It is becoming more common, and often advantageous, for trusts to be established under the law of one jurisdiction while being administered from another.
This approach offers a sophisticated solution to the challenges of international estate planning, asset protection, tax efficiency, and compliance, particularly for globally mobile families and entrepreneurs.
When considering where to settle a trust, critical factors typically include the quality and predictability of the legal framework, the robustness of asset protection laws and the experience of the judiciary in trust matters. A suitable jurisdiction should also offer political and legal stability, international recognition of its trust laws, and a flexible, tax-neutral regime.
Decisions about where to administer the trust - meaning the location of trustee services, asset management, and compliance operations - may be driven by other considerations. These may include cost-effectiveness, access to professional expertise, the regulatory environment, infrastructure for investment and reporting, and proximity to the beneficiaries or settlor.
Advantages of multi-jurisdictional trust structuring:
Access to best-in-class trust law
Selecting a jurisdiction with a modern and well-developed body of trust law provides legal certainty. Such jurisdictions are supported by a judiciary experienced in resolving complex disputes.
Efficient and scalable administration
By administering the trust from a separate jurisdiction, it may be possible to access high-quality fiduciary and administrative services at a lower cost. This jurisdiction may offer a competitive professional services market, strong regulatory oversight, and a stable financial environment, which together support reliable day-to-day trust management without undue expense.
Jurisdictional diversification and risk management
Splitting the trust’s governing law and administration across two jurisdictions reduces concentration risk, makes the structure more resilient to political or legal changes in any one jurisdiction, and may complicate efforts by hostile creditors or authorities to assert control.
Tax neutrality and international compliance
Appropriately chosen jurisdictions for both establishment and administration can offer tax neutrality, meaning no local taxes are imposed on non-resident settlors or beneficiaries, and maintain full compliance with international regulatory standards.
Strategic benefits:
Tax Efficiency
Different jurisdictions apply different tax rules to trusts. By separating establishment and administration, it is often possible to structure the trust in a way that minimises exposure to income, capital gains, and inheritance taxes, depending on the tax residency of the settlor and beneficiaries.
Enhanced asset protection
Some jurisdictions provide stronger legislative protection against creditor claims, forced heirship, and marital property claims. Using such a jurisdiction for the legal foundation of the trust, while administering it elsewhere, may increase the practical and legal hurdles for third parties seeking to challenge the trust's validity or reach its assets.
Privacy and confidentiality
Jurisdictions vary in the degree of confidentiality they offer to trusts and their beneficiaries. Establishing the trust in a location with strict confidentiality rules while administering it in a jurisdiction known for discretion and regulatory compliance can provide a well-balanced solution for clients concerned with data protection and privacy.
Operational flexibility
Administration in a different jurisdiction can offer better infrastructure, time zone coverage, or service levels. It also allows the trust to benefit from more mature or specialised fiduciary markets, without compromising on the quality of governance or oversight.
Geopolitical and regulatory resilience
Cross-border structures are inherently more resilient to local disruptions, such as regulatory tightening, financial restrictions, or political instability. Splitting the legal and administrative elements of the trust reduces exposure to changes in any one legal or regulatory environment, supporting long-term planning.
Managing perceptions of control and beneficiary rights
Some jurisdictions define control and beneficial ownership differently. Structuring the trust so that administrative control is exercised from a different jurisdiction than the beneficiary’s country of residence may help ensure local tax authorities do not incorrectly assert control or ownership, thereby preserving the trust’s offshore status.
Changing trustees:
There are various reasons why a trustee might be changed, including:
- Voluntary resignation due to age, retirement, or changing circumstances
- Death or incapacity of an individual trustee
- Professional misconduct or breach of fiduciary duty
- A conflict of interest that impairs impartiality
- A loss of confidence by beneficiaries or the protector
- Changes in a corporate trustee’s ownership, service offering, or strategic direction.
Steps to change a trustee:
- Review the trust instrument
The trust deed is the primary governing document. It typically specifies who holds the power to appoint or remove trustees and outlines the procedural steps required. - Execute a deed of retirement and appointment
Where the trust deed permits, the relevant party may effect a change by executing a formal deed that retires the existing trustee and appoints a new one. This must be done in compliance with the formalities specified in the trust deed and any applicable laws. - Apply default statutory provisions
If the trust instrument does not address trustee succession or is ambiguous, statutory provisions in the relevant jurisdiction may apply. These typically allow for the appointment of new trustees by the surviving or continuing trustees, or by a court-appointed authority. - Court intervention
In contentious or uncertain cases, or where there is no authorised party able or willing to act, an application may be made to the relevant court for orders to remove or appoint trustees. The court generally has broad powers to act in the best interests of the trust and its beneficiaries.
Administration from the Isle of Man
The Isle of Man offers a mature fiduciary services industry with very experienced professional trustees, competitive pricing relative to other offshore centres, and a strong reputation for stability and regulatory compliance. For many trust structures, this translates into materially lower ongoing costs without compromising the quality of service or governance.
Splitting the trust’s governing law and administration between two jurisdictions adds an additional layer of separation between the settlor, trustee, and beneficiaries, which can enhance asset protection and reduce the risk of a court asserting jurisdiction or tax residence over the trust.
The Isle of Man offers a tax-neutral environment for non-resident settlors and beneficiaries. It does not impose income, capital gains, or inheritance taxes on such trusts.
The Abacus Trust Group is a well-respected independent provider of professional, fiduciary, and management services. The team is adept at working in partnership with private client advisers to establish and manage bespoke structures for HNWIs, families, and entrepreneurs.
Originally part of Coopers & Lybrand, which later became PricewaterhouseCoopers, Abacus has a 40-year history of providing technical expertise and outstanding customer service – giving our clients the peace of mind they require.
No action should be taken on the basis of this note, nor should it be construed as amounting to tax, legal or VAT advice. Suitable, specific and professional advice should always be obtained in respect of any particular issue.
