How to Fund a Nevis Trust as a US Citizen: Compliance, Reporting, and IRS Rules

What is a Nevis Trust?

The structure of a trust has been helping families for generations. They are usually associated with wealth, prosperity, and elite services. Today, we delve into this topic to understand the essence of the trust and how it is a structure that goes beyond the ultra-wealthy. We focus on funding a Nevis trust as a U.S. citizen; however, this tool can help people of all nationalities. 

How the Nevis Trust Works

The origin of the trust goes back to the 12th century, to the times of the crusades. English Knights appointed someone they trusted to take care of their estate and their family while they were gone. These “trusted” parties would continue to play this role in the event of the knights’ death.

If you understand this, you understand the trust: it is transferring your valuables to a third party for protection and custody, and to benefit the people you care about.

Naturally, the world evolved, laws evolved, and people evolved. Now, the structuring of a trust is supported by the legislation of countries beyond England. One of them is Nevis, a jurisdiction that we strongly recommend for funding a trust.

The structure of a trust

Let's say that someone has goods, accounts, or properties to protect. It doesn't have to be millions of dollars. It can be anything from an apartment to jewelry, bank accounts, companies, or a combination of those.

If this person wants to protect all this, they can transfer it to what we know as a trustee. This can be a person or an entity that will guard and administer the assets as stipulated by the original owner.

The beneficiaries are the individuals previously assigned, usually the family or close friends of the settlor.

Distributions are made according to the trust deed, which stipulates the amount and timing of such distributions. Some may choose to distribute a fixed sum monthly to the children or grandchildren, and others prefer to release a large sum when the beneficiary achieves a milestone. This can be when they get married, finish college, or start an important stage in their lives.

The graphic below shows it more clearly than we can explain it:

Key Advantages of a Nevis Trust

Asset Protection

The assets become separated from the original owner, which makes them practically immune to threats such as claimants, ill-intended players, or anyone who may want to hurt the family deliberately.

Tax Neutrality and Privacy

Quite often, trusts have been associated with tax neutrality. Nevertheless, the structure shouldn't be seen as a tool to avoid responsibilities but as a way to protect the assets from any unforeseen events that may happen in the future.

In other words, the trust should not be funded purposely to avoid tax or escape from current claims. This can easily be proven, and even the best drafted trust in the most protective legislation will be rendered invalid.

One of the advantages we find in Nevis is its territorial taxation. Local structures don't pay tax for income derived and maintained abroad. 

Flexibility

Mundo’s experts say that whenever you set up a financial tool, you must understand exactly what its purpose is. The purpose of the trust is not to be flexible; it is to protect. Its strength lies in separating ownership and relinquishing control over the assets. 

All accounts, companies, dividends, royalties, and everything that exists under the trust will be subject to what's written in the deed. And even if some allow amendments later, it is not the purpose of a trust at all. 

Any attitude or factor that may suggest the settlor still has control over the assets may render the trust invalid. 

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Characteristics of a Nevis International Exempt Trust

What makes the island an outstanding asset protection jurisdiction is its Nevis International Exempt Trust (regulated by 1994’s ordinance, NIETO). Firstly, the ordinance stipulates that all potential claims can be made within a period of two years after establishment. After this, the structure becomes completely sheltered. 

Furthermore, any action against the trust must be conducted purely within the local legal system, as foreign rulings are not valid. With this being discouraging enough as it is, there's also a mandatory bond of $100,000 to start a legal action.

Establishing a Nevis Trust: Timeline & Process

Research & Planning

Every trust starts with careful planning. The owner will have to sit and think about what assets will fall under the selective protection. A trust implies a long-term strategy, so this stage must be addressed seriously and carefully.

Professional Consultation

Talk to our Mundo experts and discuss your particular situation, the nature of the assets, the location, and the needs of the family.

Start the process and send your documents 

Once you've made a decision, we send you the invoice, and you send Mundo your documents. After payment is confirmed, we start the due diligence process.

Drafting the Trust Deed

Then, we proceed with drafting, revising, and establishing the trust deed. This will be the defining document and will determine how and when the assets will be distributed. 

Appoint Trustees & Protector

Choose a trustee and, if desired, a protector. This is an individual who will oversee the trust administration and ensure that things are carried out as stipulated by the settlor. The protector is usually someone the settlor trusts. 

Transfer of Assets

After the above is settled, the definitive action is the transfer of assets. Without this, the trust will not exist. 

Annual Review & Adaptation

The Nevis trust must be renewed every year. Even though it’s not required to present yearly audits, it is required to maintain financial records within the jurisdiction of Nevis. 

Who Can Benefit from a Nevis Trust?

Contrary to what people may think, a trust is not only for the ultra-wealthy: it serves anyone who wants to protect something, even if it is only an apartment or a bank account.

Here is a list of typical uses and also profiles that can greatly benefit from Nevis:

• Parents who want to ensure funds for their children's college in the future
• Individuals who want their grandchildren to receive the funds for various uses
• Individuals who want to distribute their wealth according to their wishes and not strictly by inheritance laws
• Parents who want to teach their child how to manage money instead of just giving them full access to the family’s wealth
• Individuals who want to protect their assets from external threats and keep them safe for the use of their loved ones
• Individuals who may want to protect their money from irresponsible relatives or spendthrifts within the family
• Individuals who want to organize their wealth distribution for after they're gone, without having to use a will
• Families that don't want to go through long and expensive succession processes
• Couples or families that want to protect their home from ever being seized or taken away
• Parents who want to avoid disputes between their heirs

Costs and Fees Associated with Nevis Trusts

Establishing a trust entails the following: 

• Trust Government fees 
• Registered Agent and Registered address fees 
• Preparation of all constitutional drafts 
• Government fees for PTC (private trust company in Nevis) Government fees 
• Registered Agent and Registered address fees for PTC (private trust company in Nevis) 
• Preparation of all constitutional drafts for PTC (private trust company in Nevis) 
• Courier delivery of originals from Nevis 
• Annual renewal (government fees, Registered agent and address) of Trust 
• Annual renewal (government fees, Registered agent and address) of PTC 
• Accounting services for the first year of the trust (bookkeeping, preparation of financial statement)
• (optional) 
• Corporate bank account opening for trust + notarized set of copies for account opening (optional)

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Tax Treatment and Reporting Requirements

Those who have assets abroad must report them to the IRS, the ARCA, or whatever entity is responsible for tax collection in their country. If you are a citizen of the US, you are taxed on your worldwide income, and all your assets must be declared.

For more details about tax treatment, please consult with certified professionals with proven expertise in every jurisdiction involved.

Common Questions about Nevis Trusts

What makes Nevis different from other offshore trust jurisdictions?

A $100,000 bond and non-acceptance of foreign court rulings make Nevis stand out from other jurisdictions.

Can a Nevis Trust own companies or property?

Yes, it can own all kinds of assets.

Can Nevis citizens establish a trust?

Yes. 

Do I need to visit Nevis to set up the trust?

No. All processes can be carried out remotely. 

Can I amend or dissolve the trust later?

Only if the trust is set as revocable from the start.

Conclusion: protect the most cherished with the best 

The Nevis trust ends up being about more than protecting assets: it is about protecting your loved ones. This approach is outstanding if you want your assets to benefit your close relatives, friends, and the people you care about the most. 

In this regard, no tool is as powerful and effective as the trust, and we can help you establish one.

Mundo and how we can help you

We are a team specializing in various financial services, including company registration, bank accounts, real estate, and trusts. We have been working with Nevis for a long time and can ensure you have a smooth path towards achieving your goals.

Our team is versatile and flexible, composed of people of different ages, experiences, and backgrounds. Every member of our team contributes to forming a solid chain of knowledge that we can leverage every time we help people like you.

Contact us today