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Using trusts to protect assets in the UAE

Using trusts to protect assets in the UAE

Trusts and similar structures have long been used in international business, especially in regions such as the United Arab Emirates and Europe, where legislation allows for the effective use of these mechanisms. They serve as an effective tool for protecting assets, as well as for tax and inheritance planning. In this article, we will look at several basic types of trusts, each of which performs its own unique function and is suitable for different purposes.

A trust is a legal structure in which one party (the settlor) transfers its assets to another party (the trustee) for management in the interests of a third party (the beneficiary). Its main purpose is to protect and manage assets, as well as to optimize tax consequences.

There are several types of such structures, each designed to solve specific tasks:

1. Revocable — ideal for those who want to organize their assets but still want to retain full control over them. This type is used to manage real estate, investments, and family assets. Owners can change the terms of the trust or close it completely at any time, making it a flexible tool for capital management.

2. Irrevocable — unlike the first type, once created, the assets are legally separated from the owner and are no longer under their direct control.

This means that the owner cannot make changes to the structure or return the assets. Irrevocable trusts are often used for long-term capital preservation, as they protect assets from potential risks such as lawsuits or financial difficulties.

3. Asset protection trust — This is especially relevant for those who work in complex or risky areas of business where financial risks and legal disputes are possible. It is important to note that this approach can be useful for protecting personal property and ensuring financial stability.

4. Charitable trusts, where assets are transferred to a trust and the owner receives regular income from them, while the remainder is directed to charitable projects or funds in the future. Such forms are becoming increasingly popular in international business structures where reputation and compliance with ESG (environmental, social, and governance) principles are important. Charitable trusts not only help with tax planning but also contribute to creating a positive image for the company.

5. Dynastic — created with several generations ahead in mind. Its main task is to preserve family capital, protect it from fragmentation, and ensure clear rules for transferring assets to children and grandchildren. This structure avoids conflicts between heirs and guarantees that the funds will be used for their intended purpose.

6. Expenditure control trust — used when it is necessary to protect capital from unreasonable use by heirs. Under this trust, funds are distributed according to pre-established rules through a trustee. For example, the trustee may allocate funds for education, housing, or healthcare, which helps avoid situations where heirs spend capital on unnecessary or unreasonable purchases. This is especially relevant for families where there is a risk that heirs may not be able to manage large sums of money.

7. A trust for special life circumstances, the key purpose of which is financial support without the loss of social or state rights, if provided for in a particular country. For example, if the beneficiary needs constant medical care or special care, the funds will be used strictly for these needs. The trustee appointed to manage the trust will ensure that the money is used only for treatment, education, or daily support.

In international business, it is important not only to earn money, but also to structure the results. The right structure can save you from problems in the future, regardless of your country of residence or tax residency. For example, the use of trusts can help avoid double taxation, protect assets from lawsuits, and provide more flexible estate planning.

Thus, trust-like structures are a powerful tool for protecting assets and optimizing tax planning in international business. The right type of trust can not only preserve capital, but also ensure its effective use in the interests of future generations. In the context of globalization and constant changes in legislation, it is important to think through the structure of asset management in advance.

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1. General provisions This personal data processing policy is compiled in accordance with the requirements of Federal Law No. 152-FZ of 27.07.2006 "On Personal Data" (hereinafter referred to as the Personal Data Law) and defines the procedure for processing personal data and measures to ensure the security of personal data taken by Mikhailov Ivan Sergeevich (hereinafter referred to as the Operator).

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2. Basic concepts used in Politics

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