How To Set-up an Offshore Trust

Offshore Trust

Trusts are an ancient legal tool dating back to pre-Christian Roman times. In pre-Christian Rome, only a male Roman citizen could inherit property. To be a citizen, both your father and mother had to be Roman citizens. 

If your father was a Roman citizen, but your mother was a slave or non-Roman, you could not inherit property. Wealthy Roman men who tended to have children by many non-Roman women, often slaves, found a legal way to sidestep this requirement. 

Thus, they would appoint a Roman citizen as their legal inheritor and, in return for a ‘fee’, that Roman citizen would take possession of the property and ‘manage’ it on behalf of the true heir. The courts of ancient Rome confirmed the enforceability of this contractual relationship and the concept of “trust” was born.

Moving forward a millennium

The first formal precursors to today’s trust law were developed in medieval England in the 12th century during the time of the Crusades.

The practice at the time was for the king to tax his lords, knights, and nobles who owned property. One of the easiest times for the king to collect taxes was when the owner died. An interesting point is that the tax in those days was basically half of the estate, which is similar to today’s tax on estates.

However, the tax had two purposes:

  • The fiscal aspect – the king needed the money to run his kingdom, fight the crusades and maintain his kingdom. 
  • The king prevented creative, enterprising, and successful landlords from accumulating too much wealth and power, as 50% was withdrawn after each generation and given to the king.

The same principle still governs inheritance tax

We think that both elements of the tax still apply. Today’s government simply would not allow the wealth and power of generations of a self-made entrepreneurs like Bill Gates to continue to grow uncontrolled.

However, some creative 12th-century lawyers relied on a basic principle of common law and perhaps even natural law, namely the right of man to enter into a contract and/or make a free gift during his lifetime.

Any king in the 12th century or any government today would lose the ability to govern its people if it did not respect this fundamental human right, which has been codified throughout history, from the Magna Carta to the US Constitution.

The trust has its roots in contract law as well as in equity and became a “legal” invention quickly adopted by English Common Law. In fact, trusts are the oldest legal structure recognized by English common law, several hundred years before partnerships and seven hundred years before corporations.

The trust concept is reduced to its simplest expression

A nobleman transfers his property free of charge to a legal entity called a trust. When the nobleman dies, he owns nothing, and there is simply no “estate” for the king to tax. Conversely, as a “legal” structure, a “Trust” would not die but would continue to hold and manage property for the noble’s heirs forever.  

Although kings and governments have attempted to limit trusts by legislation and prevent them from continuing, there are trusts in the United Kingdom that date back eight hundred years, and trusts in the United States that predate the founding of our count. Many of these trusts manage vast amounts of money because they have been able to limit their exposure to taxes and lawsuits that affect humanity.

Still applicable?

Trusts have unfortunately come under severe criticism, not only in the US but throughout the developed, industrialized, and high-tax world. 

Today’s “kings” simply cannot function without your income, your assets, and yes, even your estates. The “rule against perpetuities” ensures in most states that assets must legally pass to one or two generations and not remain immune from inheritance tax for long.

A plaintiff’s lawyer recently stated there is no trust created that he cannot contest on behalf of his clients. Even the children and grandchildren of Grantor beneficiaries sue their own trusts if they feel prejudiced by the management or payment of trust distributions. 

So, what can be expected from the establishment of a trust and perhaps more importantly, where should the trust’s headquarters be located to maximize enforcement, as desired by the trust settlor?

The answer is obvious – offshore trust

If you are going to invest time, effort, and money in creating a trust, why would you create one in the land of disputes? Why create something in a jurisdiction that is predominantly pro-plaintiff and where everyone feels entitled to their fortune?

We asked a plaintiff’s lawyer whether his strategy applied to offshore trusts. He finally admitted that he had never tried to litigate against an offshore trust. Clearly, his power only applied to domestic structures.

The choice is pretty obvious to us and people should look for the jurisdiction that will best treat their assets and protect them the most. Multinational companies, for example, incorporate in one jurisdiction, manufacture in another, distribute in a third, and sell in many others. 

Why do they do this?

Because they want the best jurisdiction that will allow them to achieve their overall production, IP protection, efficiency, and profitability goals. They will not pay a German worker €60 an hour to do what an unskilled Chinese worker will do for 60 cents. Instead, they will pay the German worker €60 an hour if German production and efficiency make it the most productive country, that’s why lots of high-tech production is still done in Germany.

The choice is also evident in the creation of a family trust. Why create a trust in California, expose the trust to local, state, and federal litigation, and numerous taxes, and limit yourself to investing only in SEC-approved domestic investment opportunities

Foreign trusts can be used to cost-effectively run assets in one jurisdiction, take advantage of pro-defense legal rules in another, eliminate Common Law rules against perpetuities in a third, access the world’s best asset managers in a fourth jurisdiction, and diversify across the globe to the best investment opportunities wherever they may be found. 

The overall cost-benefit analysis is so simple and straightforward that it is illogical for someone seeking the benefits of a trust not to consider foreign jurisdictions for some or all of their assets. 

Is it legal?

Of course, it’s legal. You have a thousand years of common law as well as the constitutional right to create trust for yourself and your family, wherever you are.  Many lawyers and accountants suggest that it may be inappropriate or illegal to create a foreign trust.


Because they don’t have the expertise to do so, and of course what interest do they have in seeing their clients go elsewhere? 

The government also suggests, through the mainstream media, that only scammers, drug dealers, tax evaders, and money launderers set up offshore structures.

Indeed, the government prefers that you keep all your assets onshore and within reach for tax and litigation reasons.

There is even a specific tax form for the creation of an offshore trust.  This is form 3520, available online at

While an offshore trust has obvious advantages over its domestic equivalent, it is not a panacea for all financial problems and it certainly won’t make your taxes disappear as some speakers claim.


There are certainly unscrupulous “offshore promoters”, who want to lure you into their illegal projects.

These promoters use very complex schemes to transfer your money abroad and eventually get it back. When you hear or see this kind of talk, just walk away!

We live in a very transparent world where virtually every financial transaction leaves an electronic trail or fingerprint. US bankers recently admitted that bank disclosure rules require real-time reporting to the government of all foreign transactions.

This means that if you transfer money overseas, the government will know you did it before you leave the bank.

In summary, it is legal, ethical, and moral to have an international offshore trust, but you must have realistic expectations and understand that you will still have to pay taxes on the income earned by the trust, regardless of where it is domiciled.

The advantages of a foreign trust

A foreign trust may be able to:

  • Improve your position in relation to third-party creditors
  • Defeat diligent plaintiffs’ lawyers
  • When combined with an offshore company and/or insurance products, provide a level of legal tax deferral
  • Allows access to the 70% of international investments that are not directly available to US investors, such as hedge funds, mutual funds, and foreign stocks and bonds
  • Allows you to purchase financial products and services from around the world and pay a fair and competitive price for those services.

The fact is that offshore trusts cater to your needs and offer globally competitive services for exactly the services you choose. You won’t be paying for a variety of legal and investment services that you don’t need, as is often the case with most traditional banks.

When you combine cost-effective global services with a better litigation environment (pro-defense), internationally diversified investment opportunities, and the ability to legally support your grandchildren’s grandchildren, the choice is clear.

Shall you have an existing trust and want to discover your banking options in the event you set one later on, do not hesitate to book a free consultation with our team now.


Widelia and its affiliates do not provide tax, investment, legal or accounting advice.  Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, investment, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Please consult for more information.


Sharon Hughes

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