in the BVI, allowing settlors and beneficiaries to focus on the tax affairs in their home jurisdiction and the jurisdictions where the trust assets are situated. A BVI trust can cater to the tax needs of clients from different countries.
Succession Planning
Upon the passing of the settlor of a BVI trust, the trust assets are normally not subject to probate in the settlor's home or any other jurisdiction. The trust allows the beneficiaries to do without the expenses, delay and unwanted publicity associated with a probating process.
If the settlor comes from a jurisdiction with a forced heirship regime, assets that they settled into a BVI trust will not be affected by the forced heirship rules. The trust can provide testamentary freedom that the settlor otherwise would not have.
A BVI trust can also provide flexibility that a Will cannot come close to. For example, wealthy parents looking to provide for a spendthrift child after their passing. Letting the child have the assets outright may pose risks of not handling the wealth as wished by the parents. A BVI trust can then be put in place to ensure that the wealth will not be wasted while the child is adequately provided for. Similarly, a trust can be used to tailor-make special arrangements on how income and capital can be benefited by different beneficiaries at different points in time.
Are you interested to learn more about BVI trusts or setting up a trust in another jurisdiction? Please reach out to info@fidinamgw.com to explore your possibilities - or fill in the contact form below.
