Q. What is the best practice in estate planning for maintaining control over my Cyprus / UK or worldwide assets while making provision for inheriting to family members, business partners or loved ones upon my retirement or passing of?
A. The short answer is set up a Cyprus International Trust which will allow you avoid probate actions taking place in court upon death in the absence of an executable Will. When you hold assets under management currently generating revenue or you are invested in real estate / hold bank accounts, bonds, stocks manage companies, hold possession of private antiquities or any other form of equity of value with a Cyprus International Trust you can successfully maintain the control and management of your assets during your lifespan while directing your Trustees how and when to distribute the assets to the beneficiaries via a letter of wishes. Our firm will always use a corporate Trustee duly licensed by the CBA to offer trustee and fiduciary related services which is considered the best practice in the profession for the time being.
Q. Can I transfer assets to my underage children without allowing them to manage, own and/or benefit from the assets till they become of age and/or till they reach a specific and desired age cap?
A. Yes you can via setting up a Cyprus International Trust which will make special provision for such a condition, instructing the Trustee to act as the assets’ custodian till the pre-required conditions are met.
Q. Am I bound by law to distribute my assets on a “per stripe” formula and if so what part of my estate can be freely disposed / reserved to family members?
A. According to the Administration of Estate Law Cap. 189, yes you are obliged to distribute your estate on a per stripe formula only in case where you draft a Will or where your estate is administered via a probate action upon your passing of. Different percentages apply for disposed and non-disposed assets according to the degree of lineage. However, if you choose to set up a Cyprus International Trust, you may choose which part of your estate is managed, distributed or assigned to the various classes of beneficiaries and such provision will always supersede your obligations under Cyprus domestic – succession law.
Q. How can I secure that all actions undertaken by my Trustee shall be executed according to my letter of wishes and/or intended mandates, especially upon my passing off?
A. First off, any Trustee nominated to manage and administer an estate through a Cyprus International Trust owes a fiduciary duty of care to the settlor to act without professional negligence or fraud to the best of his abilities in good faith to promote, serve and satisfy the wishes of the settlor. In a discretionary Trust however, sometimes various scenarios or occasions shall rise where no specific mandate has been communicated to the Trustee and it is up to the Trustee to handle the situation according to the discretionary powers granted to him via the settlement deed. Additionally and most importantly, the settlor shall nominate a Protector whose role is to monitor and supervise all acts and decisions undertaken by the Trustee. A Protector should preferably be an entrusted family member or a person very closely tied / related to the settlor as he will step in the settlor’s shoes especially upon the settlor’s passing off and/or period of mental / health incapacity.
Q. Is it possible to nominate a separate person to act as a fund manager to the Trust estate portfolio while appointing a lawyer to act as a Trustee to administer and handle all corporate / legal issues of the Trust?
A. Yes you can. In this case there will be Co-Trustees nominated and appointed in the settlement deed and each of the Trustees shall assume separate roles, i.e the fund manager Trustee shall be responsible to manage and invest the Trust’s assets as well as distribute profits to the beneficiaries while the lawyer Trustee shall be responsible to administer the estate, conform with governmental authorities for accounting / auditing, compliance and tax purposes and resolve any legal disputes and/or corporate matters that need to be dealt with in relation to third parties such as creditors, contesting successors etc.
Q. What are the applicable legal fees including expenses for setting up a Cyprus International Trust and what are the annual management fees payable to the Trustee for his services?
A. Our firm charges a minimum fee of EUR.1000 plus VAT to draft and execute a settlement deed for setting up a Cyprus International Trust. If however the provisions of the CIT need further customization due to complicated structuring requirements our firm will communicate prior to any engagement such an event and the charge shall be agreed on a time spent basis according to our fixed hourly rates. It is noted that any specific action that needs to be undertaken to convey assets into the CIT including but not limited to the land registry, motor vehicle registrar, Registrar of Companies, Cyprus Stock Exchange and or banking institutions shall be charged as an additional service plus expenses. There is a one off stamp duty cost when registering the Cyprus International Trust with the Cyprus Bar Association currently set at EUR.480 for the Trust to be filed with the CBA’s Trusts’ registry and acquire a registration number. Our firm’s policy for annual management fees is an in advance payment at the end of each fiscal year for EUR.1000 plus VAT for taking all actions to administer and manage the estate as well as to ensure the CIT conforms with regulations and its tax obligations with the Cyprus Authorities. If the asset volume and/or legal complexities of the CIT are deemed to be disproportionately higher than the charged amount for the time spent in providing trustee related services, we will communicate updated terms of engagement with you and agree a fair amount to cover the increased workload.
Q. What about confidentiality and protection of anonymity related matters?
A. A Cyprus International Trust is an estate planning corporate vehicle that will allow you to maintain your and/or your beneficiaries’ anonymity and confidentiality with respect to third party creditors, contesting successors and in general from any legal entity or physical person who attempts to gain knowledge or acquire interest of your estate planning matters; exemption to the norm is the issuing of a disclosing court order which may force the Trustee to disclose specific information related to the Trust Settlement Deed to the extent where such information may be proven via court proceedings to be linked to fraudulent activities, negligent misrepresentations and illegitimate acts or omissions. A CIT is not filed with the Registrar of Companies as it is not considered a company and therefore it is not available to the public domain neither the registration number granted by the CBA is available on a public list.
Q. Should I be worried from third party claims including secured / unsecured creditors should I choose to set up a CIT?
A. It depends. If you have settled assets into the Trust at least 6 months without having prior knowledge of claims against the settling assets by an unsecured creditor then such an asset will be protected from any third party claims at a later stage unless a court of law issues a Judgment forcing the Trustees to release the said asset for forfeiture /encumbering purposes if it can be proven that it was fraudulently settled into the CIT in the first place with the purpose to defraud the settlor’s creditors. The onus of proof lies on the creditor in every case where a claim is made. Now, where there is a secured creditor usually the asset will be encumbered with a charge or memo for the benefit of the creditor and can be settled into the trust only with the prior written consent / waiver of the creditor.
Q. Can a contesting successor from a different country of origin successfully challenge the provisions of the trust and claim beneficial ownership of the total or part of my assets settled into the Trust fund?
A. No he cannot. Reason is that a Cyprus International Trust is regulated under Cyprus governing Law and the Law regulating international Trusts of 1992 will not prioritize or recognize other legislations from different jurisdictions to the detriment of the domestic legislation.
Q. Any tax incentives or benefits when setting up a Cyprus International Trust?
A. Income, gains and profits generated abroad are tax exempt on an income, capital gains and SDC basis and do not bear any withholding tax on interest or dividend payments under a CIT structure for non-Cyprus tax residents; Profits generated by the disposal of shares or other financial instruments are tax free under a CIT set up;; Interest tax is locked at 3% for Special Defence Contribution (SDC) instead of 17% payable by Cyprus Companies when dividends are distributed by a CIT to Cyprus tax residents; CITs may be also used for tax optimization purposes on worldwide assets and tax avoidance on foreign chargeable gains and be treated as exempted property for UK non-domiciles on an income, capital gains and inheritance tax basis that would otherwise be taxed on the arising basis of taxation by the HMRC in the UK post 06/04/2017 as UK non-domiciles (a person who resides in the UK for the last 15 out of 20 tax years but has a different domicile of origin) shall be considered as a UK domicile for taxation purposes and shall no longer be eligible to pay IT, CGT or IHT on the remittance basis of taxation. For more information on non-doms – UK related matters please contact us specifically.
Q. Any other benefits that I should be aware of when setting up a CIT?
A. Any type of investment via the setting up of a CIT of €2.000,000 will qualify for acquiring a Cyprus passport (citizenship by investment) and gain access to EU market post Brexit under a dual passport regime; The only criteria is that at least EUR.500,000 are invested in purchasing a dwelling, apartment or villa and such property must be maintained at all times, whereas the remaining investment can be successfully liquidated and/or withdrawn from Cyprus soil after 3 years have elapsed from the date of acquiring a Cyprus passport. It is noteworthy that in Cyprus, the investor is not obliged to pay any government tax duties or levies for acquiring a passport which puts Cyprus in an advantageous position in comparison to its competitive neighbors.
If you wish to acquire further information or in case you are interested in a particular field, tax or legal matter or procedure in relation to your estate planning affairs please leave us a message at [email protected] and an expert member of our team shall contact you shortly