Offshore trusts are often used together with offshore companies for enhanced confidentiality.
There are different types of trusts, however you would usually use a discretionary trust for this type of arrangement.
With a discretionary trust the trustees are able to use their 'discretion' as to who benefits and by how much.
Often such trusts are formed to guarantee privacy over your assets.
You may not need to be a named beneficiary of this type of trust - or named in any other way.
To make this work, the trustee and the settlor would usually all be residents of a country other than your own.
The discretionary trust would then own the offshore company which itself would own various assets such as property.
The offshore company can have a nominee director and secretary or alternatively you could use bearer shares if you use an International Business Company (IBC) incorporated in a suitable jurisdiction (for example, a Cayman exempt company).
With bearer shares the person who holds the share certificates is the person who owns the company.
Ownership is transferred simply by handing over the share certificates to someone else.
They're available in a number of offshore tax havens specializing in privacy protection.
In many jurisdictions, using an offshore trust and company structure would allow you to legally absolve yourself of ownership of the offshore company and its assets, which would instead be owned by the trust.
For UK individuals, using the offshore trust/company structure is often beneficial as it would make it easier to argue that the company itself is not UK resident.
An offshore company could still be UK resident (and therefore subject to UK taxes on worldwide income and gains) if it is controlled and managed from the UK.
If there are UK directors and shareholders it would be difficult to argue that the company is not managed and controlled from the UK.
By using an offshore trust to hold the shares in the company, provided it is the offshore trustees that exercise control over the directors, it is easier to argue the company is controlled outside the UK and is non-resident (resulting in overseas income and capital gains being exempt from UK corporation tax).
Another common scenario is for the settlor (the person who sets up the trust) to offer services to the trust for a fee (for example, managing properties or investigating investment opportunities).
In this role, you can also claim expenses for costs you incur as well as take out a loan from the company and purchase assets for the company.
Note that you'd need to be careful to ensure that legal documentation was in place to clearly establish the relationship between you and the offshore company.
This allows you to extract cash from the trust without remaining a trust beneficiary.
This can be useful because many jurisdictions, such as the UK and many European countries, have anti-avoidance legislation that applies where a settlor is also a beneficiary.
These rules can force the settlor to pay tax on the income of the trust.
Using the independent contractor route can help to circumvent these rules.
If you're looking at establishing a trust, as stated previously, you should ensure that you have trustees that you really can trust.
It's also advisable to have a trust 'protector' who can replace the trustees if necessary.
The cost of setting up an offshore trust structure will vary depending on the type of trust and whether there are any offshore companies involved.
You're probably looking at less than £1,000 for a simple trust to over £10,000 for a more complex arrangement.