Trusts Versus Foundations: Plus Benefits of Nevis Asset Protection Structures
Both Trusts and Foundations are effective planning tools with unique legislation in place for both in Nevis.
This Article considers different factors that should be taken into account when deciding between the use of a trust or foundation, and what the specific benefits of using Nevis are.
- A simple summary of what trusts and foundations can be used for
- Explores when a foundation might be more beneficial than a trust, and vice versa
- Offers a brief overview of Private Trust Companies
- Provides details as to what needs to be submitted to the Registry in Nevis
- Presents the unique characteristics that Nevis offers, in relation to foundations and trusts including asset protection
Why Consider Using a Trust or Foundation: Summary
Trusts and foundations are flexible tools that allow arrangements to remain private.
Whilst they differ in a number of important respects, they can be used to achieve similar objectives. Both can be effective structures to achieve succession planning, asset protection, charitable or philanthropic aims.
The continuity of having such structures in place is an important factor, especially after the settlor/founder dies. It is important to ensure, that as far as possible, there is no room for dispute after the settlor/founder has passed away.
Factors to Consider When Choosing Between a Trust and a Foundation
There are a number of circumstances when a foundation might be more beneficial than a trust, one of these may well be the client’s country of residence. Civil law countries are more familiar with the concept of foundations, and common law countries are more familiar with trusts.
Benefits of Foundations
Foundations have a separate legal personality and can enter into contracts, hold property, and sue, all in their own name. They may also offer a greater degree of control or involvement of the founder and/or family members in administering the structure, in comparison to a trust.
It is possible for family members to sit on the Foundation Council, or the Management Board as it is referred to in Nevis.
In addition, foundations may be better suited to holding high risk or speculative investments or trading companies, as they are separate legal entities.
Benefits of Trusts
There is a substantial body of trust-related case law, which means that there is a great deal of certainty when utilising trust structures.
Foundations are newer concepts in common law jurisdictions, and at present there is minimal supporting case law. The tax treatment of trusts is also better understood in comparison to the tax treatment of foundations in these countries.
It is also generally acknowledged that trusts are easier to establish. Provided that; the intention of the settlor to create the trust, the subject matter of the trust, and the objects of the trust (the beneficiaries and purposes) are all certain, a valid trust will be created.
Private Trust Companies (PTCs) For many years, PTCs have been a popular vehicle for administering the assets of numerous wealthy families.
One of the main attractions of a PTC is that decisions relating to the underlying trusts, are made by directors who are carefully chosen by the family or may even be family members themselves. There are a number of variants of the PTC, which can be limited by either shares or guarantee or even with separate classes of shares for voting purposes.
Careful consideration as to the level of control exerted over the PTC needs to be planned, to minimise the possibility of adverse tax implications. The PTC itself is usually owned by a purpose trust whose sole purpose is to hold these shares.
Nevis: What Needs to be Submitted to the Registry?
Nevis does not have a beneficial ownership register, public or private.
For a Nevis International Exempt Trust; the name of the trust, trustee and registered address must be submitted to the Registry but no details of the settlor.
For a Nevis Multiform Foundation; the details of the management board, supervisory board, purpose of the foundation and the address in Nevis, are required to be submitted to the Registry.
What Unique Characteristics does Nevis Offer in Relation to Foundations and Trusts?
Nevis Multiform Foundations
Nevis offers a unique structure; a Nevis multiform foundation, which can change its form throughout its life to be that of an ordinary foundation, a trust foundation or even a company foundation, so it can be adjusted dynamically, based on the client’s needs.
Unique Asset Protection Laws
Nevis trusts and foundations benefit from unique asset protection laws. If a creditor wishes to bring an action against one of these structures, they must first submit a bond of $100,000 for a Trust, or $50,000 for a Foundation to the Nevis Minister of Finance, before the court will consider the action, and no foreign judgements are recognised.
There is also a 2 year statute of limitations period for trusts and 1 year for foundations, within which a creditor must bring an action, with all proceedings being held privately ‘in camera,’ which is in the judge’s chambers.
Additional Information Regarding Nevis Trusts and Foundations
Existing trusts and foundations can easily be migrated to Nevis.
In addition, as mentioned above, a Nevis Multiform Foundation can ‘chop and change’ its form throughout its life. The fact that an existing company, incorporated either within Nevis or elsewhere and/or an existing trust, can be transformed into a Nevis Multiform Foundation can provide great continuity.
How Can We Help?
If you require any further information about Nevis trusts and foundations and the advantages that they offer, please contact: Beth Le Cheminant at: email@example.com.