Excluded Property Trusts (EPTs) are a popular tool used by non-UK domiciled individuals to protect their offshore assets from UK inheritance tax (IHT). If you are a non-UK domiciled individual, it is worth considering setting up an EPT to ensure that your assets are passed down to your beneficiaries tax-free. In this article, we will discuss the benefits of using an EPT and why Cyprus is an ideal offshore jurisdiction for the trust.
What is an Excluded Property Trust (EPT)?
An EPT is a trust established by an individual who is not domiciled in the UK. The trust holds assets located outside the UK, and these assets are deemed “excluded property” for IHT purposes. This means that when the individual dies, the assets held in the trust will not be subject to UK IHT.
Benefits of using an EPT
The primary benefit of using an EPT is that it allows non-domiciled individuals to pass on their offshore assets to their beneficiaries without being subject to UK IHT. This is particularly important for individuals with substantial offshore assets, as the UK has one of the highest IHT rates in the world.
Another benefit of using an EPT is that it provides flexibility and control over the distribution of assets. The settlor can determine the terms of the trust, including how the assets are managed and distributed to beneficiaries. This can be useful for individuals who want to ensure that their assets are distributed in a specific way, such as to support family members or charitable causes.
Using Cyprus as an offshore jurisdiction for the EPT
Cyprus is an ideal offshore jurisdiction for an EPT for several reasons. Firstly, Cyprus has a well-established legal system, which provides a stable and secure environment for the trust. The country also has a favorable tax regime, which can help to minimize tax liabilities for the trust.
In addition, Cyprus has a number of benefits for non-domiciled individuals. For example, Cyprus has a “non-dom” regime, which allows individuals who are not domiciled in Cyprus to receive significant tax benefits. This means that the settlor of the EPT can benefit from these tax advantages, as well as the tax benefits of the trust itself.
Another advantage of using Cyprus as an offshore jurisdiction is that the country has a well-regulated financial services industry. This means that there is a wide range of professional service providers, including lawyers, accountants, and trustees, who can assist with the establishment and management of the EPT.
Conclusion
In conclusion, if you are a non-UK domiciled individual with significant offshore assets, it is worth considering setting up an EPT to protect your assets from UK IHT. Cyprus is an ideal offshore jurisdiction for the trust, offering a stable legal system, favorable tax regime, and a well-regulated financial services industry. With careful planning and the assistance of professional service providers, an EPT can provide significant benefits for you and your beneficiaries.