by Kevon K K Charles, Managing Partner, K C Legal Consultancy, Attorneys-at-Law; Senior Associate, Samuel Phillip & Associates, Grenada

There is a phrase that occasionally finds its way into conversations about wealth planning: “Put it in a trust and nobody can touch it.” If only it were that simple.

Trusts have long been used by families to preserve wealth, provide for future generations, protect vulnerable beneficiaries, and organise succession. For Caribbean families whose assets and relatives increasingly span several jurisdictions, trust structures have also historically formed part of the wider conversation around managing wealth across borders, although their availability and treatment vary between jurisdictions.

But the modern trust exists in a very different world from the one in which secrecy was sometimes considered one of its attractions.

Today, the question is not simply whether assets can be placed into a trust. It is increasingly: who really stands behind it?

Why families use trusts

There is nothing inherently suspicious about wanting to protect family wealth.

A parent may want to ensure that property is preserved for children rather than immediately divided. A business owner may want continuity after death. A family with beneficiaries in Grenada, Trinidad, Canada and the United Kingdom may want an appropriate structure through which assets can be managed over time.

Where legally available and appropriate, trusts can be extremely useful for precisely those reasons. The difficulty arises when asset protection is confused with asset concealment. Those are not the same thing.

A properly established trust may legitimately protect and preserve assets. It should not, however, be regarded as a mechanism through which ownership, control, or the origin of wealth can simply disappear.

“But the Trust Owns It”

Consider a practical example. A substantial Caribbean property is held through an international trust. The settlor lives abroad. The trustees are located in another jurisdiction. The beneficiaries include children residing in several countries, while the underlying property remains in the Caribbean.

Years later, the property is to be sold.

Someone says: “But the trust owns it. Why does the bank need all of this information about the family?” And there lies the modern compliance challenge.

The existence of a trust does not necessarily end questions about the people connected to it. Financial institutions and regulated professionals may still need to understand who established the structure, who exercises control, who may benefit from it, where the underlying wealth originated, and why the transaction is being undertaken.

The trust may provide the legal structure. It does not necessarily provide anonymity.

International Trusts and the Caribbean family

This becomes particularly interesting when international trusts enter the discussion. Caribbean wealth is increasingly cross-border. A family may earn income in one jurisdiction, own property in another, establish wealth structures elsewhere, and have beneficiaries scattered around the world.

The legal landscape, however, is not uniform across the Caribbean. In Grenada, for example, the International Trusts (Amendment) Act, 2018 prohibits the creation of new international trusts after 31 December 2018. This is an important distinction for Grenadian families considering how their wealth may be structured and preserved.

International trusts may nevertheless remain relevant in practice where existing structures are encountered or where Caribbean assets or beneficiaries are connected to trusts established under the laws of other jurisdictions. In those circumstances, several legal and regulatory systems may become relevant at the same time.

Banks, trustees, attorneys and other professionals may each have their own obligations concerning identification, beneficial ownership, source of wealth, tax information and ongoing due diligence. What appears to the family as one private wealth arrangement may therefore be viewed by the institutions involved as a network of relationships that must be understood.

Privacy is not secrecy

Perhaps this is where the greatest change has occurred. Families remain entitled to privacy in the management of their affairs. Wealth planning does not suddenly become public business simply because a trust is involved. But privacy and secrecy are not interchangeable.

Modern compliance frameworks increasingly operate on the premise that legitimate structures should be capable of being understood by those who are legally required to understand them.

That does not destroy the usefulness of trusts. It changes the expectations surrounding them.

The role of the advisor

The conversation with a client cannot begin and end with the creation of a particular structure. The first question must be whether that structure is legally available and appropriate in the relevant jurisdiction.

From there, the discussion should address how the structure will operate in practice, what information may have to be disclosed, how assets entering the structure can be explained, who will exercise control, and what happens when banks, trustees or regulators ask questions years later.

Other corporate, succession and ownership structures may remain available for family wealth planning, but each carries its own legal, tax and compliance considerations.

Good wealth planning should not merely create a structure that works today. It should create one capable of surviving tomorrow’s scrutiny.

Closing Reflections

Trusts remain among the tools used internationally for preserving and transferring family wealth. For international families in particular, trust structures will continue to arise as lives, assets and beneficiaries become increasingly dispersed across borders, subject always to the legal framework of the jurisdictions involved.

But the modern trust sits at an important intersection between protection and transparency. The objective may still be to protect the family’s wealth. The difference today is that protecting wealth does not mean hiding it.

A trust can provide privacy. It should never depend upon secrecy.

This article forms part of a continuing examination of the evolving relationship between wealth, property, and compliance in the Caribbean.

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