Services · Trusts & private foundations

Trusts: how the instrument works and when it delivers

Roles, types of trust, documents, control and tax. Open pricing, with the final quote confirmed in writing before we start.

A trust is neither a company nor an account. It is a legal relationship. The owner of property (the settlor) transfers assets to a trustee, and from that moment legal title sits with the trustee while the economic benefit belongs to the beneficiaries. The terms are set out in the trust deed. That split between legal ownership and economic benefit is exactly what makes a trust work where an ordinary company cannot.

Three jobs account for most trusts: protecting property from future claims, passing capital to the next generation without a will and probate, and separating ownership from benefit where a beneficiary should not hold the property directly. A trust fits all three, but it solves none of them automatically.

There is a hard entry condition: the settlor must genuinely part with control. Not formally, not on paper - in fact. Without that, the structure becomes an expensive stage set that a court will call a sham, and all three objectives fail at once. Below we go through who does what in a trust, the main types, what gets signed, how a trust differs from a private foundation and a company, and where things usually go wrong. The jurisdiction comparison lives on a separate page: offshore trusts, jurisdictions compared.

Who does what in a trust

The easiest way into the subject is through the roles. There are four or five of them, and confusing them is the source of most trouble.

The letter of wishes sits alongside these roles: the document in which the settlor explains the thinking behind his intentions. It is not binding, and that is the whole point. The moment it reads as an instruction, the discretionary character of the trust is open to question, and the protection goes with it.

Types of trust and what they solve

The gap between revocable and irrevocable matters more than it looks. A revocable trust is easy to sell to a client - nothing is given up. That is exactly why it protects almost nothing: if the property can be recalled by a single decision, a court will usually treat it as the settlor's property.

Documents and how a trust is set up

The trust deed is the core of the structure. It fixes the governing law, the class of beneficiaries, the powers of trustee and protector, the distribution mechanics, the duration, how parties are replaced and how the trust ends. It is a document that will be read literally twenty years from now, so wording matters more than speed.

Alongside the deed you will normally have a transfer instrument, a letter of wishes, the protector's appointment, and in some regimes registration forms. In Seychelles the trustee appointment is registered; in Belize the trust goes into the international trusts registry; in New Zealand a foreign trust must be registered with Inland Revenue within 30 days.

In practice the sequence looks like this:

• Work through the mandate: what is being protected, from what, who the parties are and where they are tax resident.
• Choose the jurisdiction and the type of trust, and test the tax result in every participant's country.
• Select the trustee and agree service terms before anything is signed.
• Trustee compliance: documents, source of funds and source of wealth. This is the longest stage.
• Execute the trust deed and supporting documents.
• Actually transfer the assets: re-register shares, move funds, record title.
• Ongoing support: reporting, distributions, changes to the structure.

The transfer step reads as an administrative detail and is in fact where structures most often break. A signed deed with nothing transferred into it creates nothing at all.

Trust, private foundation or company

The three instruments address similar problems in different ways, and the choice is driven less by efficiency than by what the end result has to look like.

If a familiar corporate form with statutes and governing bodies is the binding requirement, see our private foundations section and the overview of offshore private foundations. The instruments are often combined: the trust holds the shares of a holding company, and the company owns the operating business and the real estate.

Control, tax and reporting

Control. You cannot keep it entirely - if you do, there is no trust. What you can do is calibrate influence: through a considered class of beneficiaries, a letter of wishes, a protector with the power to replace the trustee, and a closed list of reserved powers where the statute allows one. A useful rule of thumb: the settlor shapes the people and the boundaries, not the individual transactions with the property.

Tax. A trust does not reduce tax by itself. Island jurisdictions generally impose nothing at trust level, but that is only one of three layers. The settlor's country of tax residence, the beneficiary's country on distribution, and the country where the asset physically sits may each tax the same income. Many countries have rules attributing trust income to the settlor whether or not anything was distributed. The tax picture therefore has to be worked out before the structure exists, not after.

Reporting. Under CRS the settlor, trustee, protector and beneficiaries all count as controlling persons of a trust, and their details pass between tax administrations. From 2026 the updated standard applies in early-adopting jurisdictions, adding each person's role to the report; the first exchanges in the expanded format are expected in 2027. Public trust registers barely exist anywhere, but non-public ones are near universal.

The conclusion is simple. Trust confidentiality in 2026 protects you from outsiders, partners and potential claimants - not from governments. A structure built on the assumption that nobody will find out will not survive the first bank questionnaire.

Who a trust is wrong for, and common mistakes

Anyone unwilling to give up control. This is the main filter. If the answer to who actually decides what happens to the property is unchanged after the trust is set up, the wrong instrument has been chosen.

Anyone already facing a claim. Proceedings issued, a demand served, a divorce started, a guarantee called - at that point a transfer into trust will be attacked, and not offshore but under the law of the country where the dispute is running. A trust protects against future risk, not present claims.

Anyone who needs it fast and cheap. Trustee compliance usually takes weeks, requires evidence of the origin of the capital, and cannot be rushed. Servicing is a recurring annual cost forever, not a one-off payment.

Modest amounts. For a few hundred thousand dollars, the cost of a proper trustee, reporting and ongoing advice generally does not pay for itself. A will, a marital agreement and correctly structured accounts and joint ownership often do the job.

Assets that cannot be detached. Real estate and company interests in a country that applies its own succession rules and forced heirship stay within that country's reach, whatever the trust deed says.

The mistakes we see most often:

• The trust is executed but never funded, and the assets stay in the settlor's name.
• The settlor appoints himself protector with unlimited powers and effectively retains full control.
• The letter of wishes is written in mandatory language and reads as a binding instruction.
• The cheapest trustee is appointed and the structure fails onboarding at every reputable bank.
• The tax result in the beneficiary's country is never checked, and the first distribution creates an unexpected liability.
• No exit scenario is written down: termination, a beneficiary changing residence, the sale of the business.

Pricing

Prices are indicative and cover our work on a standard matter. We confirm the exact quote in writing after a short consultation, so you know the final figure before work begins. Government fees, trustee remuneration and bank charges are calculated separately unless expressly included. The jurisdiction comparison is on our offshore trust jurisdictions page.

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