Bermuda: Guide To Purpose Trusts In Bermuda

Last Updated: 29 January 2015
Article by Vanessa Schrum and Ashley Fife

1. INTRODUCTION

Located just a two hour flight from New York and a seven hour flight from London, Bermuda has been at the forefront of the trusts, insurance and funds industries for the past 50 years and has developed a formidable reputation as being one of the premier offshore jurisdictions in which to develop trust structures. Bermuda's practitioners have considerable experience in the field of both private client and commercial trusts for international clients.

2. WHAT IS A TRUST?

A trust is a legal relationship and not a separate legal entity. The relationship is created by the person wishing to create the trust (settlor or grantor) and the trustees (the persons willing to undertake the office of trustee). As part of this relationship property (trust fund) is declared to be held by the trustees for the benefit of certain parties (beneficiaries) or for certain purposes.

A trust has the following characteristics:

  • The assets constitute a separate fund and are not a part of the trustee's own estate.
  • Title to the trust fund stands in the name of the trustee or in the name of another person on behalf of the trustee.
  • The trustee has the power and the duty, in respect of which it is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed upon it by law.

3. WHAT IS A PURPOSE TRUST?

A purpose trust is a trust created to fulfil purposes rather than to hold property for beneficiaries. The concept was introduced in the Trusts (Special Provisions) Act 1989 and was conceived, primarily to respond to the need for a trust to be able to fulfil a useful role in a commercial setting – that of, the role of insulator. However, it can also be used for philanthropic purposes and estate planning purposes.

The introduction of the Trusts (Special Provisions) Amendment Act 1998 refined the law relating to trusts created for non-charitable purposes by requiring the following conditions to be satisfied.

  • The purpose or purposes of the trust must be sufficiently certain to allow the trust to be carried out.
  • The trust must be lawful and it must not be contrary to public policy.

Under Bermuda law, a purpose trust may last indefinitely or for a specified term of years.

In Bermuda hybrid trusts, with both purposes and beneficiaries, are permitted.

The trust deed may provide for the appointment of an enforcer, which is a role that is similar to that of the protector. However, the appointment of an enforcer to enforce the trust and provide for the appointment of successors is not a requirement in purpose trusts governed by Bermuda law. The Trusts (Special Provisions) Act provides the settlor, a trustee, or any person with a sufficient interest in the trust, the power to make application to the court to enforce the purpose trust. In default of any other arrangements, the final power of enforcement rests with the Attorney General.

4. WHY USE A PURPOSE TRUST?

Purpose trusts have the following advantages:

  • Flexible vehicle - there is a lack of rigid requirements for the creation and operation of trusts when compared to companies.
  • A trustee need not be concerned with duties owed to beneficiaries with competing claims and interests.
  • The terms of the trust, its settlor and the purposes are confidential.
  • Trusts are not required to be registered except for certain trusts which are themselves established to fulfil a specific statutory obligation, for example trusts established to provide pension benefits to persons with Bermudian status and their spouses under the National Pension Scheme (Occupational Pensions) Act 1998.
  • Trusts are relatively easy to set-up, requiring fewer formalities than the incorporation of a company.
  • Assets are dedicated to a specific purpose and are "ring-fenced" from insolvency risks, thereby creating a protected fund so that "bankruptcy remoteness" can be achieved.
  • The transaction may be effected "off balance sheet" or as an "orphan" structure in relation to its originator.
  • Purpose trusts can facilitate arrangements to separate voting from economic control.
  • Purpose trusts can provide an ownership vehicle for private trust companies (PTCs), special purpose vehicles (SPVs) and special purpose insurers (SPIs).
  • Purpose trusts can be used to hold a fund as security for parties' obligations in commercial transactions.

Purpose trusts have also been used for philanthropic purposes including for research and development. In Bermuda, even prior to the introduction of purpose trust legislation, a trust established for charitable purposes was valid even if it did not have beneficiaries. However, many clients wish to establish trusts for philanthropic purposes which may not fall within the definition of "charitable". Bermuda's purpose trust legislation provides that trusts formed for philanthropic or other purposes are valid provided, as required for all purpose trusts, the purposes are sufficiently certain to be carried out, lawful and not contrary to public policy.

Download article here.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions