Offshore trust update

There’s always something happening in the offshore world. We touch on two interesting issues below, one practical and one regulatory. 

Managing your structure 

There are different approaches to structures and their purpose over time. This can become more challenging as the family unit grows to include the next generation of beneficiaries, their children, perhaps their spouses, etc.

The highly publicised case of Damian Hurley and his father Steve Bing, is a good example; dealing with the potentially challenging issue of who is, or is not, included in the class of beneficiaries.

By way of background, Steve Bing’s father, Dr Peter Bing set up the trust in 1980, the class of beneficiaries included grandchildren. The case was brought by an illegitimate daughter of Steve Bing; the patriarch’s legal team argued that the definition of grandchildren did not extend to those born out of wedlock. This included Damian Hurley as his mother Elizabeth Hurley and Steve Bing were not married. The court dismissed this argument and held that Damian (and his half-sister) did qualify as Peter’s grandchild and should therefore benefit from the family trust. 

Whilst this case was decided by a court in California, it is a cautionary tale for settlors and trustees. Upon creation and throughout the trust’s existence, careful thought needs to be given to future generations, who should benefit, when and how. 

For trustees managing these structures, the challenge over time is invariably balancing expectations and assessing carefully who benefits, when and how (while recording their reasons). Following the settlor’s letter of wishes and engaging regularly with them is vital.

Some issues and potential questions for trustees to consider, 

  • Has the structure been in place for some time, might it benefit from a health check / tax review? 
  • Has the time come, as the family has grown, to revisit the beneficial terms of the trust? 
  • What are the beneficiaries’ ages, financial positions and where do they live?
  • Is a child really a child in the context of the trust? 
  • Is divorce an issue for the settlor or any beneficiary?
  • Do you need clarity on the structure’s tax position?
  • Do the trustees review the letter of wishes regularly?
  • Do they ask the Settlor to update their letter of wishes from time to time?

Anti-money laundering 

International standards are changing particularly given the EU Fifth Anti Money Laundering Directive (5AMLD) and its effect across jurisdictions, particularly in the Crown Dependencies. 

  • Guernsey, Jersey and the Isle of Man are bringing forward legislative proposals to integrate existing beneficial ownership information with those in EU member states for access by law enforcement authorities and financial intelligence units. There is no current proposal for the creation of a trusts register, as is the case in England & Wales, perhaps it is only a matter of time.
  • Moving to the Caribbean, the Cayman Islands government is making moves to reinforce the anti-money laundering regime to meet recommendations set down by the Caribbean Financial Task Force’s most recent report. This will include increased transparency and disclosure requirements for trusts. For example, trustees and the Registrar of Trusts will be required to share information on registered trusts with competent authorities. 

In anticipation of these changes, are you up to date?

For more information about how RSM can help please get in touch with Alix Langrognat or Sophie St John.