Use and advantages of the Liechtenstein Trust in practice

With a Liechtenstein Trust, you can legally, flexibly and efficiently realise almost all desired objectives in an optimal and legally secure manner, taking into account international tax and protection agreements.

Expertise

• The most common reasons for using a Liechtenstein Trust
• Organisation of the Liechtenstein Trust in practice
• Advantages of the Liechtenstein Trust compared to other jurisdictions

The most common reasons for using a (Liechtenstein) Trust

The most common reasons are:

• Long-term protection of family assets
• Estate planning and business succession
• Organisation of asset protection (creditor protection/protection against legal challenges)
• Asset protection in the event of political and economic uncertainties
• Consolidation of assets
• Flexible and fast amendment of the trust agreement and the memorandum of wishes
• Planning emigration / immigration
• Tax optimisation
• Anonymity Confidentiality
• Fiduciary business management (e.g. due to market restrictions or for reasons of anonymity)
• Fiduciary asset management until the beneficiary reaches the age of majority
• Avoidance of conflicts of interest
• Transfer by way of security
• Influencing an inheritance over several generations
• Establishment of a contract in favour of third parties (in Anglo-Saxon law only possible with a trust)
• Philanthropy

Organisation of the Liechtenstein Trust in practice

In practice, the Liechtenstein Trust can be structured as:

• Asset protection trust (The asset protection trust is intended to protect the assets from creditors and preserve the previously appointed beneficiaries).
• Blind trust (in a blind trust, the beneficiaries are not known at the beginning, but new beneficiaries can be added later).
• Complex trust (The trustee can distribute the existing or newly acquired assets in the complex trust or accumulate them in the trust beyond one tax year. The complex trust can also exist for charitable purposes. The tax deduction for charitable gifts is generally permitted).
• Constructive trust (arises when a person has a claim to assets or takes possession of them under certain circumstances and it becomes externally recognisable that this person is holding the assets for others. The constructive trust regularly arises without a trust deed or last will and testament, but rather de facto from the circumstances. The special obligations of the trustee arise from the fact that the assets are held for other persons).
• Discretionary trusts (the group of beneficiaries is only described in the trust deed and is not precisely defined. The trustee may have considerable influence in narrowing or expanding the circle of beneficiaries).
• Dynasty trust or generation-skipping trust (family trust, created as a normal express trust, but the beneficiaries are not the children of the settlor, but the grandchildren).
• Express trust (The express trust is created by the transfer of assets by the settlor and the assumption of the assets by the trustee. The most important sub-forms of the express trust are the testamentary trust, inter vivos trust, unit trust and purpose trust. In contrast to the express trust are the resulting trust and the constructive trust).
• Fixed trust (the circle of beneficiaries is precisely defined, the trustee cannot or can only slightly extend or limit this defined circle of beneficiaries; also called fixed interest trust).
• Freezer trust (only surpluses are distributed from the trust to the beneficiaries).
• Grantor trust (The grantor trust primarily serves the interests of one or more beneficiaries, partly of the grantor / settlor himself. The grantor / settlor often has a partial or full right to revoke and/or amend the legal basis of the trust at any time, in particular with regard to the beneficiaries of the trust. The grantor trust is generally not a legal entity under tax law (not itself subject to tax). The term grantor trust is used ambiguously (see also revocable trust below).
• Hybrid trust (The hybrid trust combines elements of the fixed trust and the discretionary trust).
• Inventive trust
• Inter vivos trust or living trust (trust established during the lifetime of the settlor)
• Irrevocable trust (the trust is established irrevocably, with a few exceptions for revocation).
• Investment trust (investors buy shares in an asset and receive transferable share certificates and thus a claim to the benefits from the trust assets. In contrast to a normal trust, the trust assets are provided by a large number of investors).
• Offshore trust (In the narrow sense of the word, an offshore trust is any trust established under a legal system other than that to which the settlor is subject. In the broader sense, an offshore trust is one that is set up in an offshore financial centre).
• Private trust (beneficiaries of the trust are precisely individualised persons or a group of persons. Contrast: public trust).
• Protective trust (The purpose of the protective trust is to prevent creditors of the beneficiary or the beneficiary himself from accessing the benefits or claims to which he is entitled under the trust).
• Public trust or charitable trust (The beneficiaries of the trust are an undefined group of people. The trust has a public / charitable purpose. Only the selection by the trustee establishes an actionable claim of the beneficiary against the trust. Contrast: private trust).
• Resulting trust (The resulting trust arises if the transfer of assets to the trustee has been legally effective, but the trust itself cannot be established or the trust purpose can no longer be achieved).
• Revocable trust (trust revocable at any time by the trustee/grantor – therefore also referred to as a grantor trust for simplicity’s sake).
• Simple trust or bare trust (USA only: The sole task of the trustee is to mediate the claims of the beneficiaries under the trust within a tax year. The trustee therefore only manages the trust passively. Contrast: Special trusts. The simple trust cannot exist exclusively for the fulfilment of charitable purposes (see above Complex trust) and is generally not permitted to make a tax deduction in this respect).
• Special trust (USA only: the trustees’ task is to actively manage the trust. Contrast: Simple trust).
• Spendthrift trust (The spendthrift trust replaces the payment from the trust to the beneficiary if a beneficiary is incapable of managing his assets (e.g. in the case of a spendthrift)).
• Standby trust or pourover trust (the trust has no function during the settlor’s lifetime and the assets are only transferred to the trust upon the settlor’s death).
• Statutory trust (The statutory trust is created by law. Example: Standby trust or pourover trust).
• Testamentary trust or will trust (trust created on the death of the settlor on the basis of the instructions in his will or on the basis of his last will).
• Unit trust (collective investment scheme, the settlors are also beneficiaries).
• Voting trusts (joint exercise of shareholders’ voting rights by a trustee in their favour. The voting right is transferred to the trustee).

Advantages of the Liechtenstein Trust compared to other trust jurisdictions

The Liechtenstein Trust offers the following advantages:

• The Liechtenstein Trust is not limited in time and can be established for an unlimited period.
• The Liechtenstein Trust offers maximum flexibility and legal confidentiality.
• In Liechtenstein, trusts can be established in accordance with foreign law, whereby only Liechtenstein law is applicable in the external relationship.
• The trust can be concluded for any purpose.
• The terms of the fiduciary relationship can be freely defined.
• Liechtenstein trust law is internationally protected by the Hague Trust Convention.
• The Liechtenstein Trust and the beneficiaries can invoke the fundamental freedoms of the EEA Agreement (freedom of establishment and free movement of capital).
• There are no court probate proceedings or inheritance certificate proceedings regarding the trust assets.