Most people have only a vague idea of what a trust is. It is the formal transfer of assets, for example property, shares or cash to a trustee (perhaps one or more individuals or a trust company) with instructions that they hold the assets for the benefit of others. The trust document states who is responsible for looking after the trust assets (the trustee) and who is to benefit (the beneficiaries) and any rules or conditions which the trustee or the beneficiaries must observe. The trustee is the legal owner of the assets but the beneficiaries are the beneficial owners.

There are several good reasons for you to make a trust in The Bahamas, some of which are mentioned below.

Confidentiality:

In the Bahamas your trust is not registered. As the trustee is the legal owner of the trust assets, trusts when used for legitimate purposes, offer an effective means of shielding your identity and that of the beneficiaries.

Avoiding probate:

If your foreign will is probated in The Bahamas, this will involve additional costs, publicity and often delay. With a trust these obstacles can be avoided because when you die your trustee is already the owner of your bank account.

Avoiding the pitfalls of a joint account:

Once you have set up a joint account, your joint signatory has the same rights as you do over the bank account. By forming a trust you can determine when and how a person becomes entitled to share in your assets.

Tax benefits:

Trust assets do not attract income, witholding, capital gains, estate, wealth or capital transfer taxes in The Bahamas. Also, with proper planning, it may be possible for you to mitigate tax burdens in your home country, for example, if you settle assets in trust for your grandchildren, your children's exposure to tax may be reduced.

Domestic reasons:

By using a trust you can plan for the future. Trusts can be used to:

  • delay the inheritance of children until they are older and wiser;
  • care for incapacitated beneficiaries including yourself;
  • protect the interests of beneficiaries who can not manage their own financial affairs.

Legislative Advantages:

In recent years, the government of The Bahamas has introduced two pieces of legislation which enhance the status of The Bahamas as an international finance center. One of the Acts is the "Fraudulent Dispositions Act", 1991 which has stimulated interest in so called "Asset Protection Trusts". Generally speaking however, trustees are only willing to accept this type of business if it falls within fairly strict guidelines and particularly if they can regard it as part of the estate planning needs of the individual setting up the trust.

The other piece of legislation, the "Trusts (Choice of Governing Law), Act" 1990 was enacted to provide legal certainty when dealing with a Bahamian trust which has some foreign connection. By virtue of this Act a Bahamian trust may be protected from "forced heirship" claims or the enforcement of other foreign law rules which might affect the validity of the trust.

At the moment a new "Trustee Bill" is before Parliament. When the Bill becomes law there will be additional advantages to forming a trust in The Bahamas, for example shorter trust documents and legislative recognition of the ability of the individual setting up the trust to retain powers to himself or herself.

Disclaimer:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.