New Trust legislation in the BVI has broadened the range of
trust options accessible to private clients and enhanced BVI trust legislation
by making some welcome modifications that boost the attractiveness of BVI
trusts as part of international wealth planning and financial structures.
The British Virgin Islands are previously a well-respected
trust jurisdiction - mainly because BVI trust law is derived from English trust
law, and additional supplemented by statute to offer a variety of flexible and
user-friendly trust structuring options to stylish private clients.
The latest legislation came into effect in May 2013 to
refine further the trust offering in the BVI, especially the use of Private
Trust Companies ("PTCs") and VISTA trusts. The latest changes should
help to ensure the BVI remains at the forefront of international trust planning
and a jurisdiction of selection for high net worth and ultra high net worth
families from around the globe.
The main changes are summarised below:
The Trustee Act
(i) Trust Period – For all new trusts established after May
15, 2013, the maximum perpetuity period has been increased from 100 years to
360 years. For practical purposes, this extends the life of new trusts beyond 4
generations of beneficiaries, which is more than enough for most private
trusts.
(ii) Purpose Trusts – the BVI already has highly developed
legislation for the creation of non-charitable purpose trusts, but there is a
requirement that at least one trustee must be a "Designated Person",
which has until now meant a lawyer or auditor in BVI or a BVI trust licence
holder. Now this definition has been amended so as to include PTCs. This
further enhances the utility of PTCs for those persons who would rather not use
a third party, regulated trustee for purpose trusts (including VISTA trusts).
iii) Trust Duty - The trust duty fee has been increased from
$100 to $200 and the late fee will increase from $200 to $400 for each year it
remains unpaid.
(iv) Third Party Lending/Security – Previously, any third
party lending money to a trustee could request (for its own protection and only
where there is an express provision in a trust deed that section 101 of the
Trustee Act applies) that the trustee restrict its powers of investment,
distribution and appointment and removal of trustees. Amendments have now been
enacted so as to extend the application of Section 101 to lenders of any
assets, not just money. So, this will help to offer further security for third
party lenders in future by helping to preserve the value of the trust corpus.
VISTA
The Virgin Island Special Trusts Act (VISTA) has been in
force since 2004. VISTA trusts have become a popular trust structure for
holding shares in BVI companies, because VISTA removes the trustees' responsibility
to monitor and intervene in the management of the BVI company held in trust,
whilst offering the same flexibility for planning as a regular trust. Some
welcome clarifications have been made to this legislation.
(i) Application of VISTA is now variable –Although generally
considered to be a possibility any way, amendments confirm that a new VISTA
trust can now specify the circumstances in which the VISTA regime will apply or
cease to apply during the lifetime of a trust. The power to make the declaration
that VISTA will apply/cease to apply can be vested in an individual or a
committee but not in any of the trustees.
(ii) Conversion of Non-VISTA Trusts - BVI non-VISTA trusts
can now be converted into VISTA trusts provided they meet all the conditions to
qualify as such ( e.g. holding BVI company shares) and provided further that
one of the trustees of the trust is a PTC or a trust licence holder.
iii) Number of VISTA Trustees –previously VISTA stated that
there could only be one trustee of a VISTA trust and that that trustee had to
be a trust licence holder. Now, in addition to permitting a PTC to act as a
trustee of a VISTA trust, VISTA has been amended so as to permit the
appointment of additional trustees, provided that there is at least one trustee
that is a PTC or trust licence holder. This means that non-BVI resident
individuals or non-BVI companies can now be co-trustees of VISTA trusts, if
preferred.
(iv) BVI Company Shares - The rules as to which BVI
companies cannot be held in a VISTA trust have been updated to reflect changes
in BVI corporate legislation. VISTA trust can now be formed for all types of
BVI Company other than those that are licensed in the BVI.
(v) Appointed Inquirer - In relation to permitted grounds
for complaint, it is provided that an appointed inquirer can be paid from the
trust assets and is to be given information about the trust.
(vi) Corporate
Settlors - It has been made clear that corporate settlors can establish VISTA
trusts.
PTCs
BVI PTCs have been able to act as trustees of trusts without
the need to obtain a BVI trust licence since 2007. They have become very
popular, especially among High-Net-Worth families and clients from civil law
jurisdictions who do not necessarily welcome the prospect of transferring their
wealth to an independent third party trustee when establishing a trust.
PTCs can only avoid licensing in the BVI if they undertake
"unremunerated trust business" or (for related family trusts where
the PTC is to charge fees for its services) "related trust business".
The problem previously was that if a settlor was included in
the class of beneficiaries, then the relevant trust could not fall within the
category of "related trust business", which meant the PTC could not
charge for its services. That position has now been rectified, so that a PTC
can now charge for its services for family trusts where the settlor is in the
class of beneficiaries.
Conclusion
The new legislation has brought about some very positive
changes for the BVI – expanding the suite of trust vehicles available to
international clients and assisting the jurisdiction in cementing and promoting
its position as a leading jurisdiction for international wealth planning
structures.
Regards
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