TRUSTS & ASSET PROTECTION

TRUSTS & ASSET PROTECTION

 

A trust is the formal transfer of assets (it might be property, shares or just cash) through a Trust Deed, to a trust company (Trustee) with instructions that they hold the assets for the benefit of others (Beneficiaries).

 Why make a trust?

Throughout their history, trusts have provided people with a means of protecting their assets and controlling how they are used after they have been given away. For almost 1.000 years, families have been using trusts to preserve and manage their wealth for the benefit of their heirs.

Cyprus trust law is essentially based on the English system. Trusts are mainly regulated by the Trustee Law, Chapter 193, enacted in 1955 and based on the English 1925 Trustees Act. This is supplemented by the English doctrine of equity and English case law prior to 1960.

In 1992, Cyprus enacted the International Trusts Law. On 23 March 2012, the International Trust (Amending) Law of 2012 came into effect reforming the International Trusts Law of 1992.

The new Law builds on the existing very attractive Cyprus International Trusts Law and has introduced many new competitive features. This was done to update and modernise the law and establish Cyprus as an offshore and financial centre and a serious trusts jurisdiction.


Cyprus International Trust CIT benefits:

Tax benefits

  • Income, gains and profits from non-Cyprus sources are exempt from income tax, capital gains tax, special defence contribution or any other taxes in Cyprus.
  • Worldwide income, profit and gains are taxable in Cyprus only where the beneficiary is a Cyprus tax resident; beneficiaries who are non-residents of Cyprus are taxed only on Cyprus sourced income in accordance with the Cyprus income tax laws.
  • Dividends, interest or royalties received by a CIT from a Cyprus international business company are not taxable and not subject to any withholding tax.
  • Trust capital received in Cyprus by a foreigner resident or retired in Cyprus from trusts not resident in Cyprus is not taxable on the trustee.
  • There is no estate duty or inheritance tax in Cyprus.
  • The CIT may be used to distribute untaxed income in Cyprus to the beneficiaries, that is to say, family members.
  • Pre-migration: people who have the intention to migrate to a high tax jurisdiction may obtain tax advantages in their new country by protecting assets in a CIT, in Cyprus.

 


Asset Protection

Trusts can also protect trust assets from potential creditors of the beneficiaries of the trust. The extent to which a beneficiary's creditors can reach trust property depends on how much access the beneficiary has to the trust property.

  • The CIT may be used to protect assets from risks arising in tort, contract or otherwise in relation to transactions entered into by the Settlor. Types of claims may include negligence, breach of contract, claims of spouses or former spouses, expropriation, breach of statutory duty and so on.
  • A CIT or a transfer of trust assets may only be set aside by the settlor’s creditors to the extent that it is proven to the satisfaction of the court that it (the CIT) was made with the intent to defraud creditors. The burden of proof is on the creditors who must prove that the CIT was made with intent to defraud them and that they were creditors at the time of the making of the CIT. An action must be brought within a period of two years from the date when the transfer or disposal of assets was made by the settlor to the CIT and only with regard to those assets and not any assets transferred earlier.

 


Confidentiality and Reporting

  • Through a CIT confidentiality is safeguarded.
  • There are no reporting requirements in Cyprus for the CITs.
  • The trust may hold shares of a Cyprus company with Cypriot nominee shareholders who will hold the shares of the company for the real owner, i.e. the trust.

 


Managing Family Wealth & Estate Planning

  • The CIT is ideal for high net-worth individuals with somehow complicated family structures, like for instance, divorced spouses and children from different weddings.
  • Because of the economic crisis managing family wealth by means of a CIT has gained great importance because of the way families wish to distribute property.
  • No exchange control regulations are applicable to the CIT
  • The CIT duration can be indefinite


The Cyprus law is the proper law of the CIT

  • If the chosen law of the CIT is the law of Cyprus, then Cyprus is under an obligation to protect that trust. All questions relating to CITs are to be determined in accordance with the laws of Cyprus without reference to the law of any other jurisdiction. This protects against the application of foreign laws such as forced heirship laws. It further provides for greater control, protection and security over the CIT.
  • The new legislation specifies that the CIT or the disposition of trust assets will not be void or voidable or capable of being set aside or be subject to any implied terms and in no circumstances will the capability of the settlor, the trustee, the protector or the beneficiary be subjected to any obligations or be questioned. When the CIT contains a choice of law clause in favour of Cyprus law, the provisions of the CIT law will be applicable irrespective of any other conflict of law provisions in force in Cyprus. This is a fundamental rule which must be abided by as a matter of public order.

 Plan Your Future Now


In today's "sue first and ask questions afterwards" society, everyone is under threat of having their assets wiped out for any reason whatsoever. For many people ensuring that financial assets are passed to their loved ones after they die is of key importance. We can advise on the appropriate steps to enable the transfer of assets from one generation to the next and preserving family wealth.

Our Cyprus law firm may advise you on strategic tax planning and deliver focused innovative structures for clients wishing to structure their affairs in the most tax efficient way and to protect their assets. We assist international high-net-worth families and companies to help administer, grow and protect their wealth, for the benefit of the current and future generations.


 

The Next Step

We are pleased to offer a free consultation on how you may benefit from an asset protection structure. All discussions relating to clients are treated in the strictest confidence.

Please email Andreas Mylonas directly at andreas@mylonas.law  or contact us at 00357 25 101080 to set up a consultation for  your Trust & Asset Protection needs.