The following are some of the more important changes which have been introduced by the 1993 Trustee Amendments Act in the British Virgin Islands:
Settlors now have the option to create a fixed term perpetuity period not exceeding 100 years in lieu of the common law period of 21 years plus.
Common law principles have been abolished under which trusts are held to be void ab initio if an interest might vest outside the perpetuity period. The concept of “wait and see” has replaced them.
BVI law now contains provisions which mitigate the harshness of common law principles in relation to class gifts.
There are provisions which assist in establishing the proper law of a trust, and which give statutory recognition to the right of trustees or protectors to change the proper law of a trust, and which give statutory recognition to the right of trustees or protectors to change the proper law for the protection of trust assets. The law also permits trust instruments to provide for the automatic transfer of assets to successor trustees upon the occurrence of specified events.
The jurisdiction of the BVI court has been extended so that it has authority to make orders in relation to trusts where the trustee is incorporated or registered to do business in the BVI or where the trust is administered in the territory; the court also has jurisdiction over any trust of which BVI law is the proper law, notwithstanding the absence of any other connection with the BVI.
Settlors' trusts governed by BVI law are now deemed to have the necessary capacity to pass good title to trust assets (not realty) to the trustees notwithstanding any laws relating to inheritance or succession in the settlor's place of domicile, providing the settlor is of age and of sound mind under such laws. Thus persons domiciled in jurisdictions with forced heirship laws or laws relating to community of property for spouses can create an inter vivos trust which will be recognised and given effect to by the BVI court notwithstanding the foreign laws.
BVI law now recognises trusts for purposes which are not strictly charitable, notwithstanding the absence of identifiable beneficiaries, and such trusts will not be subject to the rules against perpetuities and remoteness of vesting.
The amendments give statutory validity to the common practice of appointing protectors and specify limits to the fiduciary liability of protectors, and trustees acting with the consent of protectors. The limited obligations of custodian trustees are similarly recognised and successor trustees are given the same powers and discretions as those they replace.
The taxation of trusts and beneficiaries has been clarified to provide statutory exemption from all BVI taxes or fiscal levies (other than a one-off trust duty of US$50 payable upon the creation of the trust) for all persons who are not resident in the BVI, unless the trust fund includes BVI land or a business carried on there.
More people are realising how useful trusts can be for tax or estate planning or for asset protection. A simple trust with a standard portfolio of investments and a limited number of beneficiaries in the BVI will cost less than US$2,000, with annual trustee fees of about half this sum.
Michael Riegels is a partner with Harney, Westwood & Riegels, British Virgin Islands.