Does An Irrevocable Trust Protect Assets From Sanctions?
Alisher Ushmanov Yacht, $600M Dilbar, Seized… But Is He Worried?
You would think that when the Alisher Usmanov yacht, Dilbar, was impounded in Germany last week this would have irked him somewhat. The London based Russian Oligarch, whose net worth has been estimated to be more than $20 billion, was also being pursued by the UK’s Organized Crime Unit (OCU).
The OCU has identified around $2.5 billion of assets belonging to Usmanov that should be confiscated, including the $600 million yacht and a $65 million house in London.
As governments around the world continue to grapple with the fallout from Russia’s invasion of Ukraine, this appeared at first glance to be evidence that the UK’s sanctions regime was working.
Are sanctions against Russian oligarchs working?
Not so according to Usmanov, who announced that he transferred all of his assets into irrevocable trusts for the benefit of his children before the sanctions were imposed, thereby enabling him to evade the asset freezing orders. The issue here is that the sanctions target assets under the “ownership and control” of certain prominent Russians, including Usmanov. This might mean the Alisher Ushmanov yact could evade sanctions as they exist.
Does an irrevocable trust protect assets from sanctions?
When assets like the Alisher Ushmanov yacht are transferred to an irrevocable trust, that typically involves relinquishing ownership and control, often in favor of family members such as children. Up until now, most sanctions regimes have focused on targeting the individual rather than extended family members.
Will Usmanov’s irrevocable trusts evade sanctions?
If irrevocable trusts are being used to evade the sanctions, the net will need to be widened to include family members if those sanctions are going to have any real impact. When news stories such as this one appear, there is always a risk that all kinds of irrevocable trust planning will be tarred with the same brush. In this case, it is of course reprehensible if opaque trust structures were established for the purpose of evading sanctions.
What are the legitimate benefits of an irrevocable trust?
There are many legitimate and sensible reasons why some of our clients choose to establish irrevocable trusts. Estate tax planning is one such reason.
- Currently the estate tax exemption is around $12 million per person, meaning only the amount you leave behind above $12 million will be subject to estate tax.
- Married couples therefore have around $24 million to play with.
These exemption amounts are likely to be cut in half at the beginning of 2026, potentially bringing more families into the estate tax net. For some families likely to be impacted, transferring certain assets into irrevocable trusts is an effective and appropriate strategy to mitigate their estate tax exposure. For more information on revocable and irrevocable trusts in California, visit the CA GOV website.
Can anything be done to stop Alisher Usmanov?
There is much uncertainty as to how the war in Ukraine will ultimately end. A coordinated global effort to beef up the sanctions regime and prevent trusts from being used to evade sanctions would be a welcome development.