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Agreement on Processing of Personal Data CZ / EN

Trust

What is trust?

A trust is a traditional legal institute known for centuries. It has its origins in Anglo-Saxon law, but was already known to the Romans. It is a form of legal relationship between the founder – the original owner of the property and the administrator of the trust. The founder (trustor) entrusts his property to the care of the trustee, and this trustee then exercises the rights related to the property in the same way as if he were the owner himself, for the benefit of a third party – the beneficiary. A trust is therefore a set of assets which the founder of a trust has transferred to the administration of someone else in order to manage it either for the benefit of the founder or for the benefit of a third party. When establishing a trust, the founder draws up a so-called wish list (statute), in which he determines how the trust is to be managed and who is to benefit from the trust’s assets and revenues. Beneficiary may be arbitrarily determined by the founder of the trust, there may be more than one, and the proceeds or performance of the trust may be obtained in cash or in kind. The trust can include any movable or immovable property, shares in companies, funds or intangible assets such as intellectual property rights. It is possible to invest both personal and corporate property in the trust. Thanks to the legal separation of property from its owner, the property in the trust is also protected against potential threats such as the bankruptcy of the founder or the attempt of a third party to obtain it fraudulently. The purpose of a private trust is primarily the protection of property. Historically, the trust was established as an institution of property management for the benefit of descendants. For an example of a practical application, imagine a situation where you have built a successful company, but your children imagine their professional application in a different field than business. You do not want to sell your company to others, but at the same time you want your descendants to benefit from it in the future. There is nothing easier than placing a company in a trust fund, appointing the best manager or family friend to the administrator, for example, and enshrining in the list of wishes that the administrator will pay a certain amount of money to your children from the fund on a monthly basis. The company will be safe and the descendants will be secured. We will help you set up a trust. Contact us.

International trusts and trust structures for the protection of property

An offshore asset protection trust, or international trust, is one of the best means of protecting property when used properly. Like the Panama Foundation, it provides effective tools for effective defense against, for example, fraudulent actions by fictitious creditors. The principle of a trust to protect property is simple: the assets are transferred from your person to an international trust. You designate a trustee and a beneficiaries, and the property is then managed for the benefit of those beneficiaries. Only in a few jurisdictions have laws been enacted to promote this type of international protection. These are the Cook Islands, the Isle of Man, Nevis and Belize. In all four countries, there are laws on international trusts that provide maximum protection for property. At the same time, these countries are politically and economically stable. Thanks to historically proven case law, the Cook Islands are the most sought after for the purposes of an international trust. In second place is Belize, which provides maximum privacy and costs are lower than in the Cook Islands. Both of these jurisdictions are ideal for creating and managing a trust to protect property. The Panama Foundation is a hybrid between a trust and a corporation. She calls herself a modern cousin of an international trust

Benefits of an international trust

Protection of property while maintaining its full control The Cook Islands, Belize and Nevis do not enforce certain court decisions originating in a foreign country. This may lead to a situation where a court decision issued by a state will be unenforceable in the territory of the above-mentioned states. To ensure maximum flexibility, any of these options can be combined with an offshore LLC company. For example, in Nevis, if a creditor wants to file a lawsuit against a Nevis trust or Limited Liability Company, he must make a deposit of $ 25,000 in cash. In addition, in the Cook Islands, the action must prove, beyond any doubt, that the property has been transferred to a trust in order to deceive the creditor in question (fraudulent transfer). Also in the Cook Islands, the plaintiff must prove that the intention to deceive the creditors in setting up the trust to protect the property – and he must prove this without a shadow of a doubt. This means that the case is so clear or has been so thoroughly proven that there is no doubt about it. Such a burden of proof will be very difficult for the applicant to bear.

Diversity of jurisdictions – asset protection trust planning

Trusts in the Cook Islands and Belize provide the strongest and best-tested basis for an offshore asset protection strategy. The first-class structure will be created by merging a trust from the Cook Islands or a trust from Belize with a Limited Liability Company from Nevis; this will allow you to maximize the benefits of all these jurisdictions and further diversify the structure of your international trust. In such a structure, assets, such as offshore bank accounts, may be owned by a Nevis LLC and the LLC may be owned by a trust. A citizen of the Czech Republic can thus be the director of a Nevis LLC company, while the trust administrator is an international person. The company’s LLC director has all legal control over the LLC and the right to sign bank accounts. All of these benefits also apply to the Panama Foundation.

Why not avoid conflict?

The benefits described above can protect you against a highly motivated creditor who is willing to spend money to recover his claim in several jurisdictions. These barriers to attack also mean that a more reasonable creditor – the plaintiff – is likely to estimate the cost and chance of success against your international trust and either leave the matter at hand or settle it for a fraction of the value.

What is and is not property Protection

A properly designed asset protection plan will place part of your assets behind several barriers – the more barriers, the better the protection. A properly created asset protection trust will make you a difficult goal that can eliminate potential disputes and at least put you in a better bargaining position.
However, property protection cannot be expected to: 1. will help escape your current or reasonably foreseeable creditors. You should not transfer assets from the Czech Republic to an international trust to avoid the current creditor. Such conduct could be considered a fraudulent transfer. 2. reduce or eliminate your tax obligations in the Czech Republic. You must (as a citizen of the Czech Republic and the founder of a trust) report your international trust, your international bank accounts and pay taxes on the profits of your trust. 3. allows you to hide property. Property protection is not based on secrecy; focuses on raising barriers to direct debits. Even if your creditor has a detailed plan of your structure, he should not be able to reach for the underlying assets. 4. provide an overall estate planning solution. An international trust will facilitate the transfer of international property after death, but should be used in conjunction with a complete estate plan that is in accordance with the estate and tax laws of the home country.

Investments held by an international trust

Diversification into international investments owned by an international trust can reduce portfolio volatility while maintaining returns. Effective diversification requires investing in disparate assets. At any given time, unique economic, political and environmental events are taking place in different regions of the world. Each market reflects local conditions, which may be diametrically opposed to those in the home country. The fact that times are tough in the Czech Republic and banks pay minimal interest rates does not mean that good trading opportunities cannot be found in other countries. This concept is the basis for international estate planning and asset management. In addition to portfolio diversification, offshore investments held by an international trust provide a high degree of flexibility. A high percentage of more than 80,000 funds worldwide are located offshore. Investing in these funds often requires an offshore entity. Operating offshore and accepting only international structures allows fund managers to operate more efficiently and offer investors significantly higher returns. International investment provides not only choice and flexibility, but also a high level of privacy, thereby reducing, for example, the risk of artificial litigation for investors. Offshore investments are effective not only for the protection of property and privacy; they also allow fund managers to use risk hedging methods that are not available in some onshore markets.

Terminology related to the trust for the protection of property

Contempt of the court: The courts of the Czech Republic can exercise jurisdiction in the Czech Republic and lustrate records of people and property. If the defendant is physically present in the Czech Republic, but his property is beyond the reach of the court, the court may try to force the defendant to return this property to its jurisdiction. If the property is considered to have been fraudulently transferred to an international trust, it is likely that a Czech judge will order that the transfer be revoked. However, the only case where a trust to protect property can be breached by a Czech court is a fraudulent transfer. Fraudulent transfer: A transfer to a trust to protect property will generally be respected if it is made in good time before a debt is incurred or the creditor asserts a claim against the founder of the trust. If the transfer to an international trust is made only after the debt has been incurred or the creditor’s claim could reasonably have been foreseen, it may be considered fraudulent. Each state has its own definition of fraudulent transfer. Establish and fund your asset protection trust as soon as possible, well in advance of any claim or legal action. Letter of Wishes: A Letter of Wishes is an informal and confidential document written by the founder of a trust and addressed to the Trustee, in which it informs him how to administer the International Trust. The Letter of Wishes is not part of the trust, is confidential, revocable (most offshore trusts are irrevocable) and can be easily modified. Transfer clause: An international trust can be established in many jurisdictions. For example, a client may prefer the Cayman Islands due to the availability of a large number of banks and investment advisers. However, when such a trust is challenged by a creditor, the Cayman Islands may no longer be the best option. If the trust has a transfer clause, it may choose to move to a more favorable jurisdiction, such as Belize or the Cook Islands, in the event of an attack. The transfer may be automatic, subject to a fact (for example, a claim in the Cayman Islands), or the administrator may be granted the right to transfer the trust.

Summary of the benefits of an asset protection trust

The main benefits of a trust for property protection created on the island of Nevis, Belize or the Cook Islands include: You can protect your assets while maintaining control over your bank accounts and investments. There are fixed time limits for filing a lawsuit against trust assets. The courts in the Cook Islands and Belize do not recognize or enforce certain foreign court decisions in relation to international trusts. Obstacles to fraudulent transfer claims brought in courts in the Cook Islands or Belize include strict time limits, the requirement to prove fraud beyond a shadow of a doubt, and the absence of bankruptcy law. Procedural law prevents creditors’ “hunting expeditions” by restricting the use of written court questionnaires (eg access to documents). Obstacles to litigation on the island of Nevis – In order to file a lawsuit on the island of Nevis, a plaintiff must make a deposit of $ 25,000 in cash and hire a local lawyer. Assets can be transferred between an international trust (Belize or Cook Islands) and an LLC (Nevis). An offshore asset protection trust in the Cook Islands or Belize, combined with a non-visitor LLC, provides the highest level of protection for personal property.

Property protection: Special provisions

Bahamas

Belize

Bermuda

Cayman Islands

Cooks Islands

Gibraltar

Jersey

Turks and Caicos

PROTECTION OF THE FOUNDER OF THE TRUST:

 

 

 

 

 

 

 

 

The founder can be a beneficiary

yes

yes

yes

 

yes

 

yes

 

Maintaining control by the founder

 

yes

 

 

yes

 

 

 

Protection against later bankruptcy

 

 

 

 

yes

yes

 

yes

BENEFICIARY PROTECTION:

 

 

 

 

 

 

 

 

Provisions on wasteful beneficiaries

 

yes

 

 

yes

 

yes

 

Avoidance of enforced inheritance law

yes

yes

 

yes

yes

 

 

yes

Special provisions on non – recognition

 

 

 

 

yes

 

 

 

Does the Hague Convention apply?

no

 

 

 

no

 

 

no

CREDIT PROTECTION:

 

 

 

 

 

 

 

 

Exclusion of the Statute of Elizabeth (law of queen Elizabeth)

yes

 

 

yes

yes

yes

 

 

The trust is invalid if the transfer was fraudulent

 

 

 

 

no

no

 

 

The creditor must prove a fraudulent transfer

yes

 

 

yes

yes

 

 

yes

A clear definition of fraudulent transfer

 

 

 

 

yes

 

 

 

Creditor claims separated

yes

 

 

yes

yes

yes

 

yes

Limitation of fraudulent transfer

yes (2 years)

 

yes (6 years)

yes (6years)

yes (1 year)

 

 

 

Other:

 

 

 

 

 

 

 

 

Reverse protection for immigrant trusts

 

 

 

 

yes

 

 

 

Provisions on joint ownership

 

 

 

 

yes

 

 

 

Special exclusion of foreign law

yes

 

yes

yes

yes

 

 

 

The choice of law is binding

yes

yes

 

yes

yes

yes

yes

yes

Custodian trustee enabled

 

 

 

 

yes

 

 

 

Contact
Tetragrammaton a.s.

Žitná 562/10
120 00 Praha 2 – Nové Město

+420 777 025 554
+420 777 775 524

More questions?


Agreement on Processing of Personal Data CZ / EN

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