Offshore Trusts in Citizenship and Succession Planning

The intersection of offshore trust planning and citizenship-by-investment (CBI) is an underexplored area of international wealth planning — but one with genuine practical relevance for clients who hold or are considering CBI investments alongside broader estate planning objectives.

This guide examines how trusts can interact with CBI investments, the IHT implications of using trusts in this context, the succession planning benefits, the constraints imposed by specific programmes, and how international structures are typically assembled for HNW clients.

Why Trusts and CBI Intersect

CBI investments typically involve a specific qualifying asset: a real estate property in a Caribbean programme, a fund share in a fund-based programme, or a government bond in some European programmes. This asset must be held for a qualifying period — typically five years in most Caribbean programmes — before it can be disposed of.

From a succession planning perspective, a CBI asset that must be held for five years raises questions: what happens if the investor dies during the holding period? Who inherits the asset, and does inheritance disrupt the citizenship? Can the asset pass to children without triggering probate in the Caribbean jurisdiction?

An offshore trust as the holding vehicle can address these questions — provided the programme allows trust ownership and the structure is properly established.

Programme Rules on Trust Ownership

Not all CBI programmes permit trust ownership of the qualifying investment. The rules vary considerably:

St Kitts and Nevis: The St Kitts programme has provisions allowing real estate CBI investments to be held through a holding company or trust structure, subject to approval. The applicant must be a beneficial owner with sufficient control and benefit from the structure.

Grenada: Grenada allows investment through approved holding structures including trusts, provided the structure is disclosed and approved by the Citizenship by Investment Unit (CIU). The applicant must be clearly identified as the beneficial owner.

Antigua and Barbuda: Antigua has provisions for structured ownership but the specific requirements for trust vehicles should be confirmed with programme-registered advisers.

Malta (MEIN): Malta's citizenship programme has specific rules about asset ownership and trusts are generally not the primary vehicle for the qualifying investment, though the associated property or investment may be structured with trust overlays in certain circumstances.

The critical principle: always verify the specific programme rules before proceeding with a trust structure. Some programmes categorically require personal ownership; using a trust without approval may invalidate the application or the citizenship.

The IHT Interaction: Applicants Within the Scope of UK IHT

For applicants within the scope of UK inheritance tax — since 6 April 2025 this is determined by long-term UK residence (broadly, UK tax resident for 10 of the last 20 tax years) rather than by domicile — making a CBI investment, the IHT interaction requires careful consideration.

When such an individual places assets into a trust, this is a chargeable transfer for IHT purposes (if the trust is a discretionary or relevant property trust). A chargeable transfer at or above the nil-rate band (currently GBP 325,000) triggers an immediate 20% lifetime IHT charge on the excess. Additionally, the trust itself becomes subject to ten-year periodic charges and exit charges.

For most CBI investments (USD 200,000 to USD 250,000 for Caribbean programmes), the amount is below the IHT nil-rate band and an immediate charge does not arise. For larger investments or where the trust holds other assets, the analysis is more complex.

Separately, if the investor transfers the CBI investment as a gift (rather than into a trust), the seven-year potentially exempt transfer (PET) clock applies. If the investor survives seven years, the gift falls out of the IHT estate. If the investor dies within seven years, taper relief may apply (taper relief reduces the tax on the gift, not its value, and only where cumulative gifts exceed the nil-rate band).

The Excluded Property Trust: How the Rules Changed in April 2025

The excluded property trust (EPT) has historically been one of the most powerful structures in the context of CBI and citizenship planning. An excluded property trust holding non-UK situs assets can sit outside the UK IHT regime — both for the settlor's own IHT purposes and for the ten-year periodic charge and exit charge regime that applies to UK trusts.

Important: the basis for this changed on 6 April 2025. The UK abolished domicile and deemed domicile as the connecting factors for inheritance tax and moved to a residence-based regime. Whether a settlement's foreign assets are excluded property is now tested by reference to whether the settlor is a "long-term UK resident" — broadly, an individual who has been UK tax resident for at least 10 of the previous 20 tax years — rather than by reference to domicile. The old "15 of 20 years" deemed-domicile test no longer applies.

Why this matters for citizenship planning:

An individual who is not yet a long-term UK resident, but who is considering future UK residence, can settle an EPT before becoming a long-term UK resident, holding CBI investments and other non-UK assets. While the settlor is not a long-term UK resident:

• The non-UK situs assets are excluded property and outside UK IHT
• Future growth in asset values within the trust is also outside UK IHT while excluded-property status is maintained
• The trust can hold the CBI investment for the five-year qualifying period without UK IHT charges on the investment

Crucially, under the post-April-2025 rules this shelter is not permanent: once the settlor becomes a long-term UK resident (10 of the last 20 tax years), the trust's foreign assets can fall back within the scope of UK IHT, and there is a "tail" period during which that status persists even after leaving the UK. This is a significant change from the pre-2025 position, under which a trust settled before acquiring deemed domicile sheltered its assets indefinitely. EPTs created before April 2025 should be reviewed against the new rules.

The rules around excluded property trusts have been subject to major legislative change. Specific legal and tax advice from UK-qualified advisers is essential before settling any EPT or relying on an existing one.

Succession Planning Benefits

Beyond IHT, a trust holding a CBI investment provides succession planning advantages:

Avoiding probate in the Caribbean: Real estate held personally by a deceased investor requires probate in the Caribbean jurisdiction, which can be slow, costly, and involve disclosure of the estate to local courts. An asset held in a trust passes to beneficiaries according to the trust deed without local probate.

Continuity of ownership during the holding period: If the investor dies before the five-year holding period expires, a trust-held investment can continue to be managed by the trustees on behalf of the beneficiaries without disrupting the citizenship status. Personal ownership would require the estate to be administered and the investment transferred, potentially at risk of programme complications.

Multi-generational transmission: A trust can hold the CBI investment beyond the first generation, allowing children or grandchildren to benefit from the citizenship and any property appreciation without needing to own the underlying asset directly.

Discretionary distribution: A discretionary trust allows trustees to distribute benefits to beneficiaries at their discretion — useful where the family structure may change (additional children, divorce, incapacity) and where flexibility is preferable to fixed entitlements.

The Complication: Programme Approval and Beneficial Ownership

Most CBI programmes require that the applicant is the beneficial owner of the qualifying investment. This means that a trust structure must be structured so that the applicant is clearly a beneficiary of the trust and that the beneficial ownership for programme purposes is unambiguous.

Trust structures that obscure beneficial ownership — for example, fully discretionary trusts where the applicant has no guaranteed benefit — are unlikely to be accepted by programme governments without extensive explanation and disclosure.

The practical approach used by experienced advisers is to structure the trust with the applicant as a named principal beneficiary with a clear right of occupation (for real estate) or income (for fund investments), while the trust also extends benefits to spouse and children. This satisfies the beneficial ownership requirements while delivering the succession and IHT planning objectives.

Typical Structure for a Caribbean CBI Investment in Trust

A typical international structure for a client making a Caribbean CBI investment through a trust would involve:

1. Jersey or Isle of Man discretionary trust as the holding vehicle, settled by the client before making the CBI investment (and, where excluded-property treatment is sought, before the client becomes a long-term UK resident).

2. Programme-approved holding entity in the Caribbean (if required) — some programmes require the immediate owner of the real estate to be a local company; the trust then holds the shares in that company.

3. Trust deed specifying the client and family as principal beneficiaries, with appropriate powers for trustees.

4. Disclosure to CBI programme of the trust structure and beneficial ownership, with programme CIU approval obtained before the investment is made.

5. Trust registration where required under the relevant tax information exchange regime (Jersey and Isle of Man both have registration and reporting obligations under Common Reporting Standards).

Jersey and Isle of Man are favoured as trust jurisdictions for UK-connected clients because of their legal heritage (common law trust law derived from English law), experienced professional trust community, regulatory robustness, and their experience with excluded property trusts.

Important Caveats

Trust law, IHT rules, and CBI programme requirements all change. The interaction between the three is complex and highly individual. The analysis depends on the specific programme, the specific trust structure, the client's domicile status, the nature and situs of the trust assets, and the client's anticipated future residence and domicile trajectory.

Nothing in this guide constitutes legal or tax advice. This is a specialist area where the cost of getting the structure wrong — whether through IHT charges, programme rejection, or trust invalidity — substantially exceeds the cost of getting proper advice at the outset.

Compliance Note

UK inheritance tax rules including the excluded property trust regime are subject to legislative change. HMRC has announced various consultations on offshore trusts and international structures in recent years. CBI programme rules are subject to change by programme governments. Always seek advice from UK-qualified tax advisers, qualified trust lawyers, and CBI programme-registered advisers before implementing any structure.

How Global Investments Can Help

Global Investments provides integrated advice on international wealth structures, citizenship planning, and succession planning for internationally mobile HNW clients. We work with experienced trust lawyers in Jersey and the Isle of Man, UK tax advisers, and CBI programme specialists to design structures that work across all relevant dimensions — tax efficiency, programme compliance, and long-term succession objectives.

If you are considering a CBI investment and want to understand whether an offshore trust structure is appropriate for your circumstances, contact our team for a confidential discussion. We will help you assess the options honestly and connect you with the right specialist advisers to implement any structure properly.