Why offshore trusts are no longer just for the rich

Offshore trusts are often misunderstood. Many South Africans see them as complex, expensive structures reserved for high-net-worth individuals; a perception that has been shaped by historic high fees and limited access, which meant many did not even consider offshore trusts as part of their financial planning.

Today, however, there are options to solve for more needs, with enhanced regulation and increased competition in the space making these structures more accessible and cost-effective. Products such as the Chamarel Savings Trust in Mauritius and the Conservo International Retirement Plan in Guernsey reflect how offshore trusts have evolved to meet the needs of a broader range of South African investors.

To fully appreciate how an offshore trust fits into a broader financial plan, it helps to understand the basics:

Start with what a trust actually is

A trust is not a company or a legal entity. It is a legal arrangement that separates ownership of assets from the benefit of those assets. This distinction is what gives trusts their strength and flexibility in estate and financial planning.

Understanding the parties involved helps demystify how a trust operates. Each role exists to create checks and balances within the structure.

• Settlor: The person who establishes the trust by transferring assets into it and giving up ownership.
• Trustee: The party responsible for managing the trust assets in the best interests of the beneficiaries in line with the powers provided for in the trust deed. Offshore trusts have corporate trustees, which means a company is appointed as the trustee, and a list of authorised signatories on behalf of the company is appointed to sign paperwork on behalf of the trust.
• Beneficiary/ies: Those who may benefit from the trust. They do not own the assets and have no direct control, only an expectation or hope to receive a benefit from the trust.
• Protector: The guardian of the trust who usually has the power to dismiss the trustees even though they do not have the authority to administer or control the trust assets. The protector often has negative veto rights over trustee powers. This is an optional role and not all international trusts have this party included in their trust deeds. The protector can be an individual or a corporate entity. (This concept has not been included in South African trust law.)

Offshore trusts are more accessible than many assume

The idea that offshore trusts are only for the wealthy is outdated. In fact, for many, the starting point now is not cost, it is understanding how a structure aligns with and supports financial goals.

Consider what an offshore trust is designed to do

Offshore trusts are often associated with tax planning, but their role is broader. They can be used to protect assets from creditors, legal disputes, or family breakdowns, while also supporting generational estate planning.

They also provide geographic diversification, allowing investors to hold assets outside South Africa and manage exposure to local economic and currency risks.

Use trusts to plan for life’s realities

Trusts are particularly effective when planning for dependants who may need structured support.

• For minor children, a trust ensures that assets are managed responsibly until these minors reach a defined age, while providing for education, living, and other essential expenses before this age.
• For vulnerable beneficiaries such as those dealing with addiction, trustees can control distributions to prioritise wellbeing and prevent misuse.
• For elderly family members, trusts can ensure consistent financial support while reducing the administrative burden on relatives and limiting the risk of disputes.

Choose the right partners from the outset

Setting up a trust requires careful consideration of products, trustees, and financial advisers. The quality and integrity, as well as the fees of these partners, directly affect how well the structure performs. As with any financial decision, the choice of partners matters. South Africans looking to establish a fund offshore should work with experienced professionals who understand the legal, regulatory, and tax implications across jurisdictions, and who can guide them in building a structure that aligns with their long-term goals.

* Van der Merwe is the director at Sovereign Trust SA.

PERSONAL FINANCE