Choosing an Offshore Trust Jurisdiction for your Global Assets

Most people default to Mauritius, Cayman Islands or Bahamas when thinking about offshore trusts. Familiar names. Trusted brands. But familiarity is not a framework.

Especially when you look at it through an Indian wealth-owner’s lens.

It is not only a tax question

The jurisdiction question is almost always framed as a tax question. It is much more than that. You don’t have to move your analysis away from India to realize this. For instance, for Indian settlors, add the FEMA layer. LRS remittances capped at USD 250,000 p.a. Settling a large offshore trust may need RBI approval. The regulatory question itself is bigger than tax.

Then comes the jurisdiction question. About each one must think these things (illustrative)

How long can a creditor claw back a transfer into the trust? Does that jurisdiction recognise foreign court orders - or does it shut them out? (look at Cook Islands; an interesting jurisdiction) Can the settlor retain control without the structure collapsing? What happens if the political climate shifts - can the trust re-domicile? (look at UAE foundation laws, good flexibility in select cases)

Each of these is a separate variable. And each one can be the variable that matters.

Forced heirship

Forced heirship is one that gets missed most often. India has no forced heirship concept for Hindus - but someone domiciled in France or Germany can face claims from a spouse or children on distributions (or even the settlement of the trust property itself!) from an offshore trust, if the trust’s governing law does not expressly override those claims. Not all jurisdictions do.

Where it unravels

Jurisdiction selection is not a checklist. A structure with even one gap in these parameters can unravel at exactly the moment it needs to hold.

The complexity and the fun in navigating those multiplies in cross-border estate planning cases!