Trust Jurisdictions: Are They All The Same?

Transcription

Trust Jurisdictions: Are They All The Same?
Trust Jurisdictions:
Are They All The Same?
RBC can offer trust services in multiple
jurisdictions but we are sometimes asked why
we offer such a large choice. Surely they all
allow for the establishment of the same types of
structure?
Alan Binnington
Private Client Director
RBC Trust Company (International) Limited
La Motte Chambers
St Helier
Jersey
JE1 1PB
+44 (0) 1534 602 401
[email protected]
www.rbcwealthmanagement.com
www.rbcwmfiduciarynews.com
Trust and fiduciary services
To some degree the answer to this question
is yes, but there are in fact many reasons why
a client might favour one jurisdiction over
another. Sometimes it is simply a matter of
personal preference but a jurisdiction may
have particular characteristics in respect of
its planning environment that make it more
attractive.
In the case of an individual for whom a robust
and mature legal system is important, London
might be the obvious choice if one wanted the
jurisdiction with the longest established trust
law - England being the home of the common
law trust. However if one were looking for the
jurisdiction that has contributed most to trust
case law in recent years then Jersey would be
a strong contender. Although Jersey’s trust
statute is only 30 years old, the Jersey Courts
have gained a reputation for the quality of their
decisions and for the number of trust cases that
have come before them. Many of these cases
concern applications by trustees for directions;
for example, where they are proposing to take
a momentous decision or where they find
themselves in a position of conflict of interest.
An important factor when choosing a trust
location is whether the courts are able to assist
trustees or beneficiaries when the need arises.
If one were looking for an innovative
jurisdiction then perhaps the Cayman Islands
might spring to mind. They introduced their
own unique form of non-charitable purpose
trust in late 1997 in a statute called the Special
Trusts (Alternative Regime) Law, or STAR Law
as it is more commonly known. STAR trusts
provide a solution for those settlors who are
reluctant to allow beneficiaries full information
rights by providing a regime whereby the trust
is enforceable by a designated enforcer rather
than by beneficiaries.
Of course innovation isn’t confined to the
Cayman Islands, the Bahamas having also
created an innovative concept in an Act
passed in 2011 which enabled the creation of
a Bahamas Executive Entity or “BEE”. This is a
legal entity with limited liability and with no
share capital or beneficiaries. It is intended to be
used to carry out executive functions in private
wealth structures, for example by acting as a
protector or an enforcer of a trust.
Trust Jurisdictions: Are They All The Same? continued
If one were looking for a jurisdiction that offers
a network of double taxation agreements
(“DTAs”) and bilateral investment treaties than
one might favour setting up a trust in Barbados.
DTAs can provide significant benefits in terms
of reduced withholding taxes on dividends
and interest payments. In addition investment
treaties may prove useful if the family lives in
a country where government expropriation
of assets is a risk, with treaties often providing
recourse to international arbitration to obtain
compensation for an investment that has been
nationalized or expropriated.
For families living in a jurisdiction operating
a black-list system for the taxation of foreign
private wealth structures, the use of an
“onshore” jurisdiction such as Switzerland
may prove advantageous. One example of a
Swiss-led structure used to mitigate the impact
of black-lists is the Anglo-Swiss trust; a fiduciary
arrangement consisting of a trust governed by
English law with two trustees, one in London
and one in Switzerland. This solution has in the
past proved to be popular with Latin American
clients. Equally, a trust based in Singapore may
provide a solution given that Singapore has
positioned itself as an “onshore” jurisdiction
providing “offshore” services and is therefore
less likely to be found on tax black-lists than
some of its competitor jurisdictions.
On the subject of Asia, which is rapidly blazing a
trail in wealth creation, clients from China may
favour Hong Kong as a jurisdiction, if having
their trust relationship managed by individuals
in the same time zone and who possess the
relevant language skills and cultural affinity is of
most importance to them.
Although a settlor who is concerned about
beneficiary information rights may choose
to create a Cayman STAR trust, a number of
jurisdictions are now considering limiting
information rights. For example, Guernsey
in its 2007 Trust Law introduced the ability of
settlors to restrict the rights of beneficiaries to
information, subject to the right to apply to the
courts, where the onus is on the applicant to
show that disclosure is necessary. Guernsey, in
common with Jersey and the Bahamas, has also
introduced a Foundations Law, which provides
an alternative structure for those clients who
may be unfamiliar with the trust concept and
which may also be used to limit information
rights.
Many prospective settlors hope that a trust
structure set up for the benefit of family
members will last long enough to provide for
a number of generations and are concerned
that some jurisdictions, for example England,
Barbados, Singapore and the Cayman Islands,
place a limit on the maximum period for
which a trust can exist. However a number of
jurisdictions now permit trusts for individuals
for an unlimited duration, notably the Bahamas,
Guernsey and Jersey.
It is not unusual for some families to have
concerns about potential attacks on their trust,
whether in respect of forced heirship rights,
creditor claims or claims made by a party during
divorce proceedings. Most of the offshore
jurisdictions have now incorporated into their
laws what are known as “firewall” provisions,
which are designed to defeat such claims unless
they are in compliance with the domestic law
of the trust. Although the precise wording of
these provisions may vary from jurisdiction to
jurisdiction, they tend to provide that matters
such as the validity of the trust, the validity of
transfers into it and the administration of the
trust are to be determined by the governing law
of the trust and that foreign judgements that
are inconsistent with this will not be enforced
by the courts of the trust’s home jurisdiction.
Although these provisions are principally
directed at forced heirship and matrimonial
claims, they may also affect claims brought by a
settlor’s creditors.
In relation to claims by creditors many
jurisdictions recognize the ability of a creditor
to have a transfer of property set aside where
the debtor intended thereby to defraud his
creditors. The Cayman Islands, for example,
recognize the remedy in their Fraudulent
Dispositions Law 1989 but provide a limit of
six years from the transfer in which to make a
claim. The corresponding period in Barbados
is three years and in the Bahamas it is two. In
Jersey the matter is not provided for by statute
but a similar remedy is available in the form of
a Pauline action for which the time limit is ten
years. Although there have been no decided
Guernsey cases on the point it is likely that the
Guernsey courts would have regard to Jersey
case law on the subject, albeit with variations
based on Guernsey’s own customary law.
Although Jersey may have a more generous
period within which claims can be brought,
it is one of the few jurisdictions in which the
matter has been fully argued before the courts
(in the Esteem case). Accordingly there is now a
significant degree of certainty as to the limits of
the remedy in that jurisdiction.
RBC has a trust capability in each of the
jurisdictions referred to in this article. As can
be seen there are differences in the types of
structure that can be offered and while there
may be legal factors that will influence the
choice of jurisdiction, the choice often comes
down to matters of personal preference such
as convenience of time zones, language
capabilities, cultural affinity and established
professional relationships.
Trust Jurisdictions: Are They All The Same? continued
This publication has been issued by Royal Bank of Canada on behalf of certain RBC® companies that form part of the international network of RBC Wealth Management. RBC Wealth
Management offers trust and fiduciary services via the principal operating companies detailed below.
Services outlined may be provided by a variety of Royal Bank of Canada subsidiaries and offices, either independently or acting together, operating in a number of different jurisdictions.
You should note that the applicable regulatory regime, including any investor protection or depositor compensation arrangements, may well be different from that of your home
jurisdiction. Some of the services detailed in this document are not offered in all jurisdictions and may not be available to you.
You should carefully read any risk warnings or regulatory disclosures in this document or any other literature enclosed with this document or forwarded to you by Royal Bank of
Canada’s subsidiaries or affiliates.
This document is intended as general information only and is not intended as tax, legal, investment or other professional advice. You should always obtain independent professional
advice particular to your individual circumstances. The information in this document is based on sources considered reliable at the time, but no representation is made regarding its
completeness or accuracy and no obligation is undertaken whatever to update it for any changes of law or interpretation.
Royal Bank of Canada, its affiliates and subsidiaries and their officers, directors, employees and agents are not responsible for and will not be liable to you or anyone else for any
damages whatsoever (including direct, indirect, incidental, special, consequential, exemplary or punitive damages) arising out of or in connection with your reliance on the document,
even if the Royal Bank of Canada, its affiliates or subsidiaries or their officers, directors, employees or agents have been advised of the possibility of these damages.
IRS Circular 230 Notice: To ensure compliance with requirements imposed by the Internal Revenue Service (IRS), we inform you that in compliance with the U.S. Federal Tax Regulations,
unless expressly stated in writing otherwise, any discussion of tax matters contained in this communication (or any attachment hereto) is not intended or written to be used as and
cannot be used as or considered to be a “covered opinion” or other written tax advice; and should not be relied upon by any person for the purpose of (i) avoiding any Internal
Revenue Code (IRC)-related penalties that may be imposed on a taxpayer or (ii) promoting, marketing or recommending to another party any transaction or tax-related matter(s)
addressed herein (or attachments hereto) for IRS audit, tax dispute or any other purpose.
The addresses and main regulators of the principal RBC Wealth Management companies providing trust and fiduciary services:
Royal Bank of Canada Trust Company (Bahamas) Limited: Lyford Cay House, Western Road, P.O. Box N-3024 Nassau, NP Bahamas: Regulated by the Central Bank of the Bahamas.
Royal Bank of Canada (Caribbean) Corporation and Royal Bank of Canada Financial Corporation: Chelston Park, Second Floor, Building 2 Collymore Rock, St Michael, Barbados:
Regulated by the Central Bank of Barbados.
Royal Bank of Canada Trust Company (Cayman) Limited: 24 Shedden Road, Royal Bank House - 4th Floor, PO Box 1586, George Town, Grand Cayman KY1-1110 Cayman Islands: Regulated
by the Cayman Islands Monetary Authority.
Roycan Trust Company S.A.: Rue du Stand 56, 1204 Geneva, Switzerland.
RBC Trustees (Guernsey) Limited: PO Box 48, Canada Court, Upland Road, St Peter Port, Guernsey GY1 3BQ, Channel Islands: Registered company number 37379: Regulated by the Jersey
and Guernsey Financial Services Commissions.
Royal Bank of Canada Trust Company (Asia) Limited: 17th Floor, Cheung Kong Center, 2 Queen’s Road Central Hong Kong: Regulated by the Mandatory Provident Fund Schemes Authority.
RBC Trust Company (International) Limited: La Motte Chambers, St Helier, Jersey JE1 1PB, Channel Islands: Registered company number 57903: Regulated by the Jersey Financial Services
Commission.
Royal Bank of Canada Trust Corporation Limited: Riverbank House, 2 Swan Lane, London, EC4R 3BF.
RBC Trust Company (Singapore) Pte. Ltd: 20 Cecil Street, #28-01 Equity Plaza, Singapore, 049705: Registered company number 198702460K: Regulated by the Monetary Authority of
Singapore (licence number TC000053-1).
®/™ Trademark(s) of Royal Bank of Canada. Used under licence.
C/A2142 15/620 112019 (10/14)

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