The Ultimate Guide to Nevis Trusts: Asset Protection, Privacy and Tax Benefits All in One
As Featured on
Contents
- A Quick Primer
- What's an Onshore (Domestic) Trust?
- What's an Offshore Trust?
- Nevis Trusts Key Benefit #1: Tax Advantages
- Nevis Trusts Key Benefit #2: Asset Protection
- Nevis Trusts Key Benefit #3: Privacy and Confidentiality
- Nevis Trusts Key Benefit #4: Easy Estate Planning
- Nevis Trusts Key Benefit #5: You Can Change the Terms
- Disadvantages of Nevis Trusts
- Types of Trusts Allowed Under Nevis Law
- How to Set Up a Nevis Trust
- Case Studies about Nevis Trust
- Frequently Asked Questions
- Need Help?
A few themes come up over and over — asset protection, privacy concerns, and a desire for lower taxes. A Nevis trust is one of the few planning tools that offers all of them in one package.
But that’s not to say it’s right for everyone. They can be expensive to set up. And compliance can be a bit of a hassle.
So is it right for you? This guide will help you figure that out. It comes from the perspective of a firm whose sister firm (Fortress Trust) is a Nevis trust company.
We’ll explain why you might want to consider a Nevis trust, who really needs one, and how to get started. But first, it’s important to understand what a trust actually is.
A Quick Primer
A trust is an entity that is often used for asset protection, tax benefits and estate planning.
A settlor — the person creating the trust — transfers property into the trust and gives the trustee the authority to manage property or assets on behalf of the trust’s beneficiaries.
Important Terms to Know
Settlor: The individual who creates the trust and transfers assets into it. The settlor decides how the trust’s assets should be managed and distributed.
Trustee: The individual or company responsible for managing the trust’s assets according to the trust deed. This role requires a high degree of trust as the trustee must act in the best interests of the beneficiaries.
Beneficiaries: The individuals who receive benefits from the trust. Benefits can include income or dividends from the trust assets. The settlor specifies the beneficiaries in the trust deed.
Trust Deed: Also known as a deed of trust, this is a key legal document that sets up and governs the operations of a trust. It creates the rules and conditions under which a trust operates, defines the roles of all parties involved, and sets out how the trust assets will be managed and distributed.
What's an Onshore (Domestic) Trust?
These types of trusts are set up under your domestic laws or where the trust’s assets are located. These trusts often face high taxes and may offer less asset protection by default.
However, they are relatively inexpensive to set up and can be made to offer at least some asset protection benefits.
Some common types of domestic trusts include:
Domestic Asset Protection Trusts (DAPTs):
More than 20 states now have domestic asset protection trust (DAPT) laws. These laws are designed to protect assets in self-settled trusts. This is a trust in which the settlor is a beneficiary or possible trust beneficiary. (Traditional trusts don’t offer this protection.) But when DAPTs are challenged in court, they have a poor track record. That said, when creditors are faced with a DAPT, they’re often more willing to offer a reasonable settlement.
Recommended Reading:
- What’s the Best State for a Domestic Asset Protection Trust (DAPT)?
- What is a Living Trust and How Does it Work?
- What is a Land Trust and How Does it Work?
What's an Offshore Trust?
These trusts are similar in basic structure to an onshore trust but set up in (foreign) places with low taxes, strong privacy regulations, and better asset protection laws.
As a result, they provide top-level asset protection, greater privacy, and significant tax advantages.
Yet only a few countries offer them with all the benefits listed above. These are the Cook Islands, Belize, and Nevis.
We personally like the Nevis version of the structure best, which is formally known as a “Nevis international trust”.
And we’re not the only ones either… Data from Nevis Financial Services report a 40% increase in new international trusts from 2010 to 2020, marking the growing appeal of this jurisdiction.
Here are some of the most important benefits…
Nevis Trusts Key Benefit #1: Tax Advantages
Nevis has no income taxes, capital gains taxes, or inheritance taxes. Nevis trusts are exempt from income, capital gains, and inheritance taxes for income or gain from sources outside St. Kitts & Nevis.
This makes Nevis trusts a good choice for investors with a multinational portfolio.
Nevis Trusts Key Benefit #2: Asset Protection
Nevis was one of the first jurisdictions to pass asset protection trust legislation in 1994. Called the Nevis International Exempt Trust Ordinance, it gives you strong asset protection even if you name yourself as a trust beneficiary
(By comparison, to enjoy the same protection in the US, you‘d need to create a DAPT. And as we mentioned, these don’t have a great track record.)
Case law supports its effectiveness. Nevis trusts have successfully withstood challenges from foreign creditors. No creditor has ever penetrated a Nevis trust in a local court.
Foreign Judgements
Nevis also does not recognize foreign judgments against international trusts. Creditors must sue in the local courts and prove beyond a reasonable doubt (the highest standard of proof) that a settlor’s transfer of assets to an exempt trust was a fraudulent transfer.
Claim Limits
Creditors also don’t have much time to make a claim — just one year since the event that caused the claim in the first place. After that, the transfer is deemed not to be fraudulent.
Large Bond Placement
A creditor must post a $100,000 bond before bringing legal action against an international trust. The court may set this limit lower (or higher) as circumstances dictate.
Local Lawyer Requirement
Any creditor challenging a trust must also hire a local lawyer.
High Standard of Proof Needed
Nevis law sets high barriers for creditors wishing to challenge a trust. Creditors must prove their claims “beyond a reasonable doubt.” This is a much tougher standard than the “preponderance of evidence” required in civil disputes in most US states.
Part of a Structure Ecosystem
Nevis trusts also benefit from being part of a larger structure universe. Nevis business corporations, Limited Liability Companies (LLCs), multi-form foundations, and captive insurance companies, are all part of a legal services industry dedicated to offering one of the best asset protection frameworks in the world.
Nevis Trusts Key Benefit #3: Privacy and Confidentiality
While Nevis trusts must be registered in Nevis, details of the trust, including settlor and beneficiary information, need not be disclosed.
In fact, Nevis has a law specifically to protect client information from misuse. Called the Confidential Relationships Act, the law makes it a criminal offense to disclose confidential information of a business or professional nature, including Nevis trusts.
Nevis Trusts Key Benefit #4: Easy Estate Planning
A Nevis trust offers a key advantage in estate planning by letting settlors set precise terms for how assets are distributed. This is crucial for those wanting to avoid the often strict and long probate processes seen in many places.
With a Nevis trust, assets can be distributed quickly and according to the settlor’s wishes without interference from foreign courts. Beneficiaries get their inheritance quickly. This also reduces the potential for family disputes over the estate.
It’s worth noting that the Nevis trust law overrides foreign forced heirship laws that make estate planning in many countries quite difficult. It lets you give assets freely without following a mandatory beneficiary distribution scheme.
Nevis Trusts Key Benefit #5: You Can Change the Terms
The law allows you to change the trust terms, giving you flexibility as your needs or plans change.
This lets your trust evolve in response to changes in legal, financial, or family situations without harming the initial goals of asset protection and estate planning.
Disadvantages of Nevis Trusts
While a Nevis trust can offer many benefits, there are potential drawbacks to consider. Here are some of the main ones to think about:
#1: Higher Costs
Offshore trusts generally cost more to set up and maintain than domestic trusts. Legal fees, administrative costs, and the need for expert advice can add up, especially for large or complex estates.
#2: Tax Considerations
Another challenge may come from tax authorities, especially for settlors and beneficiaries in countries with strict tax rules and compliance demands.
US persons are subject to the Foreign Account Tax Compliance Act (FATCA), which requires various disclosures relating to offshore trusts and foreign financial assets.
That’s not to say that you are setting yourself up for an audit simply by having an offshore trust (or any other offshore structure). But it stresses the importance of having the right team on board to make sure you handle compliance issues properly.
#3: Complexity Across Countries
Nevis trusts are robust but complex. Not only that, but you need to make sure you comply with both Nevis laws and the laws of your home country — and understand how planning in one jurisdiction may affect planning done in the other.
Types of Trusts Allowed Under Nevis Law
The trust law allows different types of trusts including:
Charitable Trusts: Set up for giving purposes anywhere in the world.
Spendthrift or Protective Trusts: Designed to shield beneficiaries from their creditors.
Non-Charitable Trusts: These do not directly benefit individuals but serve specific purposes. They must have a protector who is capable of enforcing the trust’s aims.
Qualified Foreign Trusts: This is a trust set up in Nevis but governed by the laws of another country.
How to Set Up a Nevis Trust
To set up a Nevis trust, you need to understand the rules in the Nevis International Exempt Trust Ordinance. This law provides a structured approach for creating trusts that offer strong legal protection for assets.
Here are some tips:
Get Professional Help
Consulting with experts in Nevis trust law is crucial. These professionals help navigate complex rules and ensure the trust meets specific goals for asset protection and estate planning.
Choosing a Trustee
The trustee will manage the trust’s assets and must be either a licensed corporate entity in Nevis, a Nevis attorney, or Nevis law firm.
Drafting the Trust Deed
The trust deed outlines the trust’s terms and beneficiary rights. It must be clearly written to meet legal standards and avoid any misunderstandings.
Choose Beneficiaries and Transfer Assets
You will identify the beneficiaries and move assets into the trust. This step requires careful financial planning, especially with large or complex assets, or from countries with exchange controls in place.
Legal and Administration
Finalizing the setup involves registering the trust with the Nevis Registrar of International Trusts. This includes submitting the trust’s name, trustees’ names, and a compliance declaration. The names of the settlor and beneficiaries remain confidential.
You will also need to pay a registration fee to register the trust.
Maintenance and Compliance Requirements
Keeping a Nevis trust up to date involves annual reviews and compliance checks. Trustees manage these tasks and report any major changes in the trust’s structure or assets to Nevis authorities. The trust registration must also be renewed annually for a fee.
Case Studies about Nevis Trust
Following are sample case studies of the types of clients who could make good use of a Nevis Trust. They are not based on any one client, but rather represent an aggregate of similar clients we’ve helped to set up this entity.
Case Study #1: Asset Protection for Entrepreneurs
Background: Robert owns a rapidly expanding tech startup in Silicon Valley. As his personal and business assets grow, so does his exposure to litigation. This is common in the tech industry.
Use of Nevis Trust: To protect his personal assets from potential business liabilities, Robert establishes a Nevis trust. He then transfers a portion of his non-US investment portfolio and (non-Nevis) real estate into it. This protects the covered assets against any lawsuits or business debts.
Case Study #2: Retired Couple Estate Planning
Background: John and Linda are retired and have accumulated a large nest egg over their lifetime. They are worried about estate taxes and the smooth transfer of their assets to their children.
Use of Nevis Trust: They establish a Nevis trust to hold their investments, property, and heirlooms. They then form a Nevis LLC owned by the trust and gift minority interests in it to their beneficiaries. This setup minimizes their estate tax liabilities and ensures their wealth is conveyed to their children without probate.
Case Study #3: Doctor Concerned About Malpractice Lawsuits
Background: Andrew is a successful surgeon with his own practice. Given the high risk of malpractice suits in his field, he is concerned about protecting his personal assets.
Use of Nevis Trust: He sets up a Nevis trust to secure nest egg assets. This ensures these assets are protected from legal claims from his professional practice. The trust provides him with the security that those assets will remain intact regardless of his professional risks.
Case Study #4: Investor Looking for Tax Efficiency
Background: Jennifer is an investor with diverse international investments, including real estate and stocks in emerging markets.
Use of Nevis Trust: She establishes a Nevis trust to manage her investments efficiently. The trust structure allows her to benefit from Nevis’s favorable tax regime. This improves her portfolio’s tax efficiency and enhances the returns on her investments.
Case Study #5: Privacy-Concerned Celebrity
Background: Emily is a high-profile actress in Hollywood with significant earnings from her roles in movies and endorsements.
Use of Nevis Trust: Concerned about public scrutiny and privacy, she uses a Nevis trust to manage her assets discreetly. This trust helps keep her financial affairs private and out of the public eye, providing peace of mind.
Case Study #6: Developing Country Entrepreneur
Background: Jordan has built a successful telecommunications business in a developing country. However, the country has a history of unstable governments and bank failures.
Use of Nevis Trust: To avoid his country’s risky banking system and potential exchange controls, Jordan forms a Nevis trust to hold his nest-egg assets. They’re safely tucked away in a Swiss bank with high levels of capital and liquidity.
FAQs
What is a Nevis trust?
A Nevis trust is a trust set up under the Nevis International Exempt Trust Ordinance. Properly structured, these trusts offer asset protection, privacy, and tax perks. They’re designed to protect assets from creditors, preserve privacy, and ensure smooth estate planning.
From a legal perspective, a Nevis trust designed for Nevis non-residents looking for asset protection is called a Nevis international trust.
How does a Nevis trust protect my assets?
Nevis trusts protect assets by placing them under Nevis laws, which ignore foreign judgments. Creditors must sue in a local court and face tough barriers, such as a one-year statute of limitations and proving their case beyond a reasonable doubt. The required burden of proof is far stricter than any US state and most foreign countries.
What assets can be held in a Nevis trust?
A Nevis trust can hold various assets, including real estate, bank accounts, stocks, cryptocurrency, precious metals, and other personal property. The flexibility in asset types makes Nevis trusts useful for many estate planning needs.
Are there tax benefits to setting up a Nevis trust?
Yes, Nevis trusts offer significant tax advantages. There are no local taxes on income or capital gains. Nevis also lacks estate or inheritance taxes. These tax breaks can lead to substantial savings in a multinational portfolio.
However, it’s very important you consult with a tax advisor in your home country to understand whether this will benefit you at a domestic level.
How long does it take to set up a Nevis Trust?
Setting up a Nevis trust usually takes a few weeks. How long depends on how complex the assets are and the specifics of the trust setup. The process includes writing a trust deed, registering the trust, and moving assets into the trust.
Can I change the terms of a Nevis Trust?
Yes, you can alter the terms of a Nevis trust after it’s set up, as long as the changes follow Nevis law and the trust deed’s guidelines. This flexibility lets you adjust your trust to match changes in personal, family, or financial situations.
What are the annual costs of maintaining a Nevis Trust?
The yearly costs for a Nevis trust include a government fee plus fees for trustee services, legal advice, and administrative support. Total costs can vary based on the trust’s size and complexity but typically amount to several thousand dollars per year.
How does a Nevis Trust compare to other offshore trusts?
Nevis international trusts are seen as some of the most secure in terms of legal protections and privacy. Compared to other places like the Cayman Islands or British Virgin Islands, Nevis provides stronger creditor protection and privacy laws. This makes it a top choice for those prioritizing asset safety and secrecy. The Cook Islands and Belize are two of the only other countries that offer protections in their trust laws roughly comparable to a Nevis trust.
What is a Nevis trust?
A Nevis LLC, or Nevis Limited Liability Company, is a business entity formed under the laws of Nevis. It offers its owners (known as members) limited liability protection, similar to LLCs in other jurisdictions.
Nevis LLCs are often used together with Nevis trusts. By pairing a Nevis LLC with a Nevis trust, individuals can create an additional layer of legal separation between their personal assets and the assets held within the LLC. This arrangement can also provide significant estate planning benefits.
Need Help?
To our knowledge, we’re the only asset protection planning service that happens to specialize in working with US clients and has a registered Nevis trust company as a sister company.
If you’re interested in seeing if a Nevis trust is right for you, please book in a free, no-obligation conversation with one of our Associates. You can do that here.
About The Author
Need Help?
We have 40+ years experience helping Americans move, live and invest internationally…
Need Help?
We have 40+ years experience helping Americans move, live and invest internationally…
As Featured on
