NTL Trust
IMI Official Partner
Any smart individual takes steps to mitigate risk. This is one of the main drivers for Citizenship by Investment applications worldwide.
Protecting your health, physical safety, and freedom is clearly the first priority.
But having taken care of yourself, what about your assets? Your hard-earned wealth also deserves the best legal protection from frivolous lawsuits, corrupt politicians, forced heirship, and greedy ex-partners, to name just a few modern-day threats.
That way, you can plan for a peaceful retirement and pass on your wealth intact to future generations.
We often write about St Kitts and Nevis as one of the top jurisdictions for obtaining a second passport, but it’s easy for investment migration practitioners to miss an important fact: We have in our midst the top jurisdiction in the world for international asset protection structures.
Many of our CBI clients need these asset protection services, even if they haven’t thought about it just yet – so there is a win-win business opportunity for practitioners to help their clients and increase revenue at the same time.
In this article, we will give you an overview of various asset protection structures in Nevis. We will also touch on the best places to open bank accounts for CBI passport holders seeking the best asset protection.
Whether you are a CBI professional yourself, a lawyer or trusted advisor, or simply an individual who wants the best asset protection, we trust you will find this article of interest and contact NTL Trust for any more detailed enquiries.
The Best Offshore Asset Protection Lawyers Recommend Nevis
The USA is the most litigious society in the world, closely followed these days by most Western countries like the UK, Canada, Australia, and EU countries.
Therefore, it’s not surprising that America is home to the world’s top asset protection lawyers.
When you ask any American asset protection lawyer at industry events like STEP or Heckerling, what is the most watertight legal offshore asset protection structure? There is one jurisdiction that stands out: Nevis!
According to a recent Florida Bar publication, Nevis, along with the Cook Islands, are recognised as the foreign jurisdictions with “the most modern and comprehensive asset protection trusts legislation.”
Who Qualifies for an Asset Protection Trust in Nevis?
St Kitts and Nevis is a Federation, much like the United States of America. Citizenship is a matter for the federal government; hence, when we talk about CBI, the country named on the passport is “St Kitts and Nevis.”
Corporations, trusts, and other asset protection structures, however, are the competence of the different islands, as Nevis took the lead by passing its International (Tax) Exempt Trusts law in 1984.
International structures from Nevis are only available to non-residents. Nevis law is particularly strict on this matter: The settlor and beneficiaries must be non-resident in Nevis, and the trust property may not include any real property situated in the Federation.
Beyond that, however, almost anyone can qualify for Nevis’ world-renowned asset protection. Holding citizenship, as opposed to residence, of St Kitts and Nevis does not preclude you from partaking in these benefits.
Neither does domiciling assets in Nevis stop you from applying for citizenship later.
On the contrary, the Nevis Island Administration takes a very favourable view of present and future CBI citizens utilising the country’s financial services.
Creating such genuine links to the island is also well-viewed by international banks – but more on that later.
Needless to say, citizens of the other “Caribbean five” nations can also benefit from asset protection on Nevis.
It is quite possible, for example, for a Grenadian citizen to use Nevis as a wealth management base. US citizens, who are often shunned by foreign banks, are welcome in Nevis.
The only citizens who are banned from doing business in Nevis are those who are subject to UN sanctions.
Of course, it must be worth it from a financial point of view. Whilst you can set up a trust with a hundred dollars, there are set-up costs involved, so we normally tell people you need around a million minimum to make an offshore trust worthwhile.
There are exceptions to this, however, particularly for people who are expecting to receive substantial assets in the future, such as by business sale, inheritance, or the deal of a lifetime that came your way. In these cases, it often makes sense – particularly from a tax perspective – to proactively establish a trust.
What is a Trust?
Traditionally, in the Anglo world, including the USA and Canada – and, of course, the English-speaking Caribbean – putting one’s assets into trust is the most common way to invest and safeguard wealth for the long term.
This way, the person who sets up the trust, known in legal terms as the “settlor”, looks out for future generations and protects against uncertainty.
Trusts developed in England and were driven by legal necessity.
Centuries ago, knights leaving to fight religious Crusades needed someone trustworthy to administer their assets while they were away.
Women and children could not own assets, so a trusted individual who became known as the “trustee” would safeguard the assets and manage the knight’s business affairs until the knight returned home.
If the knight did not return, the trustee would manage the property on behalf of the wife and children, who were known as the “beneficiaries.”
Thereby, the knight made sure the beneficiaries were financially secure until his sons were old enough to take over.
In essence, therefore, by creating a trust, you transfer legal ownership of certain assets to a trusted third party, who must manage them according to your wishes.
Common law recognises this split of ownership between “legal ownership” and “beneficial ownership”; in other words, allowing you to retain certain rights even though you are giving away legal ownership of the assets.
Fast forward to modern times – trustees are generally professional firms, local companies or locally incorporated Private Trust Companies (meaning you can set up a company to be your own trustee).
In Nevis, the trust business is regulated by Cap. 7.03 (N), otherwise known as the Nevis International Exempt Trust Ordinance.
Is a Trust the Best Offshore Asset Protection Structure?
Trusts are the best-known asset protection structure in countries like the USA, UK, Canada, Australia, and many others, and they are used both domestically and internationally on a daily basis.
Probably the biggest disadvantage of a trust is that clients must embrace the concept of legally giving their assets away to a third party.
The law does provide protection if the trustee fails to do what he is supposed to do, and it is possible for the settlor to retain certain powers over the trust.
However, there is a fine line here because if you retain too much control and you then find yourself being sued, the judge could decide that the trust is a sham, allowing your creditors to access the trust’s assets.
For this reason, good professional advice is essential. Don’t make the mistake of buying a boilerplate trust deed on the internet and trying to do a DIY job.
Another disadvantage of trusts is that not all countries recognise them. This is actually a disadvantage that you can sometimes turn around into an advantage, but again, care and good professional advice are required.
The Nevis Multiform Foundation as an Asset Protection Structure
Fortunately, Nevis law offers similarly robust offshore asset protection structures besides trusts.
One notable alternative is the civil law concept of the foundation.
Foundation law was passed in Nevis in 2005 in response to a demand from wealthy continental Europeans, particularly French and German families.
Unlike a trust, which is a private contract without legal personality, a foundation is its own legal entity.
Creating a foundation is the act of giving legal personality to the actual assets being protected under the control of a management board that oversees those assets for the beneficiaries.
As such, the foundation does not have any owners – but the board must manage it on behalf of the beneficiaries who are designated in the foundation charter.
Nevis foundations go an extra mile, uniquely allowing each Nevis foundation to choose a “multiform”.
This means that the Founder of the foundation, in the charter, can decide how it is to be treated: as a trust, a company, a partnership or a traditional “ordinary” foundation.
The “multiform” can be changed during the foundation’s lifetime. For example, the same entity could start life as a Company and then morph into a Trust, perhaps once the Founder has retired, expatriated or experienced a liquidity event, all the while retaining continuous existence as the same legal person with the same registration number.
This sophisticated structure opens up numerous additional planning possibilities.
The Nevis LLC as an Asset Protection Structure
A more familiar concept to Americans is the LLC or Limited Liability Company.
LLCs should not be confused with traditional corporations that issue stock certificates.
An LLC is similar in many ways to a partnership, and for taxation purposes, it is typically subject to pass-through taxation.
This means that it is not taxed on its income, but instead, its members should declare their income on their personal tax returns, provided the members are not resident in Nevis; it is therefore not subject to any Nevis taxation.
An LLC must have one or more owners who are called “members”. Members may be individuals or trusts, corporations, etc. It may be managed directly by its members or by a separately appointed manager.
Some typical uses for Nevis LLCs:
The Nevis LLC can be owned by a trust and can be the trust’s “operating entity.” This provides an extra level of protection and confidentiality since the existence of the trust will not be visible to counterparties.
It’s also a useful way to protect a trust that wishes to own real estate in jurisdictions where ownership is public.
A Nevis LLC, as a stand-alone entity, has many trust-like asset protection features, separating ownership and management. You could be the sole member of the LLC, avoiding the need to transfer assets to a trust.
However, you can appoint a third-party manager, subject only to the jurisdiction of the Nevis courts, who can decide when to make distributions. This is a good “entry-level” structure for those seeking asset protection but who have not (yet) acquired the wealth to make a more complex structure worthwhile.
The Privacy Benefit of a Nevis Offshore Trust
Nevis emphasises privacy and confidentiality in its asset protection legislation. The Nevis International Exempt Trust Ordinance does not require public disclosure of the beneficiaries or the terms of the trust.
The trust deed is not filed anywhere except in the trustee’s office, ensuring that details regarding assets can remain hidden from potential attackers.
This high level of confidentiality helps individuals protect their assets from scrutiny and reduces the risk of legal action against them.
This puts time and distance (literally) between you and anyone who wants to go after your assets in a law court.
Anyone who wants to sue the structure must go to Nevis, hire a local attorney and post a bond that often exceeds $100,000 before the case can even be heard.
By the time all that happens, your assets might well have left Nevis jurisdiction!
Needless to say, a Nevis offshore entity is also a legal way of opting out of things like tax transparency rules and beneficial ownership registers.
Fraudulent Transfer Rules and the Statute of Elizabeth
The Fraudulent Conveyances Act 1571, better known as the Statute of Elizabeth, was an Act of Parliament in England, passed during the time of Queen Elizabeth I, that was the first statutory attack on asset protection trusts and maintains its relevance today.
It aimed to prevent fraudulent conveyances, allowing creditors to unwind transactions made to defraud them.
Nevis law has established a legal framework that offers specific protections against claims under the Statute of Elizabeth.
Nevis law explicitly protects assets transferred to a trust unless creditors can demonstrate fraudulent intent with a high burden of proof.
Moreover, Nevis law stipulates a short statute of limitations; claims can typically be made within one year of the transfer, significantly limiting the timeframe for creditors to challenge asset protection measures.
This short look-back period is a crucial advantage for individuals and businesses looking to secure their wealth offshore against unknown future creditors.
The One Thing Asset Protection Cannot Offer
It’s important to point out that there is one thing offshore structures cannot protect against – and that is the tax man! The IRS, HMRC and other tax departments have moved quite aggressively against offshore tax evasion in recent years, and this is a battle they have won.
So much so, in fact, that offshore asset protection has become mainstream, and you are not likely to be red-flagged for having a compliant offshore trust.
Depending on your country of residence and citizenship, you will most likely be required to declare your offshore structure to your home tax authorities and pay some tax on the income of the trust.
Of course, this would not apply to a Caribbean citizen and resident living in a country with no income tax.
Opening a Bank Account for a Nevis Trust, Foundation or LLC
We are often asked about opening a bank account. Isn’t it almost impossible for a CBI passport holder with a Nevis asset protection structure to open a bank account?
It’s certainly not like downloading an app and taking a selfie, which some people are accustomed to these days when it comes to opening a bank account.
However, we handle banking every working day, and it’s also not impossible by any means. One advantage of working with a reputable team of trust experts is being able to draw on their existing banking relationships.
Key factors to consider are the residence of the settlor and beneficiaries, as well as the types and amounts of transactions expected.
It’s no surprise that banks are motivated by money, so larger accounts are easier to open, but the banks want the money to stay there and do not like a lot of daily transactions in and out.
American clients will probably want to keep their bank accounts outside the USA, even though they will have to accept that banking fees in the offshore markets are typically higher.
Latin Americans or Asians, on the other hand, might be well served by opening an account in Miami or New York.
Switzerland, London, and Singapore remain popular choices for the world’s HNWIs, and contrary to what you might read on the internet, banks in these countries open accounts for Nevis trusts and CBI passport holders.
Other popular jurisdictions include Canada, Belize, and Barbados, where minimum opening deposits and balances are lower. The Bahamas are particularly good, where crypto is the source of funds.
Nevis itself also has a burgeoning offshore banking centre, but at the moment, we find that most clients are best served elsewhere.
As always, each case is different, but rest assured, we at NTL Trust have spent years developing strong banking connections to make things as easy as possible for our clients.
The Bottom Line
The legal framework surrounding asset protection in Nevis is well-established and sophisticated.
Nevis offers non-residents unparalleled asset protection through its advanced international trust laws, emphasis on confidentiality, the formation of LLCs, and other robust legal frameworks such as the Multiform Foundation.
Nevis has evolved to meet the needs of clients and their trusted professional advisers worldwide.
Adding a strong offshore asset protection jurisdiction like Nevis into a wealth management structure is a relatively simple and inexpensive way to enhance legitimate privacy and keep frivolous lawsuits at bay.
Opening bank and brokerage accounts for Nevis offshore structures in major financial centres is relatively straightforward, provided opening deposits are reasonably large and clients understand that fees will be higher than in domestic banks.
This combination of legal safeguards, privacy, banking access and favourable regulatory conditions positions Nevis as a top choice for world citizens seeking to preserve and protect their wealth in an increasingly litigious world.
It’s not by chance, but rather by design, that the Federation of St Kitts and Nevis is known worldwide for both Citizenship by Investment and International Asset Protection.
Finally, NTL Trust is one of the few companies in the CBI business that has its roots in the trust business, so we live and breathe both CBI and asset protection.
We look forward to working with professional advisers and their clients to secure wealth in Nevis and beyond.
To learn more, contact NTL Trust via our website.
