Liechtenstein Trust: Differentiation from other trust forms

As an alternative to the Liechtenstein Trust, the following options for asset management, asset succession and asset protection can be considered in individual cases:

Expertise

Fiduciary trust

The fiduciary trust (also known as a trust transaction or fiduciary legal transaction) is characterised by the fact that it transfers more rights to the trustee externally than he is allowed to exercise internally according to the agreement with the settlor.

The fiduciary relationship can serve the interests of the fiduciary (so-called self-interested fiduciary, e.g. transfer of ownership by way of security) or the interests of the settlor (so-called third-party fiduciary, e.g. administrative fiduciary or debt collection assignment).

In a genuine fiduciary relationship, the items or rights (the trust property) are transferred to the trustee in full. In economic terms, however, the trust property belongs to the assets of the settlor. In this case, the trustee acts in his own name, but at least partially in the interest of a third party.

In the case of a non-genuine trust relationship, the settlor remains the owner of the property or holder of the rights. However, the trustee is authorised either to dispose of the trust property in his own name or to act as the settlor’s representative.

A fiduciary transaction can be concluded openly (recognisable to everyone) or covertly. A concealed trust transaction is also recognised and effective; in particular, it is not a sham transaction as the legal effects are intentional. The situation is different if the parties involved believe that the effects would also occur through a fictitious transaction, for example through a transfer of ownership as a sham in order to save an asset from being seized by creditors.

Foundation

For the legal structure and practical application of the Liechtenstein Foundation, see our explanations at www.liechtenstein-stiftung.eu

Establishment

For the legal structure and practical application of the Liechtenstein Establishment, see our explanations at www.treuhand-liechtenstein.li

Trust enterprise (trust reg)

For the legal structure and practical application of the trust reg, see our explanations at www.treuhand-liechtenstein.li

English trust (Anglo-American trust) Common law trust

The definition of an English trust corresponds to that of the Hague Trust Convention.

For the legal structure and practical application, see:

www.bj.admin.ch > trust law > vn-ber-d

www.gesetze.li > konso > pdf

Note: The English authors / commentators and the English courts are still unable to establish their own definition of the English trust due to the complexity of the trust and ultimately follow the definition of the Hague Trust Convention.

Differences between the common law trust and the FL trust

  • The FL trust is created by contract, whereas the common law trust is established by a unilateral legal transaction.
  • While the trustee of the common law trust acquires full ownership of the trust assets, the FL trustee only has a right in rem to dispose of and manage the trust assets.
  • The FL trust is unlimited in time, while the common law trust is subject to a limitation by the rule against perpetuities.
  • In the FL trust, income may be accumulated freely, whereas in the common law trust (accumulation trust) time limits are set.

Offshore Trust

Many offshore jurisdictions do not comply with OECD standards (e.g. Panama, Marshall Islands, Caiman Islands, British Virgin Islands, Anguilla, etc.). These countries have not joined the international agreements (e.g. on the exchange of information).

Trusts established under the laws of an offshore jurisdiction are usually not recognised under legal and tax law in the settlor’s country of domicile (black lists/red lists), with the result that the trust assets continue to be attributed to the settlor. The trust is also often regarded as non-existent in the beneficiary’s country of domicile, with negative consequences for the beneficiary.

Be careful with offshore trusts! Pay attention to the black/red lists and the Financial Action Task Force (FATF) regulations that apply in the country of domicile of the settlor and the beneficiaries. In most cases, offshore trusts do not lead to the desired results.

Note: Trust jurisdictions often differ in individual cases with regard to the structure of asset protection and the recognition of foreign compulsory portions.

What alternatives are there in your specific case? Which trust jurisdiction is suitable for you?

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