I understand if I want to set up a trust, I must transfer the legal title of ownership to the trustee. How can I trust the trustee?
The trustee is an important party to the trust, however, you should first and foremost trust the legal system of the EU and its the control mechanisms . There are 3 layers of the protection: domestic, federal and international investment treaty protection. The investments are under the protective shelter of EU law. The EU law is supreme in the European Union and the professional trustees must hold an appropriate license and fulfill strict requirements regarding their employees and operations. The EU guarantees economic, political and social stability and a highly developed financial and banking infrastructure. EU law is designed to protect the taxpayers and citizens. In addition, Luxembourg, where Primus Wealth is located, is a market leader investment center in the world.
Let’s see as example:
Our client, Mr. Petrov would like to set up a secure structure within the EU for his investments for a competitive price. Primus Wealth recommended to set up an EU trust registered in Hungary, as in Hungary the licensed trustee must comply with EU law and Hungarian law requirements as well. Licensed trustees are under the supervision of the National Bank of Hungary and must have liability insurance with an exceptionally high value. The trustee is only allowed to hire employees with a valid „non-criminal record”. The trustee’s spouse or personal creditors and creditors of other trust assets managed by the trustee are not entitled to lay claim to any part of the trust assets. As there are many professional requirements and the control mechanisms in the legal system, Mr. Petrov can have absolutely confidence in the legal control of the trust.
Do my creditors have access to the trust assets?
This depends on the applicable legal system, but generally a well-structured trust can be the simplest and most efficient solution to keep away the creditors. This is true especially in countries like Hungary, where the creditors can claim funds from the trust assets only if they can prove beyond reasonable doubt in a court procedure that the asset transfer to the trust was fraudulent. The creditor must prove in Hungary that the asset transfer was a fraudulent one by which the basis for satisfying a third person’s claim has been deprived entirely or in part. In the case of having an EU trust shelter registered in Hungary, challenging the structure is burdensome, as there are several requirements:
- the legal action may only be launched in Hungary in Hungarian language,
- it has to be established that the creditor already had a valid claim against the settlor at the time of entering into a trust relationship,
- it must also be proven that other assets of the settlor are insufficient to satisfy the claim of the creditor,
- the creditor must also prove that the trustee acted in bad faith or had a gratuitous advantage originating from the contract,
- all of the above must be proven beyond reasonable doubt.
No creditor may have any claim successfully enforceable against the trust assets other than a fraudulent transfer claim. This is also valid if the creditor is a state authority or agency.
Furthermore, provided that there is no express agreement on the enforcement of civil court judgments/authority decisions between Hungary and the relevant foreign country (for example: US), a judgment of a court of the foreign country relating to a claim on the trust assets of a Hungarian trust will simply not be recognized and therefore be enforceable in Hungary. In such a case, the creditor/or foreign authority must take legal action as a part of a multilevel procedure in Hungary against the settlor and the trustee.
Let’s see the above in an example:
Mr. Goldmann established an EU trust registered in Hungary as a settlor. There is a creditor in the US who has an overdue claim against Mr. Goldmann, and the creditor successfully sues the settlor and the EU trust registered in Hungary as defendants in the US. Provided that there is no express agreement on the enforcement of civil court judgments between Hungary and the US, the judgment of the US court relating to the claim on the trust assets will simply not be recognized.
The creditor of Mr. Goldmann must take legal action as part of a multilevel procedure in Hungary against the trustee. At the end of this procedure the acceptance judgment of a Hungarian court would be enforceable in Hungary (but still through a separate enforcement procedure). The legal action may only be launched in Hungary in Hungarian language.
Can the authorities (foreign tax authority etc.) gain access to the trust assets?
Primus Wealth relocates your assets under international investment treaty protection. We set up structures in the EU under the protection of EU law and MIGA (Multilateral Investment Guaranty Agency) and take advantage of the vast network of double tax treaty and investment protection treaties. Due to the international investment protection shelters, the assets under Primus Wealth’s management cannot be expropriated without immediate fair market price compensation. It is important to point out that in offshore countries, like the Cayman Islands, BVI, Jersey, etc. this type of secure investment protection system does not exist. The protection provided by Primus Wealth covers both domestic and foreign affairs. Primus Wealth can make the system work for you. Our EU and US trust solutions can help you get your privacy back in the era of FATCA, CRS and the EU’s Beneficial Ownership Register. It is almost impossible for the authorities to gain access to your assets if you have an EU hybrid trust.
Mr. Petrov – living in Moscow -wanted to achieve full privacy for his assets. Primus Wealth recommended an EU based hybrid trust based in Hungary combined with a Luxemburg holding company. The protection provided by law for Hungarian trusts does not only extend to domestic affairs, but also to many interferences that may come from abroad. Provided that there is no express agreement on the enforcement of authority judgments between Luxemburg and Russia, a decision of a Russian authority on the trust assets will not be enforceable directly. In such a case, the authority must take legal action in Luxemburg first and then in Hungary.
(We have to note that Hungary also does not have bilateral treaty or multilateral convention in force regarding the recognition and enforcement of judgements among others with Kazakhstan, Uzbekistan, Indonesia, Malaysia, India, Israel, Japan, Hong Kong etc.)
I have an existing structure and the shareholder agreement under English law. Can this agreement remain under English law?
Yes, it can. Primus Wealth SA. Luxembourg as an international company provides services in different jurisdictions and under different governing law. The governing law depends on the structure and vehicle we use to achieve our clients’ aims. In the case of companies, family foundations and trusts the governing law must be the law of these vehicles’ jurisdiction. For example, if we set up a company in London, the governing law of the company will be English law. However, if the goal is to achieve high level of privacy protection through a trust, the trust must be set up under Nevada, South Dakota or Hungarian law. In these cases, the trust’s governing law will be the law of the situs. On the other hand, in the contractual relationships, the contracting parties enjoy absolute freedom to stipulate the governing law of the contract. Therefore, a company registered in Luxembourg or a trust having its situs in Hungary may choose English law as governing law in the contractual relationship. It may also freely choose the jurisdiction of the conflict settlement.
Let’s see the above in an example:
The client has a trust registered in Cyprus. The governing law of the trust is Cyprian law. This trust is subject to CRS reporting and it must declare its UBO under the EU beneficial owner registry regime. The trust is a 25% shareholder of a Cyprian holding company.
The client wishes to maintain his privacy and doesn’t want to be registered as UBO of the Cyprian Holding Co. The Cyprian trust must be moved to Hungary and put under the Hungarian hybrid trust regime, which is able to protect the client’s privacy and assets and at the same time comply with the EU BO regime. The trustee, situs, and governing law of the trust must be changed to Hungarian. However, the underlying company’s and contract’s governing laws and the place of conflict settlement remain intact.
Is it possible to avoid double taxation?
Of course, you do not have to pay the tax twice. Our goal is to use effectively the tax benefits and minimize or decrease to zero the amount of the payable tax. If the structure cannot be feasible by decreasing the tax to zero, then we take advantage of the double taxation treaty system. One of the most important aims of wealth planning is to eliminate the transfer and inheritance taxes for assets located worldwide. Primus Wealth offers very effective tools in order to achieve this aim using the double taxation treaty networks. The solutions provided by Primus Wealth are exempt from double taxation.
Let’s see the above in an example:
Our client, Mr. Lopez was incurring double taxation due to the poorly designed offshore structure based in the Cayman Islands. Although we could have recommended other offshore destinations, we chose an EU registered trust structure in order to minimize the amount of the payable tax using the favorable double tax treaty system. Mr. Lopez established a Hungarian trust and transferred 100% shares of an LLC with tax residence in the US. The trust provides a loan to the LLC and accordingly the LLC. must pay interest on the loan. According to the Convention between Hungary and the US for the avoidance on double taxation (DTT) „Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State.” The DTT provides guidance for taxation, therefore the solution will be exempt from double taxation. In addition, the incoming interest is tax free.
Do I have to pay tax when I transfer assets under a trust shelter?
It depends on the selected jurisdiction and the location of the trust assets. Nevertheless, Primus Wealth seeks to achieve a tax-neutral treatment for the transferred assets. Therefore, in most of the cases the transfer does not trigger taxation.
Setting up a trust and transferring assets into an EU trust registered in Hungary is fully tax free, there is no tax or a similar type of financial charge or burden levied on the trust. The trust enjoys several tax benefits: for example, any incoming financial yield, dividend, capital gain is tax fee. Asset distribution is separated into two parts:
- capital distribution, which is always tax free
- yield distribution, which is withholding tax free if the beneficiary is a legal entity or subject to a maximum 15% withholding tax if the beneficiary is a private individual.
Let’s see this example by illustration:
Can I obtain a second citizenship or a residence permit? What are the benefits of a residence permit?
Yes, following a successful KYC procedure Primus Wealth can prepare and manage your application for a residence permit or citizenship in the following countries:
- United Kingdom.
In order to ensure the privacy of its clients, Primus Wealth offers assistance in obtaining a residential permit in the EU, UK, Canada and Switzerland, which enables clients to obtain a residential address, as well as a tax number in the above countries. With a permanent residential address, the client acquires a local tax number, as the permanent residence creates tax residency. In many countries, clients may enjoy non-domiciliation or lump sum tax regimes. Any reporting financial institutions (such as Primus Wealth) operating in countries that have adopted the CRS must report to their local tax authority any accounts that are directly or indirectly owned by natural persons with a residential address in another country that has adopted the CRS. But the permanent tax residency qualifies the client to be a domestic person, therefore the service provider must change in its internal files the CRS status and the client won’t be reported if it qualifies as a domestic person.
Let’s see an example for the CRS status:
Our client, Mr. Tong is a Malaysian citizen and has an EU trust registered in Hungary. Accounts opened for the trust assets by Primus Wealth – as a licensed professional trustee – are considered as reportable accounts. The owner of the equity interest is considered to be any person treated as settlor (ie. the client) or beneficiary of all or a portion of the trust assets. As a consequence, the settlor, and the beneficiary qualify as reportable persons, whom the licensed professional trustee company is bound to identify and report. At the same time, Primus Wealth arranges for a residence permit for the client. In case the settlor of the trust is a natural person who holds a Hungarian residential address, then Primus Wealth is not bound by the above-described identification and reportingrequirements as the direct or indirect owner of the bank account holds a domestic residential address, which places him/her outside of the scope of the CRS.
How do I physically transfer my assets to the trustee?
A) You can transfer the bankable assets via bank or security transfer following the establishment of the selected entity (trust, foundation, investment fund).
B) In the case of nonbankable assets, Primus Wealth takes care of the registration of the ownership transfer in any (public) register.
Does Primus Wealth apply investment guidelines
Yes, Primus Wealth applies investment guidelines. The general investment guidelines determine how the assets shall be managed. Primus Wealth manages the assets in compliance with the preliminary assessment of the suitability taking into consideration the risk classification of the client as follows:
- Low risk: seeks risk-free yields in order to achieve higher profit (approximately 5% yield).
- Medium risk: seeks higher yields than a risk-free yield but accepts losses in order to achieve higher profit. At the same time, it avoids transactions that may result in a significant loss of its investments (approximately 8-12% yield).
- High risk: seeks higher yields than a medium risk but accepts losses in order to achieve higher profit. (Possible products: long-maturity bonds, share and derivative investment funds, corporate bonds, shares, stake in a business, etc.) – approximately 15-16% yield.
- Ultra high risk: approximately 20% yield.
Let’s see how our investment record worked in practice in the past few years:
Asset protection: what is this and why do I need it?
Asset protection makes it very difficult for a creditor to lay claim on your assets. If you choose an appropriate trust for your savings, you can enjoy maximum asset protection. If the trust assets are highly secured against all sorts of claims against the settlor, trustee and beneficiary, you can lean back and relax. This ensures that Primus Wealth is able to provide maximum asset protection for its clients. There are three layers of asset protection: (a) domestic, (b) federal (EU) and (c) international investment treaty protection.
At the domestic level the creditors of the settlor can claim assets from the trust assets only if they can prove beyond reasonable doubt in a court procedure that the asset transfer to the trust was fraudulent. The procedure must be done in Hungary using Hungarian language (see above point 2). The creditors are not entitled to lay claim to any part of the trust assets. Creditors of the beneficiary may only submit a claim against the trust assets from the point in time when the trust assets are due to be distributed to the beneficiary.
At federal level the investments are under the protective shelter of EU law. EU law is supreme in the EU and the professional trustees must hold appropriate license and fulfil strict requirements regarding their employees and operations. EU law protects the personal rights, privacy, ownership rights and the taxpayer’s rights to enjoy the freedom of establishment, among others.
At international level, the DTT, investment protection treaty networks and MIGA (Multilateral Investment Guaranty Agency) protect the investments. Hungary also has 34 bilateral investment protection treaties with third countries outside of the EU. All these treaties are approved by the EU.
How does asset protection work in practice? How can I protect my wealth against aggressive creditors?
If the creditor is very aggressive, Primus Wealth selects a jurisdiction for the protective shelter where there’s a lack of dual ownership concept (EU level of the asset protection). The result is that the creditors will have no access to the trust assets.
Under an Anglo-Saxon type of trust, including a trust established under the jurisdiction of the US, the trustee holds the legal title (legal ownership) over the trust assets, appearing as the owner to the outside world, while the beneficiary named in the trust deed holds the beneficial title (equitable ownership) over the trust assets (ie. dual ownership).
Under the civil law system, only the trustee obtains ownership over the trust assets. In civil law jurisdictions, ownership is absolute and cannot be split; hence, there is no distinction made between legal and beneficial title (lack of dual ownership). Due to the lack of dual ownership concept, no creditor can have any claim successfully enforceable against the trust assets other than a fraudulent transfer claim. The trust assets are separated from the personal assets of the trustee and may not be mixed with other trust assets managed by the trustee.
It is extremely burdensome for a creditor to lay claim on the trust assets due to the domestic level of the asset protection – creditors are separated from the assets.
Let’s see an example:
The client Mr. Sarapov as settlor establishes an EU trust registered in Hungary and appoints his children as beneficiaries. Primus Wealth acts as professional licensed trustee and the transferred assets are 1 million USD.
The trustee’s spouse or personal creditors and creditors of other trust assets managed by the trustee are not entitled to lay claim to any part of the trust assets.
Creditors of the beneficiary may only submit a claim against the trust assets from the point in time when the trust assets are due to be distributed to the beneficiary in accordance with the provisions of the trust deed.
The creditor of Mr. Sarapov can claim settlement from the trust assets only if he can prove beyond reasonable doubt in a Hungarian court procedure that the asset transfer to the trust was fraudulent.
While ensuring that the settlor has control over the assets, the assets are protected.
How long does it take to set up the trust structure?
It depends on the cooperation and contribution of the client – especially during the KYC procedure which is unavoidable and is the primary part of our work.
Following the KYC of the client, Primus Wealth can set up the structure and present the client with a tailor-made solution. If the client is satisfied with the structure, Primus Wealth can prepare the trust documentation, which takes a maximum of 5-7 days. Once the parties sign the trust documentation, Primus Wealth can arrange for the set up of the trust: open bank accounts for the trust assets, apply for registration of the non-bankable trust assets etc. The banks treat Primus Wealth as a ﬁnancial institution and as a licensed professional trustee company; therefore, opening a separated bank account for a trust takes just 2 banking days if there are no special KYC circumstances.
Let’s see the illustration of the set up of Mr. Smith’s trust structure:
Why is privacy protection important to me?
FATCA, CRS (Common Reporting Standard) and EU beneficial ownership register have created a legal environment where privacy is scarce: ex-spouse, authorities, business rivals can see your private business data at any time. Primus Wealth helps its clients get their privacy back whilst they are able to maintain strong control over their assets.
The European privacy protection regime is uniquely designed to protect the UBO’s identity even though the EU beneficial ownership register leaves very little room for maneuver for those who prefer to maintain their privacy in present times.
A good example for an effective privacy protection structure is the hybrid trust in Hungary using the asset management foundation (“AMF”). The AMF is a unique hybrid vehicle mixing the trust and foundation concept. The regulation regarding the AMF includes a legal presumption with a special view of the beneficiary of the AMF which results in an unconventional outcome in determining the beneficial ownership of a hybrid trust managed by the AMF, given that only the trustee (in this case the board of foundation) is classified as the UBO. However, asset management foundations do not qualify as financial institutions and are not obligated to report any beneficiaries, even in the case of distribution. The reporting financial institutions classify AMF as a passive non-financial entity, whose beneficial owners are the members of the foundation board.
Let’s see the hybrid structure:
Which is better for my beneficiaries: inheritance or trust?
A common question for estate planers is: which is better for beneficiaries, an inheritance or a trust? The answer for this question is: it depends on the applicable legal system, but generally a well-structured trust can be the simplest and most efficient solution. Leaving your assets in a properly drafted and managed trust offers protection against a myriad of situations your beneficiaries could encounter. Our mission is to help our clients plan and achieve their life and legacy goals by offering professional advice. Trusts are one of the most important but not exclusive means of asset transfer between generations.
Probate proceedings show that in general it takes a long time to ascertain the content of the estate and the identity of the heir. This is because in every inheritance case, the affected people need to wait for the approval of the state regarding the estate and its new owners. As a result, the time between the death of the testator and the recognition of the acquisition of ownership by the state may be rather prolonged, in extreme cases it may take several years.
In the case of a so-called “multi-jurisdictional family”, when the members of the family live in the territories of different jurisdictions and their assets and investments are in different countries, a trust can be an efficient solution for preventing any jurisdictional collision if the settlor dies and there is the need to conduct probate proceedings in several countries.
Let’s see an example of our client:
Mr. Smith passed away in California in the beginning of 2019 without having created a trust. He had assets in the US and in Europe as well. Mr. Smith had dual citizenship (US and Hungarian). There was a legal dispute between the heirs and the probate procedure was still ongoing both in Hungary and in California. What should have Mr. Smith done?
Mr. Smith should have created a trust in his life and should have appointed the beneficiaries and stipulated the time of capital/yield distribution in the trust deed, making it subject to a particular date, age, condition, or event. In addition, if he wanted to deviate from the obligatory inheritance rules, he could have done it through a trust.
An excellent choice could have been a Hungarian trust, because Hungary has an exceptionally favourable legal environment: the trust assets are not part of the estate; therefore, the assets of the trust are not involved in the endless probate proceeding.
Is the trust be bound by the rules of inheritance?
It depends on the jurisdiction. But overall, there are jurisdictions where the trust is not bound by the rules of inheritance. We recommend that an estate planning strategy be an integral part of our client’s overall wealth management plan.
A trust can be a well-designed and institutionalised solution for providing care for incapacitated relatives, persons of minor age or relatives without an independent income, ensuring that the surviving spouse, the minor or the incapacitated family member will have appropriate benefits, education, etc. after the death of the settlor. If the client chooses an optimal trust solution, he can deviate from the obligatory inheritance rules, freely deciding on who, at what time and to what extent will receive a share of the assets and their yields.
Our client Mr. Jones has a well-managed medium-sized enterprise and has children from several relationships. The relations among the potential heirs are not reassuring and there is good reason to suppose that there will be a dispute about the estate. Mr. Jones established a trust to prevent such disputes and the loss of assets resulting from it. He transferred the business shares of his company into the trust and appointed a professional trustee to manage the business. He deviated from the inheritance rules and appointed his children as beneficiaries but left out his current wife. Although Mr. Jones is obligated to provide a compulsory share for his wife, he can properly omit her from the trust deed. With this trust, Mr. Jones can mitigate the risk of a family feud in connection with the assets and there is a greater chance of keeping the assets undivided and continuing the family business successfully. Should Mr. Jones die, his company will be undivided, and it will not be involved in an inconvenient probate.
I am planning to get married. Which is better for me: prenuptial agreement or trust?
Prior to marriage, it is important to consider how our personal assets can be protected in the case of a divorce. A frequently used method to achieve this is a prenuptial agreement. However, there are multiple problems associated with prenuptial agreements. A prenuptial agreement is a consensual agreement between a couple before marriage. For a person about to marry someone, asking for a prenuptial agreement is often difficult; it may lead to the marriage being cancelled. A prenuptial agreement requires full financial disclosure. Very few couples are willing to share every aspect of their financial affairs with each other. A prenuptial agreement, if wrongly prepared, can be invalidated by a court upon application by a party in a divorce. Even if a prenuptial agreement is correctly drafted, there is no guarantee that it will be enforced.
Primus Wealth Group offers the opportunity for future spouses to fully protect their assets without the need for a prenuptial agreement by using trusts.
Our client Igor before his marriage acting as a settlor is able to create a trust by transferring his assets into the trust. By doing it so, an irrevocable trust can be created, which ensures protection from the creditors, claimants of lawsuit and of course the potential future ex-spouse. The beneficiary of the trust may be freely selected by the settlor, this may even be Igor itself.
Can the trust assets be used to secure a loan? Can they be used as collateral?
The trust assets can be used to secure a loan. However, the trustee can use the trust assets and act only within the framework of the trust deed and may not extend beyond its powers. Therefore, the best term for this is: “the trustee can charge the assets”. The trustee may apply for credit charged on the transferred assets and borrow or charge the trust assets (or the investments which belong to the trust assets).
Furthermore, the trustee may invest the funds and shares, as well as real estate, non-listed securities, works of art or precious metals belonging to the trust assets, and to terminate such investments at its discretion, or change the investment portfolio.
Mr. Wang established a trust acting as settlor and transferred cash contribution into the trust with the intention of buying a company and he wanted to improve the capitalization of the acquired company. Therefore Mr. Wang laid down in the trust deed that the trust assets can be used to secure a loan. Then Primus as trustee purchased the shares of the company using one part of the transferred cash contribution. For the capitalization of the company the trust provided a loan using the transferred assets according to the trust deed.
Is it worth to establish an LLC under the trust? Who controls the company if it’s owned by a trust?
The LLC is a simple and easy way to implement and use a good structure, therefore we can say: yes, it is worth it. LLCs work well when we are setting up the asset protection structure ahead of any possible issues the client may face. LLCs are used to protect liquid assets, real estate, business interests, collectibles, and intellectual property. Higher level of protection requires a combination of LLC and trust. It usually makes little difference where an LLC is organized. Primus regularly uses LLCs under the trusts we manage as further asset protection vehicles and uses always a tailored solution for our clients. LLCs under the trust are controlled by the trustee which means Primus is entitled to exercise the voting rights as a trustee and to appoint the executive officers of the company belonging to the trust assets in compliance with the provisions of the trust deed.
Asset transfer as capital is tax exempt and there is complete freedom to retain control over the assets and to revert the assets back to the client.
Mr. Kovac was involved in a wide range of business activities. He wanted to set up a company, but he did not want to be directly involved in the transaction. He formed a standalone trust acting as settlor – as well as beneficiary – and transferred cash contribution as transferred assets into the trust. The trustee -representing the trust – established an LLC under the umbrella of the trust using the cash contribution by the company registration. The asset transfer as capital contribution into the new company was tax exempt.
How does the trustee control the economic activity (corporate governance) of the transferred company (LLC)?
If the trust assets include participation or shares of LLCs, the trustee may exercise rights relating to the corporate governance of the participation/share of LLCs belonging to the trust assets. However, the extend of these rights depends on the applicable legal system. Under the civil law systems, the trustee obtains ownership over the trust assets, the ownership is absolute and cannot be split. As owner the trustee can exercise many rights regarding corporate governance, but has not complete economic control (taking into consideration the management of the company).
In civil law systems the trustee may exercise for example the below rights relating to the corporate governance:
- appointment and recall of the managing director, determination of the mechanism for appointment, as well as exercising the employer’s rights regarding the managing director;
- appointment and recall of the supervisory board, determination of the mechanism for appointment;
- define the corporate business targets;
- appointment of the management;
- determination of the remuneration guidelines of the management, supervisory of the management activity and taking the necessary steps in connection with the supervision;
- the evaluation and remuneration of the managing director(s), the supervisory board and the management;
- definition of the risk management guidelines, which ensure the assessment of the risk factors, the suitability and management of control mechanisms and the supervisory systems, and the legal compliance;
However, using a protector can be a specific way to control the economic activity of the transferred company (assets) as follows:
Protector means a person, who performs the supervision of the trustee’s activity and exercises the powers and the rights granted under the trust deed. For example, the settlor is entitled to appoint a protector whose prior consent is required to alienate the trust asset or any part of the trust assets.
Are the transferred assets and investments insured?
Yes, Primus Wealth maintains an indemnity insurance policy provided by Lloyds Syndicate, resulting in effective financial protection for our valued clients. The insurance covers our Group activity worldwide which functions as a safety net for our clients.
In addition, all of our colleagues have master’s degrees in law or economics or both. We employ domestic and international tax advisors, LLM degree lawyers, highly trained chartered accountants and experienced financial market analysts.
Mr. Smith wished to conduct commercial trading while optimizing its tax liability. However, Mr. Smith is a prudent investor, extremely careful and he prefers insured investments. Primus Wealth presented its insurance policy provided by Lloyds Syndicate and Mr. Smith was reassured. Then he formed a standalone trust acting as settlor and transferred cash contribution into the trust. He sleeps now well even when markets are volatile because his investments are insured.
Am I able to access my funds any time? When can the investments be liquidated? How long until I can gain access to my funds?
Of course, you can access your funds. How long it takes mainly depends on the structure, but Primus Wealth Group always strives to create the best tailor-made solution for its clients.
In the case of investment fund investment – where the investors have access to professionally managed portfolios of equities, bonds, and other securities – your funds can be released at the end of the month. However, there are some investment vehicles – for example hedge funds – where the lock-up provisions restrict an investor’s ability to withdraw capital for a specific period (generally one year). It is the same situation for collective investment trusts (“CIT”) that are longstanding vehicles used by Primus Wealth in order to commingle the assets of qualified trusts for investment. There are also cases where the legal requirements prescribe the length of the investment. Good examples are the residence permit programs.
With an individual trust, the nature of the asset can influence the duration of the release. The administration carried out by Primus Group is fast and efficient. Liquid assets can be released immediately, but for individual trusts the release can take 1-2 weeks due to administrative reasons (our legal team must prepare the necessary documentation).
Let’s see an example using UNIT trust:
Our client, Mr. Ivanov wanted to release the trust assets because he needed liquid assets for a new investment. Mr. Ivanov has a UNIT trust managed by Primus Group. Using a UNIT trust is a very transparent investment from the client’s perspective, because in the investment policy, the risk category, accounting (base) currency, investment concept, the minimum increment of proportion unit, the benchmark index, the maximum portfolio exposure, and the applicable investment instruments are determined. In our example, Mr. Ivanov wanted to release the assets following one a half years of investment period at the end of February 2020.
With the UNIT trust, any assets transferred by the settlor will participate in the investment from the first business day of the next month following the actual transfer. The allocated unit of investment is calculated based on the net asset value of the trust applicable on the last business day of the actual month. The minimum holding period is the first 12-month period following the initial date of investment. Any distribution of the transferred assets to the beneficiaries during the minimum holding period initiated by the settlor is subject to a 2% handling fee. In our case following the expiry of the minimum holding period, the handling fee shall no longer be applicable.
Mr. Ivanov initiated the distribution of the Transferred Assets by sending a Letter of Wishes in a Written Statement to Primus Wealth at the beginning of March.
The day of distribution of the Transferred Assets shall fall on one of the first three business days of the quarter of the calendar year following the date by at least thirty days, when the trustee receives the Letter of Wishes from the Settlor.
Therefore, Mr. Ivanov accessed his assets at the beginning of April 2020 and so he could successfully start his new business.
Must part of the transferred assets be in liquid assets (in order to cover costs)?
In most cases, this question is not an issue, because the transferred assets are liquid using investment funds or UNIT trusts. Therefore, the minimum amount is always available to cover the maintenance and administrative costs.
If the client sets up an individual or a hybrid trust and only non-bankable assets are transferred into or kept in the trust assets – including any assets which directly or indirectly are transferred into or kept in an underlying company as a part of the trust assets -, an amount must be paid in advance to cover the costs and fees of the trust for the next two years. Primus Group is entitled to charge all fees, expenses and charges on the transferred assets.
How can I supervise the investment of the transferred assets? What statements will I receive in connection with my investments and how frequently will I receive them?
Primus Group has a wide-ranging obligation to provide information regarding the investments, therefore, our clients may always monitor the activity of Primus Group in respect of the trusts and investments. Primus Group provides complete information and accounts to its clients according to their request, but at least once a year if non-bankable assets are transferred into or kept in the transferred assets.
If the investment includes listed shares or cash or any bankable assets (securities, any tradable financial instruments etc.) Primus Group provides complete information and accounts monthly to our client or to the person indicated by the client (protector, beneficiary). If you have a UNIT trust Primus Group sends quarter year statements for your investment. There are some specific investment funds where the client is able to check the daily exchange rates. All statements are sent in written form.
If the portfolio management of the assets are performed by a third party in the framework of an outsourcing agreement, then Primus Group provides complete information and accounts monthly to the client the information and statements received from the party once a month.
Let’s see our monitoring structure:
Am I permitted to provide instructions for making certain investments?
Of course, but it depends on the nature of the investment.
If the assets are in an investment fund, the trustee may not receive or act on unique instructions from the client. On the other hand, the client can exercise broad instructions rights if he has a separate LLC. LLCs work well when we are setting up the asset protection structure ahead of any possible issues the client may face. LLCs are used to protect liquid assets, rental real estate, business interests, collectibles, and intellectual property while the client is able to instruct the business decisions directly.
With an individual trust the client as settlor may not give direct instructions to the trustee. However, the trustee can take into account the client’s will: let’s see an example.
Mr. Lopez established an individual trust. On the date of signing the trust deed, Mr. Lopez did not appoint the beneficiaries in the trust deed. However, the deed contains that the settlor is entitled to appoint the beneficiaries in the form of „Letter of Wishes” and shall be entitled to determine the proportion of the beneficiaries, the date and conditions of the establishment or the termination of the title. Although Mr. Lopez may not instruct directly the trustee, using “Letter of wishes” the trustee will consider his wishes.