An arrangement established under the laws of a jurisdiction outside the United States where assets are held and managed for the benefit of designated individuals or entities. These arrangements are subject to the laws of the jurisdiction where they are formed. For instance, if a trust is established in the Bahamas with a U.S. citizen as the grantor, the structure would be governed by Bahamian law, while U.S. tax laws would still apply to the U.S. citizen.
Such arrangements can offer benefits like asset protection, estate planning, and, in some instances, tax deferral, though these advantages are often subject to strict reporting requirements to the relevant tax authorities in the grantor’s jurisdiction of residence. Historically, these structures were utilized primarily by high-net-worth individuals and families; however, their use has become increasingly common with the globalization of wealth management and the accessibility of international financial services.
