In the world of international wealth management, trusts occupy a special place. They are not a mass-market product, but a sophisticated planning tool for high-net-worth families and entrepreneurs who wish to shape the future of their assets in advance and in a professional manner.
A trust is a legal construct of common law systems, under which the settlor transfers assets to a trustee to be managed for the benefit of defined beneficiaries and for purposes determined in advance. The key legal effect is the separation of the trust assets from the settlor's personal estate: once the trust is established, the assets cease to be the settlor's property in the direct sense, with far-reaching consequences for succession, asset protection and tax planning. In civil-law jurisdictions, similar functions are often performed by foundations.
When a trust is truly appropriate
Controlled transfer of wealth
A trust allows for clear rules: when, in what amount and under which conditions beneficiaries receive income or capital. Access to the capital itself can be restricted, with only income distributed, or distributions can be linked to specific life events or milestones.
Professional management of a family business
Where there is a substantial and complicated business, and the next generation is unwilling or unable to manage it, the shares can be transferred into a trust. Professional managers or trustees run the business, while the family receives dividends without involving heirs in day-to-day management.
Reduction of family conflicts
Management decisions are taken by the trustees within the framework of the trust deed, rather than around the family table. This significantly reduces the potential for disputes between heirs with differing expectations and interests.
Long-term asset protection and geopolitical risk management
A properly structured trust, not created as part of a fraudulent scheme, can provide an additional layer of protection against future creditors and mitigate exposure to political or economic instability in the settlor's home jurisdiction, particularly where the trust is established in a stable, reputable jurisdiction.
Choice of jurisdiction and entry thresholds
Jurisdiction is critical. Guernsey and other British Crown Dependencies offer developed trust legislation and political stability; the Cook Islands are known for robust asset-protection regimes; in Europe, Luxembourg and the Netherlands are frequently used for foundation-type structures; Israel has a detailed regime with specific rules for residents and non-residents. The choice depends on the citizenship and tax residence of the parties involved, the nature of the assets, tax considerations and confidentiality requirements.
It should be stated frankly: a trust is not a tool for the middle class. It is justified where there is significant wealth, assets spread across several countries, a family business with multiple potential heirs, a need to secure minor children, or long-term philanthropic objectives.
Trustees and confidentiality
Trustees are typically professional institutions: law firms, accounting firms or family offices. Their powers and duties are defined in detail in the trust documentation, and they are accountable to the beneficiaries and, in many cases, to regulators. An important advantage is the high level of confidentiality: unlike corporate registers, trust documents are generally not subject to public disclosure in most jurisdictions.
In our practice, it is not uncommon that, after a thorough analysis, we conclude that a different structure is more appropriate than a trust. The lawyer's role is not to "sell" a particular instrument, but to design a solution that will remain effective and resilient for the family or the business over the long term.
Maxim Rakov, Attorney at Law, Partner at international law firm ENR, specialising in international asset structuring and trust structures
Partnered with ENR
