Reserved Power Trusts – An Offshore Innovation

When a settlor creates a trust, he relinquishes legal ownership, and thus control, of the assets he places into trust, which then fall under the control of trustees appointed by the settlor.

Most settlors find this idea to be largely unpalatable, even where doing so would enable them to enjoy the considerable benefits that come with establishing a trust of their assets.

These include the mitigation (or deferral) of taxes, the protection of assets from creditors or from political risk, the avoidance of forced heirship rules in the settlor's home country, the orderly succession of assets after death or the continuity of a family business following the settlor's death.

Fortunately, Bermuda has responded to this quandary through the introduction of reserved power trusts.