BAHAMAS: An Introduction
Offshore Trusts in The Bahamas
Since obtaining independence from the UK in 1973, The Bahamas has significantly developed its economy – particularly to attract high net worth individuals – by developing the English trust concept as a protected, ring-fenced fund transferred by a settlor to a trustee for the benefit of beneficiaries or for charitable or non-charitable purposes. Unless the settlor was trying to defraud the existing creditors, the fund held by the trustee is free from claims of creditors except in respect of debts incurred by the trustee qua trustee.
While HNWIs can create testamentary trusts, normal practice is for them, in their lifetimes, to irrevocably transfer their dynastic wealth to trustees of a trust governed by Bahamas’ law, so that it does not pass under their wills and is not subject to the rights of any forced heirs or close relatives under succession law on their death. Usually, the beneficiaries will have no fixed entitlements (eg, lifetime rights to income) but will merely be objects of the discretionary powers of the trustee or the settlor to appoint capital or income of the trust fund to them. They have only a hope of benefiting from the exercise of such discretion. Therefore, they have nothing to satisfy any judgment creditor they may have. It is possible for the settlor to act as a trustee as well as one of the beneficiaries, but they should not act as a sole trustee as this could lead to the trust being regarded as a sham, where, in reality, the trust fund is held by a trustee at the settlor’s discretion and is therefore treated as still belonging the settlor. Even without being a trustee, the settlor may reserve to themself extensive powers, eg, to appoint income or capital to beneficiaries or the right to withhold consent to the exercise of specified trustees’ powers.
The trustee may be a company or Executive Entity licensed under the Banks and Trust Companies Regulation Act 2020, or it may be a private trust company or qualified Executive Entity exempt from such licensing requirement but required to have a local registered representative, either licensed by or registered with the Central Bank so that the Bank can monitor compliance matters. See the Executive Entities (Amendment) Act 2025 and the Banks and Trust Companies (Private Trust Companies and Qualified Executive Entities) Regulations.
The trustee first needs to manage the trust fund within whatever safe or speculative parameters are laid down in the trust instrument and, second, exercise the trustee’s discretionary powers to distribute income and capital to beneficiaries. The trustee may be empowered to employ a discretionary portfolio manager or even required to employ a specific person in such role. The exercise of certain management or distributive powers may require the consent of a designated person, eg, the settlor while alive and then a designated protector, who may be a relative, a professional, or a private company. Provision may also be made for a family council to meet to discuss matters. Highly flexible governance structures involving underlying companies owned by the trustee can be created to last indefinitely or for a specified period.
The trustee must take into account the settlor’s wishes as expressed from time to time, whether given orally or in a letter of wishes, and whether intended to apply before or after the settlor’s death or both, but the trustee must not slavishly follow those wishes. The trustee must exercise an independent discretion in deciding whether or not to give effect to them. Therefore, the trustee, acting in the best interests of the beneficiaries as a whole or of a particular beneficiary, can choose not to follow the settlor’s wishes, though normally the trustee will feel some moral persuasion to do so unless circumstances have changed significantly since a letter of wishes was received.
The Bahamas benefits from a government committed to enhancing the competitiveness of its financial services and trust industry, which is well served by experienced practitioners and judges. Accordingly, parliament has recently enacted The Trustee (Amendment) Act 2025, the Banks and Trust Companies Regulation (Amendment) Act 2025 and the Arbitration (Amendment) Act 2025, taking into account lessons drawn from recent case law.
Under Section 77 of the Trustee Act, as amended, not only can a trustee, for its own protection, apply confidentially to the court for advice or direction, but so may any person holding a power within the trust structure, eg, powers of appointment of trust assets, consent, direction, revocation or variation, or a power to appoint or remove trustees or other power holders such as protectors.
Under Section 77A Banks and Trust Companies Regulation Act 2020, as amended, provision is made for civil proceedings concerning a trust to be heard in private with the court file sealed. However, a judgment may need to be published in a form that no private or personal information is disclosed.
The extensive amendments to the Arbitration Act, which originally focused upon resolution of commercial disputes, are designed to promote and facilitate the effective resolution of trust disputes by confidential arbitration. To this end, the amendments allow greater access to the courts to appeal points of law in private, unless the parties prefer otherwise.
Finally, because compliance with Financial Action Task Force international standards is fundamental for maintaining confidence in the Bahamas’ finance industry, necessary amendments were recently made to six key pieces of legislation: the Proceeds of Crime (Amendment) Act 2025, the Register of Beneficial Ownership (Amendment) Act 2025, the Companies (Amendment) Act 2025, the International Business Companies (Amendment) Act 2025, the Financial Transactions Reporting (Amendment) Act 2025, and the Non-Profit Organizations (Amendment) Act 2025. The government, strongly supported by leading lawyers, accountants, trustees, bankers and investment managers, is committed to ensuring that The Bahamas remains a leading jurisdiction providing a safe and thriving environment for the creation and growth of private wealth.