My recent visit to Jebel Ali free zone authority (JAFZA) to seek opinion on putting shares of a Free Zone Co in to a trust was an educational exercise. To my surprise, none of the officers I spoke to at the JAFZA customer centre knew what the Trust is all about. Following the JAFZA experience, I thought, it would be a good idea to put some useful info on the blog, which educates readers.
Trusts are a vital wealth planning tool for high net worth families as one of the primary vehicles used for passing wealth from one generation to the next while safeguarding the family’s wealth, regulating access to assets by younger family members, and providing long-term oversight and investment management for the family fortune. The trustee of a trust is responsible (directly or indirectly) for productive asset investment, sound decisions on beneficiary distributions, protection of the trust corpus, and timely, accurate completion of financial reports and tax returns.
For some families, establishing a private trust company to act as trustee may be an alternative to the more traditional institutional bank or individual trustee arrangement. A private trust company is a family-owned enterprise that combines attributes of institutional and individual trustees and can provide many of the same services.
Whilst a private trust company may be attractive for families that have specialized assets, such as a family-owned business, or those that do not wish to use the investment management services of a bank, there are, however, substantial barriers to creating a private trust company, including high start-up and capitalization costs, regulatory requirements and potential tax risks.
Private trust companies have gained in popularity. More offshore jurisdictions now permit them, and some are continuing to modify their laws in order to attract new trust assets. Yet, the tax and legal precedent to guide the establishment of private trust companies is evolving.
While this is a much more complex topic than we can cover in a page, we hope this article provides a foundation for future discussions among family members and advisors.
