Offshore trusts or overseas trusts are formed due to the distinct asset protection that is provided. One can hold assets as well as funds and property and these assets are then managed in accordance with the rules laid down in the deed of trust. There are offshore tax benefits that one can avail of as well which are preferred to the taxes residing in one's country. The distribution of the funds or the benefits of the assets among the group of persons who are known as beneficiaries of the trust fund is also dictated by the deed of trust.
It is formed through an arrangement that is entered into by a person or a group that is referred to as a trustee. The trustee and the settler come into an agreement. The settler is a group of people or a distinct person. The provisions are made in the form of a legal agreement. It is known as a deed of trust that is formed between the trustee and the settler.
It is well-established policy that new immigrants to Canada are given a five-year tax exemption, through the use of an appropriately structured overseas trust. Furthermore, offshore trusts established by non-residents of Canada for Canadian beneficiaries are not subject to Canadian tax at all. Canadian residents may receive distributions of capital from such overseas trusts tax-free.
Trusts are subject to taxation. Whenever you move property into/out of a trust, there may be tax consequences. Furthermore, the income and appreciation of the assets may also be taxed. Therefore, it is always a good idea to consider the offshore tax implications and minimize them whenever possible.
New or recent immigrants to Canada may continue to use offshore trusts and obtain a 60-month tax exemption. In addition, trusts established by persons who never become resident, either by will or during their lifetime will be tax-free indefinitely. Former residents now living outside Canada may set up a tax-exempt overseas trust to benefit Canadian family members after 60 months of non-residency (18 months if set up by will on death).
Overseas trusts provide the trustee with great flexibility, control and authority over their assets and provide absolute confidentiality, total privacy and protection from liability. Assets managed by overseas trusts are mainly free from tax applicable in a settler's home country or jurisdiction, protecting assets for heirs. An overseas trust is effectively a shield of protection to protect assets from scrutiny, tax and civil legislation and provide peace of mind for people looking to protect their assets and provide for their descendants into the future.
