The concept of Trust is not a new one, in fact evidence of its use dates back to the time of the Romans. However, it was not until the 13th Century that the notion of "common law trusts", as we know it today, emerged. Today, most if not all fortune 500 companies and their principals engage in some form of "offshore" business activity, and Trusts have become one of the dominant instruments to facilitate such activities. The reason for this is simple really, as every individual or company has a desire to protect, preserve and enhance their wealth, and the offshore environment has presented itself as the principal means for realizing these goals as it offers:-
- Protection from creditors and other litigants
- Wealth enhancement as it creates tremendous trade advantages through the avoidance of capital gains and income taxes.
- Preservation of wealth by ensuring that heirs are well provided for long after your demise, and facilitating the continuation of business activities, and the avoidance of probate, estate taxes and forced heirship provisions.
The great benefit of the trust is that it allows the legal ownership of property to be distinguished and separately vested from the enforceable rights of use and enjoyment of that property. This makes the trust, particularly when established offshore, an extremely flexible, sophisticated and creative instrument for asset protection, tax, estate, and investment planning, and the preservation of confidentiality.
The three basic elements in a trust are the Settlor, the Trustee and the Beneficiary. The Settlor is the creator of the trust and may be either an individual, a corporation or another legal entity. The Settlor creates a trust by transferring title to assets which he owns to another person or entity with instructions that: those assets be held for the use and enjoyment of a third party The entity to which legal title to the assets is transferred and who holds those assets for the benefit of the third party is the trustee. The third party for whose use and enjoyment the assets are held and managed by the trustee is the beneficiary.
The trustee is under a legally enforceable obligation to exercise his trust powers for the benefit of the beneficiaries, and not to put himself in a position where his duties as a trustee conflict with his personal interests.
The beneficiary or beneficiaries may either be specifically named individuals or may be sufficiently defined class of persons from among whom the trustee is given a power to name specific individuals who are to benefit.
Trust may be either irrevocable or revocable. In the latter case the trust is called a "grantor trust".
In the case of an irrevocable trust, the trust assets are not usually deemed part of a deceased settler's estate, and passes to the beneficiaries without probate or estate taxes
International Corporate Services can assist in all aspects of trust formation.
BELIZE TRUSTS ACT, Revised 2000
Belize, as a result of its 2000 trust law, now present the most modern and flexible trust legislation in the world as the following review will illustrate:
Under the Act, trusts may be created either by oral declaration or by written instrument without any formalities or technical expressions. Unit trusts must be in writing and trusts relating to land in Belize cannot be enforced unless they are in writing.
The trust may state the proper law; if silent, then the law with which the trust has its closest connection at the time of creation shall be the proper law. If the law intended by the settlor or the law with which the trust has its closest connection does not provide for the types of trusts involved, then the law of Belize shall be the proper law.
Draftsmen may draw trusts with severability, and severable aspects of the trust may be governed by laws of different jurisdictions. The trust may also provide that the proper law or the law governing severable aspects of the trust may be changed from one jurisdiction to another.
Importantly, where the proper law or the law governing a severable aspect of the trust is changed to the law of Belize, the law of the old jurisdiction cannot operate to make void or invalidate the trust or the functions of the trustee. The converse also holds true. When the trust leaves Belize, the law does not apply to the trust so as to impair it nor invalidate the functions of the trustee.
Abolition of the Perpetuity Rule.
The rule against perpetuities is abolished in relation to trusts. Non-charitable trusts may be created for a maximum of 120 years. Charitable trusts may be established with unlimited duration.
A high level of asset protection is achieved since a Belizean court cannot vary or set aside a Belizean trust, nor recognize the validity of any claim against the trust property, pursuant to the law of another jurisdiction or the order of a foreign court in respect of marriage or divorce; succession or claims by creditors in an insolvency. This provision insulates the assets of the trust notwithstanding the law relating to fraudulent transfers, the Bankruptcy Act and the Reciprocal Enforcement of Judgements Act which could ordinarily be used to reach such assets.
Settlors, Beneficiaries and Purposes
Any person having capacity to own and transfer property may be a settlor of a trust. The settlor may also be the trustee or protector of the trust. The law provides for the creation of spendthrift trusts and abolishes the rule that a settlor may not be the beneficiary of a spendthrift trust. Both settlors and beneficiaries may give to trustees letters of wishes to guide the trustees in the exercise of their functions. Trustees may or may not have regard to the letters, although no fiduciary duty is established merely by giving one to a trustee.
Charitable trusts may be created for various purposes, including the relief of poverty, the protection of the environment, the advancement of human rights and fundamental freedoms, education and religion. A purpose may be regarded as charitable whether it is carded out in Belize or not, and regardless of whether it is beneficial to a community in Belize or elsewhere. Non-charitable purpose trusts may also be constituted under the Act. Such trusts must provide for the appointment of a protector, in default of which the Attorney General may appoint one.
Protectors and Trustees
Trusts may provide for a protector who may also be a settlor, trustee or beneficiary. In the exercise of his office, a protector owes a fiduciary duty to the beneficiaries or purposes of the trust, but he is not considered a trustee.
The minimum number of trustees is one with a maximum of four except for charitable trusts, and a trustee may also be a settlor and beneficiary. Due diligence, observance of utmost good faith, acting to the best of one's abilities and skills, and the standard of care of a reasonable and prudent man of business are required from all trustees.
Simple mechanisms are introduced for the removal and resignation of trustees.
The Act sets out in a schedule all the implied powers of trustees for clarity and certainty. Interestingly, trustees engaged in any profession or business are entitled to be paid their fees and charges for business and time spent in connection with the trust. Also, corporate trustees are entitled to remuneration agreed upon with the settlor or protector
Wide powers are given to trustees to advance moneys for maintenance and education of minors and beneficiaries generally. Trustees are similarly empowered to advance moneys to beneficiaries before their interest in the trust has vested.
Breach of Trust
Trustees are personally liable for loss, depreciation in value of trust assets or loss of profits consequent on a breach of trust. However, in the case of a corporate trustee the directors are not personally liable.
Persons who receive property or income with knowledge of breach of trust are constituted constructive trustees thereof.
The usual powers of tracing are included and the periods of limitation and prescription are removed for actions against trustees for fraud and recovery of property.
The Trusts Act permits a non-common law settlor to create a trust peculiar to his law, religion or nationality. However, such an instrument must recite that it is a trust, and it must be of type approved by the Attorney General by publication in the Gazette for it to be governed by the Act.
Belize Trust Act Revised 2000
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