Domicile Matters: Frequently Asked Questions when Considering Choice of Domicile

Domicile Matters

Unfortunately, plans conceived with a compartmentalized view of a client’s wealth, lifestyle and family dynamics are often worthless in practice and requires the overarching organization of what is happening, and more importantly, where it is happening. Increasingly we have moved towards a practice that is focused on ‘whole life’ planning and in this context we are often asked fundamental questions about legal protections under Bahamian law. The purpose of this article is therefore to give a brief overview of some of the frequently asked questions.

Family Law

Is a marriage validly executed in my home country binding in your country? Is the recognition of the marriage dependent on specific proceedings?

Yes, a marriage validly executed in your home country would be recognized in The Bahamas. It would not be necessary to apply to a Bahamian court to have such a marriage recognized. In The Bahamas, a foreign marriage will be recognized as valid provided that it complied with the laws of the country in which it was solemnized.

On a transfer of domicile to The Bahamas, is the marital asset regime under which the couple was married binding in The Bahamas in the case of separation and/or divorce?

Yes. If either party to the marriage is domiciled in The Bahamas on the date the divorce proceedings are begun or habitually resident for a period of three years prior to that date, pursuant to our Matrimonial Causes Act, the Supreme Court of the Bahamas has jurisdiction to entertain proceedings for divorce or judicial separation.

The question of whether or not either party is domiciled in The Bahamas is decided with reference to the English common law principles and principles of private international law, and decided in each case by the court having considered the totality of the circumstances. To effect a change of domicile, what is important is that the person has left their place of domicile with the intention of never returning and has a present intention to make The Bahamas their permanent home and to never in any circumstances abandon it. There is, however, a settled presumption in favour of the continuance of an existing domicile, a presumption made stronger by the fact that the domicile is the domicile of origin. Therefore, since a person may only have one place of domicile but may have any number of residences, habitual residence is much easier to prove.

If either party is domiciled or habitually resident, as described above, then the Supreme Court would have jurisdiction to entertain proceedings for divorce and also to allocate financial resources between the parties in accordance with our Matrimonial Causes Act.

Would the marital asset regime of X Country (place of marriage) or The Bahamas (the place of domicile) prevail in the case of separation or divorce?

If the Bahamian court has jurisdiction to entertain proceedings because either party is domiciled or habitually resident as described above, then the marital asset regime of The Bahamas will apply in proceedings for divorce or separation.

Under the Matrimonial Causes Act, the court has wide ranging discretion to adjust the financial position of the parties to a marriage by making an order for periodical payments or a lump sum to the former spouse, payments for the benefit of any child of the marriage and/or an order governing the apportionment of property between the parties.

If neither party are domiciled or habitually resident in The Bahamas, then the court cannot exercise jurisdiction over the parties.

In The Bahamas, is it possible to validly execute a nuptial agreement (or any other similar agreement concerning the marital asset regime) to be enforced in case of separation and divorce?

A Bahamian court has wide discretion to adjust the financial position of the parties and may alter any agreement containing financial arrangements in certain circumstances. Also, any provision, which purports to restrict any right to apply for an order containing financial arrangements, is void and unenforceable. It is because of this power to alter and amend, and the inability of the parties to exclude the court’s jurisdiction by agreement, that nuptial agreements were, until fairly recently, considered of dubious effect in The Bahamas. This was the case until M v F [2011] 2 BHS J No 13 – the decision by former Chief Justice of the Supreme Court of The Bahamas, Sir Michael Barnett (a former partner and present consultant to Graham Thompson) which held that nuptial agreements should be enforced following the English case of Radmacher v Granatino [2010] UKSC 649 unless in the circumstances fairness would dictate that the parties not be held to their agreement. 

In the case of divorce, would decisions issued in a foreign court be enforceable under your domestic law with regard to movable and immovable assets located in your country?

The parties may have their marriage dissolved in their country of domicile and could have the decree of divorce recognized in Bahamian courts if one or both parties is domiciled in that country at the time of the decree, or that court has exercised jurisdiction on the basis of residence for a continuous period of three years up to the date of application, or has exercised jurisdiction on the ground that one or both parties are citizens of that country.

A judgment issued by a foreign court regarding moveable and immovable assets located in The Bahamas, subject to certain exceptions, may be enforceable, either by registration under, or pursuant to the Reciprocal Enforcement of Judgments Act, or by a separate action for the enforcement of the judgment in a Bahamian court. Notwithstanding the above, no judgment of a foreign court will be enforced in respect of real estate located in The Bahamas. Similarly, under the Trusts (Choice of Governing Law) Act, trusts governed by Bahamian law cannot be invalidated or set aside by reference to the laws of another country. Therefore, if the parties settle assets on a trust governed by Bahamian law, then no order of a foreign court that seeks to invalidate the Bahamian trust would be enforced.

In the case of divorce, can one of the spouses be compelled to pay alimony? If this is the case, please outline how the alimony is normally calculated?

Provided a Bahamian court exercises jurisdiction, a spouse may be compelled to make a lump sum payment and/or periodic payments by order of the court. There is no set calculation for the assessment of periodic or lump sum payments. The court in exercising its jurisdiction to make such payments may have regard to any number of factors including the income and earning capacity of property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future. Other factors include the standard of living the family enjoyed prior to breakdown of the marriage, the duration of the marriage and the contribution made by each of the parties to the welfare of the family.

 Succession

(The following answers assume the deceased was domiciled in The Bahamas at the date of death.)

What law governs the devolution of real and personal property of a deceased person who dies domiciled in The Bahamas?

Where a person domiciled in The Bahamas dies intestate (whether wholly or partially), Bahamian Laws of Intestacy govern the distribution of the real and personal property of the deceased situated in The Bahamas, and personal property situated outside of The Bahamas. Real property of the deceased situated outside of The Bahamas will be administered in accordance with the laws of the place where the real property is located.

Is the living spouse of a deceased person entitled to a mandatory portion of the deceased’s estate?

Yes. Where a person dies testate, the surviving spouse is entitled to a lifetime interest in the matrimonial home. Additionally, the Bahamian courts have jurisdiction to make adequate financial provision the surviving spouse where the will does not do so.

Where a person dies intestate, the surviving spouse is entitled to a 50 per cent share in their deceased spouse’s estate in addition to the lifetime interest noted above.

Are surviving children of a deceased person entitled to a mandatory portion of the deceased’s estate?

Yes. Where a person dies intestate, all surviving children (whether born in wedlock or not) are entitled to a 50 per cent share of their deceased parent’s estate to be split equally between them.

Where a person dies testate, there is no mandatory portion of the estate that goes to children of the deceased; however, the courts do have the jurisdiction to make adequate financial provision for minor children where the will does not do so.

 Is the devolution of the estate of a person who dies testate subject to probate proceedings?

(The answer below assumes that the deceased is domiciled in The Bahamas and has a will that is recognized under Bahamian law.)

Yes. To deal with and distribute the assets of a deceased person’s estate, application must be made to the Bahamas Supreme Court, to its probate side for a grant in the estate of the deceased.

Is a will validly executed under X country law enforceable in The Bahamas with regard to assets located in the Bahamas?

Yes, provided the grant is authenticated by the issuance of a Grant of Letters of Administration with the will annexed by the Bahamas Supreme Court; and the property in The Bahamas is devised in the will (whether by specific devise or by residuary clause).

Is it possible to constitute a trust in The Bahamas? If so, what are the main features?

It is possible to set up a trust in The Bahamas which is subject in all respects, save for where the Trust deed provides otherwise, to the Trustee Act 1998. Trusts may be set up for beneficiaries or under the Purpose Trusts Act 2004 for specific purposes, or for such purposes and beneficiaries.

The main features of a Bahamian trust are:

(i)    Upon the settlor transferring property on trust to the trustees of the trust, the trustee becomes the legal owner of the trust assets and the Settlor divests himself of all legal and equitable interest therein.

(ii)   The beneficiaries collectively own the trust assets beneficially, though the legal ownership of the trust assets remains with the trustee.

(iii)   The duties of a trustee are fiduciary in nature, and as such, he is subject to the requirement that he act in good faith, that he administer the trust for the benefit of the beneficiaries, that he not profit from his position or place himself in a position where his duty and interest conflict.

The advantages of a Bahamian trust are:

 (i)    No registration of the trust deed is required.

(ii)   The settlor may issue a Letter of Wishes, which is non-binding but will serve to direct the trustee’s mind to the wishes of the settlor which will be followed unless there is some good reason why they should not be.

(iii)   The settlor may reserve powers to revoke or amend the trust, appoint, add or remove trustees, appoint, add or remove beneficiaries, or require a trustee to consult in the exercise of his discretion. Directed trust provisions now allow the settlor or some third party to give directions to the trustee which the trustee must follow (except in the case of fraud).

(iv)  The settlor may himself be a beneficiary of the trust.

(vi)   A protector may be appointed to oversee the trustees, and the deed may be drafted to require that trustees consult or gain the consent of the protector before exercising certain powers.

(vii)  Beneficiaries without vested interests are not entitled to the disclosure of the existence of the trust, trust deed or other trust instruments.

(viii)  The trust may be set up to accumulate income, giving the trustees the power to invest and to make such distributions to one or more of the beneficiaries or none of them as they shall in their discretion determine.

(ix)   Trusts can be set up as viable asset protection vehicles in that the Bahamian Fraudulent Dispositions Act puts a strict time limit of two years after the relevant disposition on any action by creditors to void a disposition to a trust or other like disposition as a fraud on creditors.

(x)   In the Bahamas, a trust may be set up for purposes, or beneficiaries, or both.

Aliya Allen
Partner, Graham Thompson, Bahamas