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Trusts V Asset protection (Monte Carlo)

I would like to take this opportunity to point out some of the pros and cons of trusts and whether the use of a trust is 1/ beneficial in comparison to an "asset protector" and 2/ available to you in your location.

There are many types of trust available and all have similar qualities. For the benefit of this article and as the forum post is in Monaco, we shall use the" Monaco Protected content as an example and compare it with the "Nucleus asset protector".

In itself the "Monaco Protected content is reasonably comparable to many other types trusts. The reason a Protected content is popular in Monaco is mainly for convenience. As you may be aware, France does not recognise trusts therefore "asset protection" could be a way of overcoming this.

The Protected content is available because it is held in Monaco which is of course a principality and is not governed, in the main, by French law. This makes access to a trust available for individuals that reside in Monaco.

Unfortunately the Monaco Protected content does not work for everybody and there are two major points to be aware of. Firstly you have to be resident of Monaco for the Protected content to be of any benefit to you, simply working in Monaco and living in France will NOT benefit you in having a Protected content as the French government do not recognise trusts. Secondly, if you own property in France as well as Monaco a very indistinct grey area comes into effect as to whether you can have that property in your trust and whether the portion of the trust held in France will be recognised. By looking at the bullet points below you will be able to establish whether a Protected content would be a wise choice.

1/ You work in Monaco, but you do not live there. This may not be the right choice for you as the Monaco Protected content is specifically designed for individuals residing in Monaco.

2/ You plan on moving outside of Monaco at any stage in the future.There are other options available for you that are far more beneficial should you plan on moving outside of Monaco at any stage in the future.

3/ You are a US citizen.The Monaco Protected content can still be used, however reporting requirements still apply. There are more beneficial products available that can help you to overcome this major issue.

4/ You have assets held outside of Monaco and within France. All of the assets held within France may still be liable for certain taxes as "trusts" of any form are not recognised. Therefore you may find that any assets in France and in your Monaco Protected content are not recognised on death and placed outside of the trusts advantages.

5/ Lack of flexibility could be a concern for trusts holding certain assets.
Trying to change the contents of a trust can be complex and costly.
Using the trust to draw down from on a regular basis can be difficult.
There may be limitations as to the type of investments that can be held within a trust, if allowed at all outside of the banks recommended investment portfolio.
Limited access.
Ongoing management issues.

6/ "One size fits all". Trusts are often not designed to be a personal product and consequently not particularly versatile in the way they are written. It is not unusual to find that have a particular set of rules may apply to all of the people owning that trust.

7/ "Pooled assets". Whichever option you ultimately decide upon it is extremely important to recognise whether your assets are "pooled" together with other members in the trust. From a security aspect you should always try to ensure that the product you are using has "non-pooled assets". Interestingly some banks offer pooled assets and have relatively low limits set as guarantees in the event of bankruptcy.

With the information provided you would be well advised to consider your personal circumstances before making the decision as to whether a trust or asset protection is right for you.

The FM Group have recently acquired an asset protection product that works very similarly to the Monaco Protected content . The Nucleus asset protector or NAP for short offers the same advantages of a trust but with many added advantages, including the following:

1/ The Nucleus asset protector works equally well wherever you reside INCLUDING France where standard trusts are quite simply not recognised.

2 /The Nucleus asset protector works equally well for for US citizens and negates the need for any reporting requirements.

3/ The Nucleus asset protector helps you to make the most of any IHT and CGT allowances and the potential tax liabilities and because you have a choice on the investments that can be held in a NAP can negate the 35% withholding tax on investment income in Monaco, distinct advantage.

4/ The Nucleus asset protector is written on an individual basis recognising the fact that each individuals circumstances are different. The NAP is not a "white wrapper" and each individuals circumstances command the way the product is designed around them personally.

5/ The costs involved are very competitive for the NAP and are comparable to many trusts.

6/ NON POOLED ASSETS. Your assets are not pooled, in the event of any losses incurred by the company holding the assets this will not have an effect on your assets as they can not be touched by any third party. This is a Major consideration when considering the right type of protection.

7/ Investment choice. With the assistance of our MIFID regulated investment advisers, you will be able to build a portfolio within your asset protector to your specification, should you wish to. Of course as with all choices in the NAP the decision is yours and the NAP can be written to include any type of investment you wish, including personal investments.

8/ Asset management. Your assets within the Nucleus asset protector are managed on an ongoing basis and can be changed regularly at your discretion.

9/ As stated, your Nucleus asset protector has extreme flexibility and can be set up to your specifications.

There are of course many advantages to the Nucleus asset protector over a trust. If you would like further information, I would be delighted to discuss them with you.

Gerry Bartholomew
The FM Group
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