There are many different financial structures and arrangements that you can utilize to keep your family wealth safe from credits, judgments, and other untoward instances. One of the first things that you may ask before creating a family wealth protection plan is whether you need secure them through a domestic or international bank account. Is opening an international bank account a smart and sensible strategy for family wealth?
Some financial experts suggest that creating a foreign bank account offers a list of tactical and legal advantages over domestic bank accounts. The rationale for this argument is that family wealth assets within an international account are protected from the rulings of unsympathetic jurisdictions.
Family asset protection is a legitimate use to open an international bank account. If you are seeking to include this strategy into your overall family asset protection plan can enjoy many benefits simply by opening an international bank account.
It is important to note that the increasing number of blended families and heirs spread around the globe, opening an international family trust is the best way to organize their estate. If your family crosses numerous international boundaries and have complex family affiliations, there are however prevailing legal and tax provisions in your home country that you must follow as well as the other countries where other family members reside. Creating an international family trust can be complex, but with the right guidance and support, you can rest assured to accomplish this initiative smoothly and successfully.
Opening a bank account and the creation of a family trust or a foundation hand in hand. In essence, a trust is a legal deed wherein a trustee has the discretion to decide which of the beneficiaries are to benefit from the trust.
There are many advantages to creating an international family trust. Here are some of them:
The assets within a foreign discretionary trust are separate from the assets under the name of its beneficiaries. Family trust assets are protected from creditors in cases wherein beneficiaries are sued or undergoing bankruptcy.
Opening a bank account in an international jurisdiction is an excellent tax planning instrument. The overall tax paid by a family may be reduced through the following ways:
- Distributing income and capital among the beneficiaries on lower marginal income tax rates.
- Distributing different types of income to different beneficiaries.
Each named beneficiary must pay tax at their marginal rate on trust income distribution received from the trust in each financial year.
Carrying Forward Losses
In certain instances, an international family trust may carry forward losses.
Capital Gains Tax Discount
A discretionary trust structured overseas is entitled to discounts on any capital gains made on disposal of any assets help by a discretionary trust for a certain period.
Before setting up a family trust and subsequently an international family bank account in a foreign jurisdiction, it is crucial that you seek accounting, legal, and tax advice to determine whether this initiative is ideal for your personal circumstances.
In addition to helping with estate planning, a family trust ensures that your assets are managed according to your exact wishes on behalf of your beneficiaries. Family trusts are not limited to the use of high-net-worth families. Truth be told, anyone can set up a family trust to provide protection for their family members.
Types of assets that can be held in an international family trust
International family trust are most effective when protecting movable assets such as marketable securities, small business stock, limited partnership interests, bank deposits, and LLC interests.
It is important to remember that an international family trust is not effective in protecting real estate located in the origin country. In essence, real estate properties remain subject to the powers of the courts of your home jurisdiction where properties are located.
Qualities of an ideal foreign family trust strategy
- The family trust becomes irrevocable.
- The family trusts gives the trustee the discretion to withhold payments.
- A grantor is not the trustee.
- The family trust provides the trustee the discretion to withhold payments from beneficiaries.
- The trustee is a foreign trust company or financial institution.
- In some cases, a friend or consultant serves as the trust protector, so long as the protector is not based in your country of residence.
- The family trust explicitly states that the location of the trust governs all trust provisions.
- The sole asset of the family trust is a 100% ownership position in a foreign limited liability company or other legal entity that can be controlled by the debtor when not under creditor duress.
Before you can set up an international bank account for family wealth management, here are a few steps that you need to undergo to set up an international family trust.
The trustee refers to the person or legal entity that will be primarily responsible for administering and managing the family trust based on the terms of the deed.
A trust may be one or more individuals within your family or a private company that is specifically established to function as a trustee. Despite the high cost of setting up a private company, it is generally recommended that a private company stand as the trustee for a family trust. This strategy will significantly reduce personal liability. Additionally, using a private company also avoids the unnecessary administration where changes need to be made respective of the registered owner of each trust asset where there are changes in individual trustees.
Drafting of family trust deed
There are a few important matters that a family trust should address and resolve. Therefore, it is important to keep all these issues in mind when you are creating a family trust deed. These include the following:
- Identify the beneficiaries
- Determination that the trustee can make and its powers in terms of capital and income
- Any financial issues such as the trustee’s remuneration and how taxes and other expenses will be paid
- Personal interests and liabilities
- Measures in the event a trustee’s appointment or removal
You should ensure that your trust deed is customized to your family’s unique circumstances.
Trustee/s sign trust deed
The trustee/s must hold a meeting accepting their appointment as trustee/s of the family trust. Here, they must fully agree to be bound by the terms of the family trust deed.
Opening a bank account
The next step is top open an international bank account at your preferred jurisdiction. The bank account for the family trust must be under the name of the trustee/s. This generally happens after the family trust has been established and the trust deed is finalized. The bank will require submission of paperwork and documents that relate to the family trust before opening the account.
Once you have opened a bank account, the initial deposit should be the settlement sum. The trustee/s must deposit the settlement sum before making any other deposits or processing any other transactions.
Trust is now operational
After the successful creation of bank account, the trust is now operation and can start accepting contributions. Subject to the terms of a trust deed, an international family trust can borrow money and make investments in their chosen jurisdictions.
Holding family assets in a foreign bank account is completely legitimate and can be convenient for families who maintain second homes outside of their country of origin or travel frequently. Before considering opening a family trust and international bank account, make sure to ensure that the benefits outweigh any risk from lax consumer protection laws and any inconvenience posed by existing regulations.
As a premier consulting firm that specializes in providing financial and investment solutions to international clients, we offer comprehensive services that allow families to protect their assets through investment vehicles and international trusts in Luxembourg or their chosen jurisdiction. An integral part of asset protection and wealth management for family trusts is creation of a foreign bank account. We have the expertise and connections that facilitate smooth and hassle-free international bank account creation in Luxembourg or other international jurisdictions. To learn more about how we can help in your asset protection plan, reach out to a Damalion expert today.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.