Offshore trusts in Germany: estate planning and asset protection

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Offshore asset protection with trusts and trust law in Germany

With our German mandates, we regularly develop complex estate planning with regard to assets, which is documented, among other things, in the USA. Again and again, the question arises as to whether a US trust or an offshore trust can be a suitable vehicle for the client. A trust is a structure in which a person (the “grantor”) of another person (the “trustee”) grants power of disposal through a contractual agreement (“trust agreement”) and associates this with instructions and restrictions. He is in the broadest sense comparable to a German foundation. However, the trust does not have its own legal personality, but represents a legal relationship between grantor and trustee, mostly in favor of third parties, the beneficiaries. There are revocable trusts and irrevocable trusts (so-called ” irrevocable trusts”).

There are different forms of trusts, each for different purposes. Such purposes may be, for example, estate planning or asset protection against third party access (“asset protection”). Often it is also asked whether such a trust helps the client in Germany with regard to tax law.

In principle, German law does not recognize the Trust and does not recognize it. In that regard, he is not tax-treated like a German foundation. German tax law is then applied to a trust if there is sufficient connection to Germany. This may be in the person of the grantor, the trustee or beneficiary or the location of the assets. In September 2012, the BFH decided on another dispute in this context ( ) and found that ongoing disbursements from an existing US trust to beneficiaries resident in Germany are subject to German gift tax. Distributions upon dissolution of a trust to such persons are in any case subject to German gift or inheritance tax. The provisions of the German double taxation convention (inheritance tax), in particular Art 11, Paragraph 3 b, are applicable in principle.

From a tax point of view, we generally advise our German clients not to hope for special tax benefits from a US trust. However, for estate planning purposes and also for protection against creditors, the trust is a suitable vehicle for such clients. Depending on the situation in each case, the Trust may be very tax-efficient in terms of US estate tax, especially if US real estate is involve.

Vecchio: The assets of Venezuelans in the US have been protected

Carlos Vecchio, ambassador of Venezuela in the United States to the service of the interim president, Juan Guaidó, together with the Minister Counselor, Gustavo Marcano, and the representative of Venezuela before the OAS, Ambassador Gustavo Tarre, informed that in 2 weeks the diplomatic mission has managed to protect the assets in the United 

States of Venezuela and denounced the dismantling that the usurping dictatorship has perpetrated throughout the consular network, affecting thousands of Venezuelans in North America, rights that the diplomatic mission works hard to restore as soon as possible.

“During these first 2 weeks of work we have been focused on deepening the political change that is already underway, with very clear lines of action: the first has to do with the protection of the officials who were already in office, they decided to stay and recognize the President in charge Juan Guaidó; the second very important aspect has to do with the service that is offered to the Venezuelan citizens who are here and the protection of our nation’s assets in the United States, “summed up Ambassador Vecchio. Gustavo Marcano presented the radiography of the status found and actions of the diplomatic mission to resolve this situation. He denounced the violation of rights and the commission of crimes by the usurping dictatorship to the detriment of thousands of Venezuelans in the North American country to avoid the processes of identification and political participation of Venezuelans in the United States.

“The usurper regime dismantled Venezuela’s entire consular network in the United States. Here they had closed the consular and diplomatic seats, dismantled the links with Saime and the electoral registry, they took money in cash that they had charged. So far, we are talking about more than 3 thousand injured people who paid for the issuance of their extension or passport and who are now victims of a continuous scam of the usurper regime that not only illegally took all the extensions, passports and other documents; but it continues using the web of the Saime to swindle to the Venezuelans in the outside, because they remove the money to them without that they can channel the service to them. 

The first call we make to Venezuelans is not to continue falling into the scam that the usurping dictatorship advances from Venezuela, “he explained. Marcano highlighted the protection of assets that the diplomatic mission headed by Ambassador Vecchio has advanced in two weeks.”Among the first actions that the interim president Guaidó entrusted to Ambassador Vecchio and the entire diplomatic mission was the protection of assets and we have done so. The usurping regime tried since 2017 to sell the nation’s headquarters and assets in the United States, the most emblematic being the headquarters of the Consulate of New York and the headquarters of the Military Attaché No. 2 of the Embassy of Venezuela. 

Immediately we made the inventory and managed to protect these assets of the republic that add 5 in Washington and 3 in New York, “he said. The advisory minister reported that “it was officiated as a legitimate embassy to all relevant institutions to freeze the accounts and assets of the nation in the United States so that they were no longer available to the dictatorship and we have confirmed that this was done. Bank accounts were protected from the Embassy and assets that are now available to the National Assembly which constitutionally may or may not authorize the disposition of said funds. “

He specified that the National Assembly of Venezuela is channeling budget approval so that diplomatic missions can continue to function, and in the case of the United States, the 11 officials who have already recognized Interim President Guaidó, with whom he held a previous meeting to the press conference, as well as the new additions to the diplomatic mission.

In this sense, Marcano explained that a plan for the reopening of the consular function in the United States is being developed, which has been carried out in phases.”In phase 1 we have made the inventory of assets and personnel, and the legal review within the framework understood that we are working for the cessation of the usurpation of the dictatorship. Phase 2 includes the designation of new consular teams that must be given by the Acting President and the National Assembly in the coming weeks. We have been raising a report of the primary needs of our Venezuelan nationals in the United States such as passports, extensions, identification documents, and visas, doing everything necessary to determine what the first actions will be. Phase 3 implies the constitution of a special migratory program to meet the needs of Venezuelans as a result of the consular function. We emphasize that we are acting within the framework of the usurpation carried out by the dictatorship, but there are actions that we can take with the countries that have recognized President Juan Guaidó, that will resolve the situation of identification that Venezuelans have in the United States. In the last stage, we will assume effective control of the nation’s assets in accordance with international law. We are doing everything within the framework of legality and in coordination with the government of the United States, which is the host of this diplomatic mission, “he explained.

Finally, the diplomatic representatives emphasized that “in 2 weeks we have advanced, this work will be transitory and very soon we will have institutions at the service of the Venezuelans who have been the most violated by the actions of the regime for a long time.