Trust legislation amendments to make Bermuda more attractive, competitive

By added on 15/07/2014

A proposed change to Bermuda’s Trust legislation is aiming to make the Island more “attractive and competitive”, reports the Royal Gazette.

Grant Gibbons, Minister of Education and Economic Development, told the House of Assembly Friday that the amendment would help to retain and create jobs for Bermudians.

“This legalisation facilitates the modernisation of Bermuda’s Trust law,” he said. “It will enhance Bermuda’s reputation as a quality and reputable jurisdiction for international Trust business.”

The proposed amendment to the Trustee Act 1975 will provide a statutory framework for applications to Bermuda’s courts on the basis of the common law principle known as the Hastings-Bass Rule. This provides the courts to set aside an exercise of Trustee power if the resultant effect was not as intended. It must be evident the Trustee’s actions would have been different had they taken into account relevant information they failed to consider.

Mr Gibbons said: “The proposed amendment to the Trustee Act 1975 will provide greater flexibility, clarity and certainty in our legislation with respect to the conduct of Trust business in Bermuda. The rule has been used for over 25 years to mitigate any negative impact on Trust beneficiaries and to relieve Trustees of the consequences of errors in their exercise of fiduciary power.

“This amendment is consistent with Bermuda public policy, in favour of the establishment and maintenance of Trusts in Bermuda for legitimate estate and tax planning purposes.

“With high-net worth individuals from emerging markets gaining familiarity with Bermuda as a reputable and well-regulated jurisdiction, it is anticipated that this amendment will lead to further Trust business for Bermuda. With our existing legislation, if a potential Trust settlor feels that, at some stage, they may wish to avail themselves of Hastings-Bass relief, our competitor jurisdictions have a strategic advantage by having such provisions coded in their law. There is also the risk that an incumbent Bermuda Trust that seeks the benefit of a Hastings-Bass relief might choose to re-domicile to one of those more accommodating jurisdictions, in the interests of certainty.”

Mr Gibbons also highlighted the “material contribution” Trust business makes to the Island’s economy. He said: “Last May the BDA Trust Focus Group surveyed 30 Trust companies on the Island. Fifteen of them responded with substantive data that showed that those 15 directly employ 158 people in Bermuda — nearly 80 percent Bermudian. Those 15 had $125 billion in assets under administration with their investments benefitting Bermuda’s investment managers, funds and our banking sector.”

Last Wednesday, the Senate approved the Trusts (Special Provisions) Amendment Act 2014 that will allow settlors to retain more control over a Trust in Bermuda.