British Virgin Islands Trust Law

The British Virgin Islands trust law is based largely on English common law, as supplemented by the Trustee Ordinance 1961, (similar to the UK’s Trustee Act 1925). In 1993 the Trustee Ordinance was substantially amended by the Trustee (Amendment) Act, thus creating a very modern piece of trust legislation.

The Trustee (Amendment) Act, 1993

The main features of the Trustee (Amendment) Act, 1993 (“the Act”) are as follows:

Perpetuities and Accumulations

• the perpetuity period can be fixed for a term not exceeding 100 years which alleviates the need to use the old fashioned common law “lives in being” clause

• income can be accumulated throughout the duration of the trust

• introduction of a number of saving provisions, the most important being “a wait and see provision”, which applies to trusts created after July 16, 1964

Proper Law and Jurisdiction

• provision of a definition of what constitutes the “Proper or Governing Law” of a trust

• provision of a list of factors to determine the closest connection of a trust, if the Proper Law is not specified in, or cannot be reasonably inferred from the trust instrument

• the courts of the British Virgin Islands have jurisdiction over a trust, if Proper Law is simply said to be that of the British Virgin Islands with no requirement for any other connecting factor

Forced Heirship Provisions

• inclusion of provisions protecting dispositions from forced heirship laws in a settlors home jurisdiction

Purpose Trusts

• inclusion of provisions allowing purpose trusts to be created for any lawful purpose

Control by Settlor

• provisions providing statutory recognition for the use of a protector – the “watchdog” over trust assets and trustee decisions

• provisions to allow the settlor to restrict the trustee’s power by reserving certain matters to the settlor

• restriction of the liability of a trustee, if a trustee gets the protector’s or settlor’s consent to certain matters

• inclusion of a provision deeming that the reservation of a power by a settlor in respect of the trust or the fact that the settlor is also a beneficiary are not necessarily inconsistent with the existence of a trust

• inclusion of a provision which allows the trust instrument to provide that a settlor or protector is not liable to a beneficiary for the bona fide exercise of any power contained in the trust instrument

Taxation and Registration

• a trust which provides for the Proper Law to be that of the British Virgin Islands must be stamped with a US$50 revenue stamp

• a provision excluding any trust registration requirements thereby maintaining confidentiality

• the trustees, the trust, or non-resident beneficiaries are not liable for any British Virgin Islands tax

Authorised Investments

• the trustees have broadened powers of investment allowing a trustee to invest trust funds in an investment the trustee wishes provided the trustee acts prudently

Schedule of Powers

• inclusion of a Schedule of Powers, containing powers typical of those commonly found in offshore trusts, which are able to be incorporated into the trust instrument by reference

Amendment to Trust Instrument

• inclusion of a provision, provided such power is expressly contained in the trust instrument, which allows a trust to be amended or revoked by the trustee