How a Nevis Trust Can Protect Your Family’s Wealth and Your Children’s Future

International exempt trusts can be an effective component of a family’s wealth management strategy. The Nevis International Exempt Trust (IET) in particular is set up to preserve a wide variety of assets from creditors and litigation while allowing for the transfer of wealth to children and later generations.

While establishing a Nevis trust itself offers significant protection, the surrounding structures must be equally robust. These include the trust itself, the trust deed, the selection of trustees, the transfer of assets to the trust, the timing of establishment, and the trust’s subsequent administration. 

Key Takeaways

• A Nevis trust can be a highly effective strategy to protect family assets and plan for the future while properly executing a legacy.
• This jurisdiction is one of the few locations worldwide that offers effective protection against foreign judgments and forced heirship for trusts formed as international trusts, domiciled in Nevis, and established in strict compliance with Nevis law.
• A trust enables parents to determine when their children can begin to enjoy the family’s wealth, rather than immediately transferring full ownership of assets.
• Asset protection during the settlor’s lifetime is also possible, but it must be set up correctly.
• As with any jurisdiction, you cannot find a country where the individual(s) involved are exempt from all tax liabilities and completely immune from any and all potential claims.
• Moreover, the protection afforded by any asset protection strategy diminishes quickly in the event of a lawsuit, a creditor claim, or even the settlor’s bankruptcy.
• Several factors must be considered when establishing a trust, such as the settlor’s domicile or citizenship, the settlor’s personal and family circumstances, the assets to be placed in the trust, and the relevant tax and succession laws applicable to the assets. 

Why Family Wealth Planning Is About More Than Inheritance

Many of the families we work with have similar questions when they start thinking about estate planning. The fundamental question is “Who gets what?” and in simple circumstances a will is all that is required to set out how an individual’s assets are to be distributed after their death. However, for families with significant assets, both here and overseas, and complex property holdings, many further factors must be considered when undertaking estate planning. Many parents, in particular, do not want their children to inherit their entire fortune while still young and vulnerable. They are concerned about a variety of issues that may affect their children, including the running of their business, potential legal issues, divorce, and financial mismanagement, to name but a few. Many family members also now live overseas, and as such, the laws of that country in respect of succession may differ from those here in England and Wales, as will the tax implications.

Another apparently simple question that families often underestimate greatly is

How can wealth be protected while I am still alive?

We need to clearly understand each issue, including protecting an individual’s assets during his/her lifetime and preserving those assets for future generations.

An asset protection trust set up in Nevis can protect a settlor’s assets during his/her lifetime and then distribute them to the settlor’s children upon reaching the age set out in the trust for each child’s share.

International business professionals, investors, and multi-generational families can utilize a Nevis trust to protect their wealth and continue to allow it to grow.

What Is a Nevis Trust?

A Nevis Trust is set up as an “international trust” under the Nevis Trust statutes. It must meet one or more requirements of the Nevis Trust statutes and be created as a Nevis Trust under the laws of the island of Nevis.

The international trust is regulated under the laws of Nevis as an “international trust” where such trust is administered by one or more corporate or individual trustees qualified to act under the Nevis Trust statutes; the settlor(s) and all beneficiaries are non-residents of Nevis; and such trust does not hold any interest in real property located within the jurisdiction of St. Kitts and Nevis.

Finally, for completeness, a short description of the participants within a trust structure follows below. 

As long as you adequately separate the assets placed into trust from the beneficiaries’ own outside assets, employing trusts for asset protection and estate planning can be quite powerful.

While setting up a trust is crucial, many factors influence the success of a trust structure. These include the quality of the trust deed, the independence of the trustees, beneficiaries’ ability to retain their capital in separate funds within the trust, and strong governance under applicable legislation.

How Can a Nevis Trust Protect You During Your Lifetime?

Sometimes people mistakenly believe a trust is only for asset protection after death. However, a Nevis Trust can also protect your assets during your lifetime. For Nevis trusts, the Financial Services Regulatory Commission (FSRC) states that Nevis will not enforce a foreign judgment against an international trust. Consequently, to recover debt from trust assets, a creditor must commence a separate civil action in the courts of the Federation of St. Kitts and Nevis. Note, however, that an international trust is not immune from challenge, and any such challenge must be brought in an alternative jurisdiction.

Protection from certain foreign judgments

Using your global assets as collateral for a loan, incurring debt, etc. is within your discretion. However, foreign assets owned by a defendant in a foreign legal action will not be subject to that foreign court’s judgment against that individual or the trust for that individual that you established in Nevis.

That all claims against a trust must be filed in the courts of Nevis is a major reason individuals worldwide choose to invest their hard-earned dollars and protect their financial futures by establishing a Nevis International trust.

Furthermore, a general comment on foreign judgments is necessary to make clear that the information above about enforcing a foreign judgment against a qualified international trust established under the laws of Nevis does not apply universally. 

Protection against certain forced-heirship claims

Succession laws can vary from jurisdiction to jurisdiction. In certain countries, mandatory laws govern the distribution of the deceased’s property to certain family members. This is often referred to as forced heirship.

A major feature of the Nevis International Exempt Trust (NIET) structure is the ability to protect the NIET from being classified as void, voidable, or defeated in its purposes in relation to a settlor subject to forced heirship provisions of a foreign jurisdiction. This is particularly relevant to families with investments spread around the world who move between countries from time to time.

How a Nevis Trust Can Protect Your Children’s Future

The main advantages of using trusts in family wealth planning are that an heir’s inheritance can be transferred without them immediately taking ownership of it. 

This is especially relevant for parents who want to transfer family wealth to their children while managing it until the children reach an age at which the parent believes they can manage the asset(s) effectively and possibly achieve goals before being given control of the asset(s).

The various provisions that can be incorporated into a trust deed will depend on the intentions of the settlor(s) and may include:

• Education;
• Healthcare;
• Housing;
• Maintenance;
• Investment;
• Staged distributions;
• Discretionary financial support;
• Inheritance by future generations.

Using a trust for family wealth management, rather than simply giving assets to children, rests on a core principle: ownership. For example, property left to children at death is given in full ownership. In contrast, property given by a settlor to children during the lifetime of the settlor will remain in trust and be distributed to the children of the settlor in accordance with the terms of the trust established by the settlor prior to distribution.

Why can this matter for children’s inheritance?

Discretionary family trusts are a powerful tool for distributing a family estate and allow the trustee and family to distribute assets as intended by the trust. They allow more beneficial distributions than rigidly adhering to a proportionate distribution for children of different ages and with different needs. For example, in a simple case of two children, one who commences business at an early age and becomes instantaneously wealthy before his parents die, and the other a 20-year-old university student with considerable debt, the discretion would allow distribution of the greater part of the estate to benefit the child in greatest need, i.e., up to 75% of the total benefit of the estate, whilst allowing the first child to remain wealthier than necessary with only a quarter of the benefit of the estate passing to him in order that he has more than sufficient for his needs.

Children may inherit at the age that the testator considers appropriate. The trustee distributes to subsequent generations of children from the trust.

This flexibility is especially relevant if some or all of the children are abroad and their circumstances change over time.

TRUSTS & FOUNDATIONS
FREE CONSULTATION

on offshore structures and jurisdictions
that would best meet your
asset protection goals.

on offshore structures and jurisdictions that would best meet your asset protection goals.

We’ll contact you in 10 minutes

CLICK TO
BOOK CLICK TO
BOOK

We’ll contact you in 10 minutes

Can a Nevis Trust Protect an Inheritance From a Child’s Own Financial Risks?

A Nevis trust can be designed to protect a child’s inheritance long-term and even ensure it lasts indefinitely. In addition to the restrictions placed on a trust by its terms and the laws of the jurisdiction where the child resides, there are limits to the protection of all trusts.

A child who inherits investment portfolios becomes the owner of those assets. Assets held directly by a child are subject to the typical risks of ownership and may be subject to claims by the child’s creditors in a dispute, whether in a professional or business context.

A trust is typically a well-funded entity that protects a portfolio of assets for the long term. A child may have certain powers in a trust agreement; however, these are clearly defined, and the child has no control over individual trust assets.

Add a Nevis trust to your family wealth planning. Use the trust to keep assets safe for the long term and transfer them at death rather than before death. 

Protecting Wealth Today and Passing It on Tomorrow

Many of the best family wealth plans are structured around two time frames at once.

While the Nevis trust for family wealth is commonly perceived by many to be merely a vehicle for the transfer of wealth from one generation of a family to the next, a person who has started a business and is now establishing a trust to protect his or her company will typically want to have immediate access to qualifying investments using some or all of the other family assets for short-term business purposes. This person will want to continue managing the protected assets and then pass them down to the grantor’s children and grandchildren.

To implement these goals, a grantor who wants to retain control of the assets, including the business, can use a Nevis trust for inheritance and intergenerational wealth transfer. 

How Is a Family Nevis Trust Structured?

The basic family trust structure shown above can also be extended to include all aspects of international wealth management needed to meet a particular family’s needs.

For families seeking more complexity in their international wealth management, the same family trust can still be utilized to support the family in their various endeavours while the investor’s interests are managed on an international basis. Basic trusts like a family trust are typically viewed as standalone entities. However, in complex wealth management scenarios, a simple trust can be an important component in managing a client’s interests worldwide.

Family trusts are most commonly set up as separate entities but can also form part of a more complex international wealth management structure.

Many families include other entities in their trust structures, including a company or LLC set up as an asset manager, which the trust’s trustees then manage. The trust safeguards the family’s assets while managing their wealth and distributing it to appropriate family members in accordance with the trust.

An effective Nevis trust requires a properly structured trust and clear identification of the trust’s assets and liabilities. In recent years, Nevis trusts have become a popular offshore vehicle for investors and families alike. 

The role of the trustee

The roles of the trustee(s) in a trust are critical to effective administration of the trust.

Whether a trust with a Nevis address is a statutory trust or a trust agreement, the involvement of the trustee(s) is necessary for the effective administration of the trust.

A trust established with a Nevis address is considered a statutory trust, which is subject to the oversight of the Nevis Financial Services Regulatory Commission (FSRC). Typically, a trust is administered by a licensed Nevis trust company or other equivalent entity.

As an asset protection strategy, this can be seen with suspicion and probed in considerable detail, especially if the settlor attempts to utilize the trust to transfer assets while retaining full ownership and control as either the settlor or beneficiary.

By contrast, an efficiently functioning trust provides full transparency as to the structure and powers afforded to the trustee and, in addition, enables the settlor or beneficiaries to exercise the trustee’s powers as provided for within the trust instrument and by statute. 

What Makes a Nevis Trust Effective?

The key factors that must be given due consideration to ensure the formation of a valid Nevis International Trust are interlocked and interrelated, so there is no magic formula to guarantee their successful implementation.

1. Define a proper purpose for the Trust: Like typical family trusts, Nevis International Trusts are set up for the benefit of the settlor and his or her family members. In most cases, the trust is established to manage the wealth of the settlor and his or her loved ones, to address certain succession issues, or to address other family-related issues and problems.
2. The Trust must clearly define which of the Settlor’s assets will be transferred to the Trust and distinguish them from the Settlor’s other personal assets.
3. Trustees: Choose people who are completely independent and competent to run the trust professionally.
4. Trust Deed: The Trust Deed should be written to cover all of the circumstances that you require in order to achieve your goals and objectives. We strongly advise against using ‘do-it-yourself’ trusts, which form part of our legal services.
5. Transfer Assets: Transfer the assets which you wish to include within the Nevis International Trust to Nevis and then include them in the Trust in accordance with the laws of Nevis and also the laws of your home country.
6. Governance: Adequate provision should be included within the Trust Deed for the governance of the Trust, including, for example, the appointment of a protector and other such individuals as appropriate.
7. Administration: Methods and documents to manage the ongoing administration of the newly created offshore structured Nevis Trust.
8. Any offshore structured Nevis Trust must be administered to ensure full compliance with the country’s anti-money laundering Know your customer’s requirements, as well as the tax and reporting requirements of the trust’s home country.

When Should You Establish a Nevis Trust?

Creating a trust as part of your overall family wealth management is vastly different from making transfers in anticipation of a lawsuit or bankruptcy notification. Asset protection structures exist to reposition liabilities so they fall outside the jurisdiction of U.S. courts.

A court may later rule that a transfer was improper or even fraudulent and therefore ineffective. However, as families plan for their future and are financially stable, they can establish a Nevis offshore trust before adversity befalls them.

In addition, other opportunities could exist to put an asset protection plan in place. These may include launching a new business with considerable litigation risk, experiencing a rapid increase in investment assets, moving to a foreign country or taking a job abroad, children growing up and becoming adults, children living in different countries, preparing to sell a business or in the process of liquidating a business, or planning for long-term succession needs.

• Launching a new business with considerable litigation risks;
• Experiencing notable growth in investment assets;
• Relocating internationally for work or lifestyle purposes;
• Children transitioning into adulthood;
• Family members residing in multiple countries;
• Anticipating the sale or liquidation of a business;
• Engaging in long-term succession planning.

It is always wise to seek the assistance of your attorney and tax advisor, who are knowledgeable about the relevant laws of a country in which you are considering the formation of a Nevis offshore trust. 

Nevis Trust vs. Leaving Assets to Children Outright

When deciding whether to use a trust or pass assets directly to your children in your will, there is no single right answer. It will depend on your objectives for your family.

Trusts are typically the cornerstone of any comprehensive estate plan, but your will needs to address your estate’s specific needs too. So even though you may have a trust or two in your estate plan, you still need a will.

In many cases, families with foreign assets need a fully integrated plan and structure for their trust(s), aligned with country-specific corporate, stockholding, and real estate holding structures and local laws in all countries where family members live.

Nevis Trusts, Privacy, and International Compliance

Nevis’s legislation governing international trusts is the Nevis International Exempt Trust Ordinance. While privacy is one of the biggest advantages of offshore trusts, it is important to note that privacy and anonymity are different.

The Nevis Financial Services Regulatory Commission sets out the requirements for forming international trusts in Nevis under the International Trusts Act. While the trust deed is not filed with the registration documents of a corporation, such as those for a Nevis Offshore Company, for example, all persons conducting activities in relation to a trust (i.e., trustees, attorneys, accountants, etc.) must comply with all relevant statutory requirements.

Cross-border tax transparency is essential today under the OECD Common Reporting Standard (CRS), which enables the automatic exchange of information about financial accounts held by tax residents of respective countries or jurisdictions. How a trust is classified under the CRS will determine the applicability of the regime to a trust.

In addition to the CRS requirements, a foreign trust will likely be subject to foreign trust reporting requirements for U.S. persons. U.S. persons with an interest (direct or indirect) in any foreign trust at any time during the taxable year must file an Annual Information Return for Foreign Trusts on Form 3520-A for each foreign trust in which the U.S. person has an interest for the taxable year of the trust.

The HMRC guidance states that non-resident trusts will be treated as if they were resident in the UK for certain purposes, including the trust itself, the settlor(s), and the beneficiaries. Where some or all of the beneficiaries are UK residents, they may have further reporting obligations in respect of the non-resident trust. Therefore, the two phrases above are best described as separate assertions. The first ‘tax neutral in Nevis’ suggests that, for tax purposes, the trust is considered to be tax neutral in Nevis, whilst the second ‘the family pays no taxes’ is misleading in that it suggests that none of the family members have any tax liabilities in respect of the trust.

How to Establish a Nevis Trust

While each family’s circumstances are unique, most families follow these 5 basic steps when establishing a trust in Nevis. See below for a general overview of the steps involved to create a Nevis trust.

1. Clearly define the trust’s purposes instead of selecting a trust location based on hearsay or family myths. Clearly set out the purposes of the trust for your family’s particular needs — asset protection, estate planning, asset transfer to beneficiaries, investment protection, and wealth building for future generations.
2. Assess the global circumstances of your family: In order to determine which family members will be required to obtain a Nevis Foreign Trust for their benefit, you will need to outline their citizenship and residence status. Where do your beneficiaries live? How are assets of the Settlor(s) around the world held? What liabilities does the family have worldwide, and how can they be best managed through the establishment of a trust in Nevis?
3. Develop the Trust Agreement: Determine how to allocate interest between beneficiaries; detail the scope of action for trustees to manage trust assets and make distributions to or for the benefit of beneficiaries. Define structural provisions and mechanisms necessary to govern the trust and set forth the roles and responsibilities of the trustee (or trustees), as well as that of a protector (or protectors), to assist the trustee. The agreement can be stand-alone or be supported by a Nevis company.
4. Register the trust: The new international trust is established under the laws of Nevis, and all relevant registrations with local authorities are complete. Additional information regarding the process and cost to register a Nevis trust can be found on the website of the FSRC of Nevis (Financial Services Regulatory Commission).
5. Transfer assets to the trust: After the trust agreement has been executed to establish a new trust, all assets intended to be transferred by a settlor to the trust must be transferred individually and in accordance with the applicable laws. Some examples of assets that may have unfavorable tax consequences when transferred into a trust include real property and certain corporate shares.

Who May Consider a Nevis Trust for Family Wealth?

We can explore with you whether establishing a Nevis Trust is appropriate for your family’s wealth management needs, without requiring a minimum financial threshold, which can make it beneficial.

It is important to determine whether the trust’s benefits outweigh its potential costs and complications for your family’s circumstances.

You are therefore protected and may consider a Nevis trust for your family if…

• You have enough capital to invest in your business ventures and earn significant income.
• You face the risk of legal action in your home country or elsewhere that could affect your assets.
• Your children (and/or grandchildren) are expected to inherit assets in some form.
• Family members reside in different parts of the world.

Concerns regarding forced heirship rules exist.

You are looking to put in place a long-term strategy to manage your wealth over several generations.

The entrepreneur described in the previous example may currently have certain liabilities in relation to his/her ongoing business operations but wishes to protect the child(ren)’s future inheritance and investments for the time being. Such an international entrepreneur could establish a single, unified wealth management structure.

Note also that citizenship planning and trust planning are two completely separate concepts. To obtain St. Kitts and Nevis citizenship, all applicants must meet certain criteria, but there is no requirement that a Nevis trust be established by a citizen. Conversely, a non-citizen can establish a Nevis trust.

Can a Nevis Trust Protect Both You and Your Children?

Yes, this could be one of several reasons families set up their trusts this way. 

One reason a settlor may want to protect his or her own interests is to clearly separate personal assets in which the settlor retains legal ownership from trust assets the settlor has transferred to the trust.

This is also a reason why families want to control the distribution of their wealth to children and later generations. In structuring their trusts, families have found that the strategy of personal wealth management helps to safeguard their current wealth and, at the same time, start to plan for the succession and distribution of that wealth to later generations.

These two objectives need not be mutually exclusive. A well-structured family wealth plan can protect the current generation’s wealth while also planning for succession and inheritance for later generations.

Of course, all of this will depend on the specific provisions of the trust agreement(s), the nature of the property or assets that are transferred to the trust, when such transfers occur, and the applicable laws of all jurisdictions in which the trust has been granted recognition. 

Summary

An international exempt trust of Nevis can be a useful tool to assist with the management, protection, and transfer of wealth to the current generation and future generations of a family. An international exempt trust of Nevis can provide a structure for a family to manage wealth, protect assets, and distribute trust assets to beneficiaries.

An international trust can benefit from Nevis law’s statutory provisions on enforcing foreign judgments, as well as additional protections against attacks on a beneficiary’s interest in trust property. Also, the trust can be created to last for a long period and administered by the trustee according to the settlor’s detailed instructions.

Beyond asset protection, an international trust creates a system to manage and distribute wealth to your children and future generations of your family. By transferring significant wealth before you pass away, rather than at death through intestacy, an International Exempt Trust of Nevis can also protect beneficiaries from potentially huge future estate and death taxes.

In summary, an International Exempt Trust of Nevis is not a restriction on the control of an internationally mobile family’s wealth; it is a means to empower that family to manage and protect their wealth and distribute it to future generations as they see fit.

Frequently Asked Questions