Specialist Asset Protection Trusts
Often a higher level of protection is required to safeguard assets. The Gibraltar based Asset Protection Trust offers this, together with only a handful of other jurisdictions. It has been in use for almost 20 years and is a tried and tested concept.
The Gibraltar Asset Protection Trust
The key feature of the Gibraltar Asset Protection Trust (GAPT) is that it is not based on standard Trust law. Its heart lies in the bankruptcy legislation. This ensures that a set procedure can be established to place beyond any doubt the three certainties of a Trust that are required. These are 'Certainty of words', 'Certainty of subject' and 'Certainty of object'.
Certainty of words
Often trusts are dismantled by careful legal attack of their validity. A leading case, Rahman, set aside a trust deed and many years of administration by a bank trust company located in the Channel Islands. The Jersey Court held that the modus operandi undertaken by both the Trust administrator and the Settlor was insufficient to claim a proper Trust had indeed been formed and maintained.
Certainty of subject
In many cases the reason the Trust is set up, or the assets which are placed into it, or the manner in which they are held, is unclear. Even if original instructions are straightforward, their subsequent interpretation may be capable of several different possibilities. Attacks have taken place, often via the Courts, to set aside Trusts where their precise reason and operation has been proved to be unclear.
Certainty of object
The actual assets placed into the Trust and their final treatment can sometimes not be clear. Again, attacks by the Courts have served to set Trusts aside.
Contingent Liabilities
Sometimes Trusts have been set aside as the Statute of Elizabeth has prevailed. This principle dictates that a Settlor should be able to reasonably oversee future events which could lead to a liability for which the Trustees will need to account. The GAPT ensures that this cannot happen. A precise definition of contingent liability exists. Often Court cases and other actions against a Trust can be proved to have been anticipated by the Settlor. The Gibraltar legislation sets out precise instances which define what constitutes a valid contingent liability at the time the Trust is made.
The Settlor signs an affidavit of solvency which sets out all his known liabilities on that day. This is then certified by an independent professional familiar with the individual’s affairs. In that way a subsequent claim that a contingent liability existed when the Trust was made cannot be validly brought.
Certainty over whether the Trust was actually set up on a certain date is also addressed. It is necessary for the GAPT to be registered with the Registrar of Dispositions. This is a private register administered by the Financial Services Commission (FSC) and is not available for inspection by third parties. Its function is to ensure a Trust was set up on a certain date under the terms of the GAPT (Bankruptcy Ordinance). There is a small fee to register the Trust and then an annual fee for as long as the Trust is in existence. The only information sent to the Registrar is the name of the Trustee, the date upon which it was set up and the country of usual residence of the Settlor.
Why use a GAPT?
Wealthy individuals who wish to safeguard a portion of their wealth, say 10-30%, often consider these. They are planning vehicles which are available to structure ownership of their assets such as the family home. The GAPT is seen as a further defence mechanism in the event of an unforeseen circumstance.
In the past, professionals who may be at risk in the future have utilised these such as Doctors and Dentists. Those who invent or produce potentially health damaging products such as mobile phones and machinery, should consider GAPTs.