BAHAMAS: An Introduction to Bahamas

Offshore Trusts in The Bahamas 

The Bahamas is a very well-established trust jurisdiction for the creation of trusts, the administration of trusts by experienced substantial trust companies (with the benefit of the court’s protective guidance where needed), and the resolution of trust disputes, whether by the court or by arbitration. Significant judgments, that will have relevance for other trust jurisdictions, will shortly be delivered on the efficacy of clauses forfeiting the interests of beneficiaries if they contest provisions in a trust, the extent to which trust cases may be heard in private and the extent to which awards of arbitrators in trust matters can be challenged in the courts.

The Bahamas is served well by experienced practitioners and judges whether applying established law or developing new law. The government is also alert to the need for The Bahamas to have legislation keeping it as a leading trust jurisdiction in the development of flexible asset-holding structures involving trusts.

Over the last decade or so the government, advised by leading practitioners, has enacted the following legislation to create an environment in which diverse types of trust structures may flourish: the Trustee (Amendment) Acts 2011, 2013 and 2016; the Rule against Perpetuities (Abolition) Act 2011; the Purpose Trusts (Amendment) Act 2011; the Executive Entities Act 2011; the Trusts (Choice of Governing Law) (Amendment) Act 2016; and the Foundations (Amendment) Act 2020.

Very flexible structures, to last indefinitely or for a specified period, can be created, perhaps involving underlying companies or other entities, and enabling a settlor or a designated “protector” to provide significant input into the decisions of the trustee.

To ensure that The Bahamas complies with high global standards, the government has enacted the following legislation: the Financial Transactions Reporting (Amendment) Act 2022; the Central Bank Act 2020; the Bank and Trust Companies Regulation Act 2020; and the Digital Assets and Registered Exchanges Act 2020 with supplementary Regulations, policed by the Securities Commission of The Bahamas.

The outlook for trustees and trust lawyers in The Bahamas is a good one because high net worth individuals in their lifetimes look to organise what they see as dynastic wealth, so that it does not pass under probate of their wills subject to rights of forced heirs if such a succession-on-death regime applies. Trustees hold a ring-fenced fund protecting the fund from the trustees’ creditors except for debts incurred by the trustees in their capacity as trustees. Usually, the settlor and the other beneficiaries will only be objects of a discretionary power in a trust instrument and so have a mere hope of benefiting from an exercise of the trustees’ discretion so that they have nothing to satisfy a judgment creditor.

The trustees need to manage the trust fund within the parameters laid down by the settlor and need to consider how to deal with income and capital under the usual flexible discretionary trust instruments, subject often to input from the settlor or a protector. Even after a settlor’s death, his or her letter of wishes must be taken into account, though the trustees are not legally bound to follow those wishes, even if they feel morally obliged, unless circumstances have changed significantly since the letter was written.

The Bahamas is a pleasant place to live, work and holiday, with good international communications. Need one say any more?