BAHAMAS: An Introduction to Offshore: Trusts

Since obtaining independence from the UK in 1973, to attract HNWIs, The Bahamas has significantly developed its economy 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 their then creditors, the fund owned by the trustee is free from claims of creditors except, of course, for 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 chosen to be 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 arising 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 merely have hopes of benefiting from the exercise of such discretion. Thus, they have nothing to satisfy any judgment creditor they may have. It is possible for the settlor to be a trustee as well as one of the beneficiaries, but they should not be a sole trustee as this could lead their trust to be regarded as a sham trust where the reality is that the trust fund is held by a trustee to the order of the settlor and so treated as still the property of the settlor. Without being trustees, settlors can reserve to themselves extensive powers (eg, to appoint income or capital to beneficiaries or for their consent to be requisite 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 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 check on matters. See Executive Entities (Amendment) Act 2025 and Banks and Trust Companies (Private Trust Companies and Qualified Executive Entities) Regulations.

The trustee needs first to manage the trust fund within whatever safe or speculative parameters are laid down in the trust instrument and, second, to 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 particular person in such role. The exercise of some 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 or a professional person or a private company. Provision may also be made for a family council to meet to discuss matters. Very 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 expressed from time to time, whether given orally or in a letter of wishes, whether to be considered before or after their death or both, but the trustee must not slavishly follow the settlor’s wishes. The trustee must exercise an independent discretion whether or not to give effect to those wishes. Thus, 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 obligation to follow those wishes unless circumstances have changed significantly since a letter of wishes was received.

The Bahamas benefits well from a government concerned to enhance the competitiveness of its financial services and trust industry, well-served by experienced practitioners and judges. Thus, 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 account of lessons 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 also any person holding a power within the trust structure – eg, powers of appointment of trust assets, consent, direction, revocation or variation, or to appoint or remove trustees or power-holders such as protectors.

By virtue of Section 77A of the Banks and Trust Companies Regulation Act 2020 as amended, provision is made for it to be possible for civil proceedings concerning a trust to be heard in private with the court file sealed, though a judgment may need to be published in a manner such that no private or personal information is disclosed.

The extensive amendments to the Arbitration Act, which was 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 make possible greater access to the courts to appeal in private on points of law unless not wanted by the parties.

Finally, because compliance with Financial Action Task Force international standards is fundamental for confidence in the Bahamas’ finance industry, necessary amendments were recently made to six critical 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 alert to ensuring that The Bahamas remains a leading jurisdiction providing a safe thriving environment for the creation and development of private wealth.