Technical briefing - 01 March 2017

Trusts and trustees for the Indian community; is the concept dead?

Concern as to the precise implications of the reporting obligations instigated by the Indian FISC in 2015, combined with reporting obligations under FATCA, and more recently CRS have left tax payers in many countries, including India, concerned that the potential benefits (not necessarily tax driven) of holding assets offshore have been significantly eroded.


Michael Powell

Director, Private Client Services

This is understandable, particularly where there is a continuing lack of clarity as to the precise implications of the respective reporting obligations and the likely reaction of fiscal authorities when reviewing the affairs of local residents. An optimistic perspective suggests that once there is greater clarity as to the precise nature of the implications of each of the reporting obligations, the traditional reasons for establishing trusts may well revive an interest in offshore structures for one or more of the following reasons:

Asset protection and estate planning

In an uncertain world increasing numbers of people will wish to establish structures holding assets outside their country of residence, so that in the event of political or economic instability or an event predicating a rapid departure they and their dependents will have access to assets elsewhere. Advice would have to be taken in each case to ensure due reporting until such eventuality.

Increased divorce, bankruptcy where family and company assets have been blended, fear of kidnap and management of family wealth for extended families where family members have differing levels of involvement in family company affairs, are some of the other reasons for establishing a trust structure.

Family protocol

As part of the longer term planning for preserving family wealth, family protocols are an increasingly valuable tool. They can address the aspirations of individuals, give family companies the best chances of success, deal with succession, a family’s approach to philanthropy and generally address those issues which are perceived to have potential to disrupt family life and commercial success.


Ironically, in a world where the concept of confidentiality seems to count for little, many clients, are seeking increased levels of confidentiality for proper reasons.  Experience suggests that increasing numbers of clients wish to have all of their structuring under one roof, once they have for example assured themselves as to the robustness of IT systems and that other proper protections are in place. Using one organisation can also facilitate a coordinated approach to international reporting, rather than run the risk that different reports, that may not marry up, are provided by different organisations to authorities, thereby leading to potential for unjustified and potentially expensive investigation.


Many Indian families have an NRI member which can facilitate broader tax planning opportunities for the international element of the family. In these circumstances, structures are more often now established under the roof of one trusted service provider, but on the basis that each element is respectively compliant with the jurisdiction where the beneficiaries are situated. It is not, for example, uncommon for Indian families to establish sub-funds or independent trusts for the US members of a family, with other trusts being structured and administered so as to accommodate beneficiaries resident in different parts of the world.

Choice of jurisdiction

For many clients with Indian connections, Jersey appears to be a particularly popular jurisdiction for holding structures, providing years of experience and the skill sets required to deal with internationally-based families and their wealth. Indian advisers and intermediaries know Jersey to be a well-regulated jurisdiction with a common approach to the management of wealth.

Retention of control

Few entrepreneurs wish to relinquish control! There are a multiplicity of ways in which settlors can legitimately retain control over the assets which they have put into trust, retaining a proper balance between the settlor’s aspirations and the trustees’ responsibilities. A combination of establishing a private trust company, the use of appointers, protectors and settlor reserved trusts can all ensure that the settlor does not lose control over those assets most dear to him and his family being in most cases, private family shares but sometimes other assets as well.

In summary, the changing tax environment has without doubt, as was its intention, spread fear amongst those who may have considered establishing offshore structures, notwithstanding that this was for entirely proper reasons. This should not however preclude potential clients and their advisers from considering opportunities to establish trusts (with due reference to for example the Indian Tax & Exchange Control Laws), whether within the existing Indian fiscal code for the Indian resident community or for NRI’s with such structures forecast to play a significant role in a family’s wealth management for successive generations in the future.

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