How to Use Offshore Structures in Estate Planning

Offshore structures can be powerful tools in estate planning when they’re used correctly, transparently, and for the right reasons. For internationally mobile families, entrepreneurs with cross-border assets, and anyone facing complex succession rules, they can reduce friction, safeguard assets, and provide long-term governance. The challenge isn’t finding a jurisdiction—it’s designing a structure that actually works for your goals, stands up to scrutiny, and remains manageable for the family. This guide distills what I’ve seen work in practice, the pitfalls to avoid, and a step-by-step path to building something robust.

Why People Use Offshore Structures in Estate Planning

Offshore planning isn’t about secrecy or shortcuts. When used responsibly, it solves problems that onshore options can’t easily address.

Cross-border families and assets: If your heirs live in different countries, or you hold investments and property across borders, offshore structures can provide one coherent framework instead of trying to reconcile multiple, conflicting legal systems.

Asset protection: In stable jurisdictions with strong trust law, certain structures can shield assets against future personal liabilities, political risk, or forced heirship—provided they’re set up well before any threat arises and for bona fide purposes.

Succession control and governance: Offshore trusts and foundations allow for thoughtful control over how and when heirs benefit. They also enable continuity so the plan survives family changes and business cycles.

Probate avoidance: Proper titling through a trust or foundation can avoid lengthy and costly probate processes in multiple countries.

Tax efficiency (not evasion): Used correctly, offshore tools can reduce double taxation, manage estate/inheritance exposure (e.g., U.S. estate tax for nonresidents), or defer local taxes where permitted. All within the law and fully reportable.

A few anchors:

U.S. estate tax tops out at 40% and can apply to nonresident aliens (NRAs) with U.S.-situs assets over $60,000. Structuring matters.

The U.K. inheritance tax (IHT) is generally 40% above allowances. “Excluded property trusts” can ring‑fence non-UK assets for non-doms if settled at the right time.

Canada has no estate tax but a deemed disposition at death that can trigger capital gains across a portfolio or business.

Automatic financial reporting is the norm now. FATCA and the OECD’s Common Reporting Standard (CRS) cover over 100 jurisdictions. This is not a secrecy game; it’s a compliance and design exercise.

The Offshore Toolbox: What You Can Use

Trusts

The workhorse of international estate planning. A settlor transfers assets to a trustee, who manages them for beneficiaries under a trust deed.

Discretionary trusts: Trustees decide how to distribute income and capital, guided by a letter of wishes. Flexible and often protective against claims.

Fixed interest or life interest trusts: Beneficiaries have specified rights (e.g., a spouse gets income for life).

Reserved powers trusts: The settlor keeps certain powers (e.g., directing investments or changing beneficiaries). Useful for control, but over‑reserving can weaken asset protection or trigger adverse tax treatment.

Special-purpose trusts:

VISTA trusts (BVI): Let trustees hold shares in an underlying company without micromanaging the business—good for operating companies.

STAR trusts (Cayman): Can combine charitable and non-charitable purposes and offer wide flexibility.

Jurisdiction matters. Jersey, Guernsey, Cayman, BVI, Bermuda, and Singapore have strong trust law, well-developed courts, and experienced trustees. Liechtenstein is a civil-law alternative with a long trust tradition.

Foundations

Civil-law analogues to trusts, often used where trusts are less familiar (e.g., continental Europe, Latin America, Middle East). A foundation is a legal person, with a council managing assets for named purposes or beneficiaries.

Strong for forced heirship planning in civil-law countries.

Good for situations where a family wants a “corporate-feel” governance structure with a charter, bylaws, and a supervisory board.

Popular jurisdictions include Liechtenstein, Panama, and Malta.

Holding Companies and Private Trust Companies (PTCs)

Holding company: Typically a BVI, Cayman, or Singapore company that holds investments, real estate, or operating businesses. It simplifies ownership, helps manage situs risk (especially for U.S. estate tax), and can centralize reporting and banking.

PTC: A company (often owned by a purpose trust or foundation) that acts as trustee for one family’s trusts. It gives the family more influence over trustee decisions while maintaining legal separation and fiduciary duties.

Insurance Wrappers and PPLI

Private placement life insurance (PPLI) and variable annuities can wrap investment portfolios within an insurance contract:

Potential benefits: Tax deferral in some jurisdictions, streamlined reporting, and easier succession of financial assets.

Requires careful design: Must be institutionally priced, with segregated accounts, and true insurance risk to be respected by tax authorities.

Typical minimums: Often $5–10 million of investable assets.

Banking and Custody

No structure delivers results unless banks and custodians will work with it. Expect stringent onboarding, AML/KYC checks, and ongoing review. Choosing reputable banks in stable jurisdictions is key to long-term viability.

How Taxes Really Work Across Borders

Think in layers: residency, asset situs, and the type of tax.

Residency: Most countries tax residents on worldwide income/gains. Estate or inheritance taxes often look at domicile or deemed domicile (U.K.), or apply to worldwide assets.

Situs: Source-based taxes depend on where assets are located. Example: U.S. estate tax applies to U.S.-situs assets even for nonresidents.

Type of tax:

Estate/inheritance/gift taxes (transfer taxes)

Income and capital gains taxes

Wealth taxes (less common, but present in some countries)

Exit taxes (upon migration or asset transfers in/out of certain regimes)

Reporting and Transparency

FATCA (U.S.) requires foreign institutions to report U.S. account holders; U.S. persons must file Forms 8938 and FBAR, among others.

CRS (OECD) compels automatic exchange of financial account information for residents of participating countries. Trusts and foundations are generally “financial institutions” or “passive NFEs,” which means reporting of controlling persons (settlors, beneficiaries).

Trust reporting: Many countries now look through trusts for tax and reporting. If you’re seeking confidentiality, expect it to be limited to privacy from the general public, not tax authorities.

U.S. Persons

If you’re a U.S. person, offshore estate planning is less about taxes and more about asset protection and succession clarity.

Foreign trusts with U.S. grantors: Usually taxed as grantor trusts if certain powers exist—income flows through to the grantor.

Foreign non-grantor trusts with U.S. beneficiaries: Distributions of accumulated income can trigger the “throwback tax” and interest charges. The tax complexity can outweigh perceived benefits.

Reporting: Forms 3520/3520‑A for trusts; FBAR and Form 8938 for financial accounts; PFIC rules for offshore funds; CFC/GILTI issues for controlled foreign corporations.

For U.S. persons, consider whether an onshore trust (e.g., Delaware, South Dakota, Nevada) combined with international custody achieves your goals more cleanly.

Non-U.S. Persons with U.S. Exposure

U.S. estate tax: NRAs are taxed on U.S.-situs assets above $60,000. U.S. stocks, U.S. mutual funds/ETFs, directly held U.S. real estate, and cash in U.S. brokerage accounts are generally U.S.-situs.

Common strategy: Hold U.S. assets via a non-U.S. company, which can avoid U.S. estate tax exposure for the shareholder (careful with FIRPTA for real estate, branch profits tax, and local country anti-avoidance rules).

Beware of substance and local anti-deferral rules; treaty networks and CFC regimes can complicate simple “blockers.”

U.K. Non-Doms

Excluded property trusts: If settled while non-UK domiciled (and before becoming deemed domiciled), non-UK assets can be outside the IHT net indefinitely. Timing is critical.

Ongoing charges: Some UK trust charges apply, but excluded property treatment is powerful when structured properly.

Remittance basis changes: Rules have tightened over time; stay current and plan around remittances.

Canada and Civil-Law Countries

Canada: No estate tax, but deemed disposition at death. Trusts can defer or manage capital gains; “estate freezes” are often used domestically. Offshore solutions must respect Canadian attribution rules and reporting.

Civil-law jurisdictions with forced heirship: Offshore trusts/foundations with robust “firewall” provisions can preserve the settlor’s wishes against forced share claims—provided the assets are placed well before any challenge and documentation is meticulous.

Choosing the Right Jurisdiction

A “good” jurisdiction is one that will still be credible 20 years from now, not just one with low fees today. Consider:

Legal strength: Case law on trusts/foundations, experienced courts, recognized firewall provisions, and predictable outcomes.

Regulatory reputation: OECD-compliant, strong AML/KYC culture, and banks that aren’t constantly de-risking.

Professional infrastructure: Quality trustees, directors, lawyers, auditors.

Political stability and speed: You need responsive regulators and service providers.

Practicalities: Can you hold the assets you need (e.g., U.S. securities, private equity, crypto) under that regime without constant roadblocks?

Cost: Setup and annual maintenance should fit your budget for decades.

A quick snapshot:

Jersey/Guernsey/Isle of Man: Gold-standard trust law, strong courts, consistent service.

Cayman and BVI: Flexible legislation, massive corporate infrastructure, respected providers.

Bermuda: Strong regulation, good for insurance-linked and complex structures.

Singapore: Excellent reputation, stable banking, rising trust/foundation hub.

Liechtenstein: Civil-law foundation expertise, robust professional class.

Panama/Malta: Foundation options; ensure you work with top-tier firms to manage reputation and bank acceptance.

Step-by-Step: Designing and Implementing Your Structure

1) Clarify Objectives

Be specific. Examples:

Protect operating company shares from family disputes or creditors.

Avoid multi-country probate and maintain privacy from the public.

Provide for a spouse and minor children with staged distributions.

Limit U.S. estate tax exposure on U.S. stocks for nonresident owners.

Create a philanthropy track with real governance.

Write these down. They anchor everything else.

2) Map the Family and Assets

Family tree, including citizenships, tax residencies, marriages/divorces, special needs, and potential relocations.

Asset inventory: public securities, private companies, real estate by country, bank accounts, art, yachts/aircraft, crypto, carried interest, IP.

Liabilities and potential risks: personal guarantees, pending litigation, regulatory exposure, political risk.

3) Tax and Legal Analysis

Engage advisors in each key jurisdiction:

Where you live

Where the assets sit

Where beneficiaries live (current and likely future)

Jurisdictions you might move to

Ask for written memos on:

Income/capital gains tax implications now and on death

Transfer taxes (estate/inheritance/gift)

Reporting (FATCA, CRS, local)

Anti-avoidance rules (CFC, transfer of assets abroad, attribution rules)

Treaty interactions and anti-abuse provisions (e.g., PPT under BEPS)

4) Draft a Structure Chart

Keep it simple. A common approach:

A discretionary trust or foundation at the top

A holding company beneath for listed assets and private investments

Operating companies or SPVs for real estate and special assets

Clear banking and custody at each level

Add a protector (or protector committee) and think hard about reserved powers versus true trustee discretion.

5) Select Trustees and Service Providers

Interview at least two or three firms:

Track record with your asset types and complexity

Regulatory status and internal governance

Response times, service team depth, fees

Willingness to work with your banks, investment advisors, and auditors

Consider a private trust company if you need more influence. If you go that route, make sure the PTC’s board has independent professionals, not just family members.

6) Draft Key Documents

Trust deed or foundation charter and bylaws

Protector appointment and powers

Letter of wishes: specific, thoughtful, reviewed annually

Family governance paper: investment policy, distribution guidelines, education plan for heirs

Shareholders’ agreements for family companies, aligned with the trust documents

Prenuptial/postnuptial agreements, if relevant

Be cautious with reserved powers. Overdoing it can:

Undermine asset protection

Trigger adverse tax treatment (e.g., grantor trust status where not intended)

Create management and control in a high-tax jurisdiction

7) Open Banking and Custody

Choose banks that accept your jurisdiction and entity types

Prepare for extensive source-of-wealth/source-of-funds documentation

Decide on investment management: in-house, external advisors, or discretionary mandates

Ensure account opening names match exact legal names and that signatory authority aligns with governance documents

8) Fund the Structure Properly

Re-title assets and register share transfers correctly; update cap tables

For real estate: check stamp duties, FIRPTA, local tax consequences

For U.S. securities held by NRAs: typically use a non-U.S. company as a blocker to mitigate estate tax

For private equity and funds: avoid PFIC/CFC traps for U.S. or other sensitive-residency beneficiaries

For artwork/yachts/aircraft: handle importation, VAT, and flagging rules carefully

Document every transfer and maintain valuations to support future tax positions.

9) Put Reporting on Rails

Set up FATCA/CRS classification and GIIN/EIN registrations where necessary

Calendar annual filings: trust returns, company accounts, regulatory fees

U.S. persons: 3520/3520‑A, FBAR, 8938; UK: trust register (TRS) if applicable; EU: beneficial ownership registers where required

Agree who does what: trustee, administrator, tax advisor

10) Test and Review

Run a table‑top exercise: What happens if the settlor dies tomorrow? Who controls what, how quickly, and at what tax cost?

Review annually: beneficiaries’ residencies change, laws evolve, and banks update their policies

Update letters of wishes after major life events

Timelines and costs:

Setup: 6–16 weeks depending on complexity and banking

Costs: Simple holding trust from $15k–$40k setup, $8k–$25k annually; PTC or foundation with multiple entities can run $50k–$150k setup and $30k–$100k+ annually. PPLI often requires $5–10m+ and bespoke pricing.

Case Studies (Anonymized)

1) Latin American Entrepreneur with Political Risk

Problem: Family business in home country, children studying in Europe and the U.S., concern about sudden capital controls and forced heirship.

Solution: Cayman discretionary trust with a PTC; underlying BVI holding company owning non‑domestic investment portfolio and a separate SPV for a minority stake in the operating business. Banking in Switzerland and Singapore. Firewall provisions counter forced heirship; letter of wishes sets staged distributions and education funding.

Result: Assets outside local jurisdictional reach, continuity if something happens to the founder, smoother governance with independent directors alongside a family advisor.

Common mistake avoided: Founder resisted reserving too many powers, preserving the trust’s integrity.

2) UK Non-Dom Establishing an Excluded Property Trust

Problem: Long-term U.K. resident but not domiciled; on path to deemed domicile. Significant non-U.K. investment portfolio.

Solution: Before deemed domicile, settled a Jersey discretionary trust holding a BVI company which in turn holds the portfolio. Trustee is professional; protector is a trusted advisor. Investment policy defined; distributions focused on children’s education and future housing.

Result: Non-U.K. assets remain outside the U.K. IHT net. Ongoing annual reporting handled by trustee; family retains oversight through protector powers.

Common mistake avoided: Timing. If settled after becoming deemed domiciled, excluded property status would be lost.

3) Nonresident Holding U.S. Real Estate

Problem: Non-U.S. family buys U.S. rental property. Direct ownership creates U.S. estate tax exposure and withholding on sale.

Solution: Non-U.S. holding company owns a U.S. LLC that holds the property. Estate tax exposure mitigated for the shareholders (with careful attention to local-country tax). FIRPTA handled through the U.S. entity layer; professional property management and tax filings in place.

Result: Clean exit process and better cash flow management.

Common mistake avoided: Avoided direct personal ownership of U.S. situs assets.

4) U.S. Tech Founder with International Investments

Problem: Considering an offshore trust for “tax savings.” U.S. beneficiaries, PFIC-heavy funds, and potential liquidity event.

Solution: Stuck to a U.S. domestic dynasty trust for tax simplicity; used international banks for custody of global portfolios. For foreign venture allocations, chose U.S.-friendly fund wrappers to avoid PFIC issues.

Result: Estate planning and creditor protection achieved without the punitive U.S. tax treatment of foreign trusts.

Common mistake avoided: Stepping into foreign non-grantor trust throwback regimes and complex PFIC/CFC traps.

5) Crypto Investor with Cross-Border Heirs

Problem: Substantial digital assets, heirs in three countries, fear of lost keys and probate chaos.

Solution: Jersey trust with a specialized digital asset custodian. Clear policies for cold storage, multi-sig, and emergency access. Letter of wishes ties access to a family governance protocol and staged education around asset custody.

Result: Reduced key person risk and defined succession for high-volatility assets.

Common mistake avoided: Keeping private keys personally while pretending they were “in trust,” which would have undermined both security and legal ownership.

Forced Heirship, Probate, and Family Dynamics

Forced heirship (common in civil-law systems and under Sharia) mandates minimum shares for close relatives. Offshore trusts/foundations with firewall provisions can uphold the settlor’s chosen distribution plan, but only if:

The structure is set up well before any disputes

The settlor genuinely divests ownership and control

The assets are moved to a jurisdiction with strong protective law

Documentation clearly records intent and purpose

Add family governance:

Family constitution: not legally binding, but aligns expectations

Education plan for heirs: financial literacy, trustee roles, distribution philosophy

Dispute resolution mechanisms: mediation clauses and escalation paths

Control Without Undermining Protection

This is the hardest balance.

Protector role: Appoint a protector (or committee) with powers like hiring/firing trustees or vetoing certain actions. Use independent, reputable individuals. Avoid giving protectors day-to-day management powers that blur fiduciary lines.

Reserved powers: Limit them. Investment direction might be acceptable in some jurisdictions, but too much control can lead courts or tax authorities to treat the assets as still yours.

Private trust company: Good for complex families and operating businesses. Populate the board with a mix of family and independent professionals. Keep minutes, hold regular meetings, and respect corporate formalities.

Distribution standards:

Many families use variations of “HEMS” (health, education, maintenance, support) for baseline distributions, then add performance and milestone-based grants (e.g., matched savings, education achievements). Codify this thinking in your letter of wishes and family governance documents.

Common Mistakes (And How to Avoid Them)

Starting with the jurisdiction, not the goals: Decide what you want to achieve first; let the design follow.

Keeping too much control: Over-reserved powers risk asset protection and tax outcomes. If you can unwind the trust at will, a court or tax authority can too.

Underfunding or mis-titling: A beautifully drafted trust with assets still in personal name achieves nothing. Move title, update registers, and document transfers.

Ignoring beneficiaries’ tax positions: A trust beneficial for the settlor can punish heirs under their home country rules. Model distributions and test assumptions.

Using blacklisted providers or thinly capitalized “shelf” companies: Banks may refuse accounts; courts may disregard the structure. Work with top-tier, regulated firms.

Treating letter of wishes as a side note: This is your voice when you’re not there. Make it clear, balanced, and updated.

Forgetting life insurance for liquidity: Estate taxes, equalization between heirs, or buyouts often require liquidity. Don’t force fire sales.

Neglecting compliance: Late or missing trust/company filings can trigger penalties or, worse, pierce the structure in disputes.

No plan for special assets: Private businesses, carried interest, or digital assets need specific provisions; standard trust deeds won’t cover operational realities.

Waiting too long: Transfers made after a claim arises are easier to challenge. Early, documented, purpose-driven planning is stronger.

Maintenance: Make the Structure Boring (In a Good Way)

Sustainability beats cleverness.

Annual trustee meeting: Review performance, distributions, beneficiary circumstances, and risk.

Update letter of wishes: Births, marriages, divorces, relocations—refresh your guidance.

Compliance calendar: Renew KYC, file annual returns, CRS/FATCA reporting, local tax filings, and pay government fees.

Valuations and audits: Regular portfolio valuations; audit if complexity or governance demands it.

Investment policy review: Ensure risk profile and asset allocation still match the family’s goals and time horizons.

Succession of roles: Identify successor protectors, PTC directors, and advisors. Keep contact and identity documentation current.

Business continuity: If the trust holds an operating company, align board composition, key person insurance, and shareholders’ agreements with the trust’s long-term plan.

Ethics, Reputation, and Banking Reality

The era of “secret accounts” is over. Sustainable planning embraces transparency with tax authorities while preserving legitimate privacy from the public.

Full reporting: Assume everything is reportable either now or soon.

Substance over form: Board meetings, minutes, local directors where appropriate. Economic substance rules in many jurisdictions require real activity.

Sanctions and screening: Ensure no counterparties or assets are connected to sanctioned individuals or countries.

Media risk: Choose jurisdictions and providers that won’t attract negative headlines for your heirs. Governance quality reduces reputational risk.

Special Topics and Practical Tips

Philanthropy

Charitable trusts or foundation sub-funds can codify family giving.

Donor-advised funds (DAFs) in reputable jurisdictions offer simplicity and tax recognition in some countries.

Separate philanthropic governance to avoid conflicts with family distributions.

Real Estate

Country-specific taxes and transfer costs can be material.

Title under a company or trust must be well documented; consider local lenders’ willingness to lend to SPVs.

Estate exposure differs dramatically across borders; revisit the structure if you move.

Financial Assets

For non-U.S. persons, holding U.S. securities via a non-U.S. company may reduce estate tax exposure.

For U.S. persons, be cautious with offshore funds (PFIC rules). Use tax-friendly wrappers or U.S.-domiciled funds.

Digital Assets

Specify custody arrangements in the trust deed.

Include key management protocols, access procedures, and disaster recovery.

Work with trustees experienced in crypto to avoid operational and compliance mishaps.

Pre-Immigration Planning

Establish structures before becoming resident in a high-tax jurisdiction.

U.S. inbound planning: NRA-settled foreign trusts can have grantor treatment before residency; plan for status changes, or you could flip into punitive regimes.

UK inbound planning: Excluded property trusts must be set up before deemed domicile. Get the timeline right.

Migrating or Modifying Structures

Trust migration or “decanting” can update outdated terms. Check how the destination jurisdiction treats migrating trusts for tax and legal continuity.

Corporate redomiciliation can move a company without triggering a deemed disposal—varies by country and needs careful tax input.

Document reasons for changes; regulators and banks prefer a clear story.

A Practical Checklist

Planning and design:

Define objectives and constraints

Map family and assets; identify tax residencies and potential moves

Commission tax/legal memos for all relevant jurisdictions

Draft a simple structure chart

Governance and documentation:

Trust/foundation documents prepared and reviewed by independent counsel

Protector role defined with balanced powers

Family governance note and investment policy statement

Shareholders’ agreements aligned with trust terms

Prenuptial/postnuptial agreements considered

Implementation:

Choose trustee/PTC, administrators, directors

Open banking/custody accounts with clear signatories

Title transfers executed; share registers updated

Valuations obtained; gift/transfer filings made where required

Compliance:

FATCA/CRS classification completed

Registrations: GIIN/EIN, local business registers, trust registers (if applicable)

Annual compliance calendar agreed with advisors and trustee

Beneficial ownership reporting addressed where required

Operations:

Trustee meetings scheduled annually

Investment oversight in place (advisors, mandates, or committee)

Distribution protocols and documentation processes agreed

Regular review of letters of wishes and successor appointments

Risk and continuity:

Insurance for liquidity (estate taxes, equalization)

Key person and D&O where relevant

Sanctions screening and ESG policies with banks/providers

Exit/migration plan if laws or circumstances change

Final Thoughts and Professional Observations

Keep it simpler than you think. Most effective plans use few entities with tight governance, not a maze of SPVs.

Timing beats tactics. The best results happen when planning is done years before any stress event—before a lawsuit, before residency changes, before a liquidity event.

Bankability is a reality check. If a reputable bank won’t open an account for your structure, the problem isn’t the bank.

Education is part of the asset. The next generation needs to understand the structure’s purpose, not just receive distributions. In families that invest in governance and education, structures last; in those that don’t, they crack under pressure.

Review rhythm matters. Annual check-ins catch small issues before they become painful and expensive.

Estimates vary, but independent research has repeatedly suggested that a meaningful share of global financial wealth—often cited in the mid‑single to low‑double digit trillions of dollars—is held outside individuals’ home countries. That isn’t inherently bad or good. What matters is intent, design quality, and compliance. When you align those, offshore planning becomes a legitimate way to protect your life’s work, look after your heirs, and keep your affairs orderly across borders.