Trustee (Special Provisions) Amendment Act 2014
About Fozeia Rana-Fahy
Fozeia Rana-Fahy is a Director in the firm’s litigation practice group. Ms. Rana-Fahy practices in the areas of civil and commercial litigation and is an accredited mediator.
Fozeia Rana-Fahy’s full profile on mjm.bm.
2014 also saw the introduction of the Trustee (Special Provisions) Amendment Act 2014 (the “Act”) which provides statutory clarity and certainty with respect to the powers settlors can reserve or grant over a trust without calling into question the validity of the trust structure. The powers enshrined in this legislation are expected to attract a wide class of settlors from both North America and Europe and further enhance Bermuda’s reputation as the offshore jurisdiction of choice for trusts. The Act amends the Trusts (Special Provision) Act 1989 by inserting a new section 2A which sets out an express list of certain interests and powers that can be retained by a settlor or granted to a third party, including the following:
- In case of a reservation to the settlor or other donor of trust property, a power to revoke the trust in whole or in part
- A power to vary or amend the terms of a trust instrument or any of the trusts, purposes or powers arising thereunder in whole or in part
- A power to decide on or give directions to advance, appoint, pay, apply distribute or transfer the trust property
- A power to act as, or give directions as to the appointment or removal of directors or officers of companies owned by the trust, or to direct the trustees how to exercise voting rights
with respect to the shares of such companies - A power to give binding directions in connection with the purchase, retention, holding, sale or other commercial or investment dealings with trust property or the exercise of any powers or rights arising from such trust property
- A power to appoint, add, remove or replace any trustee, protector, enforcer or other office holder or advisor
- A power to add, remove or exclude any beneficiary, class of beneficiaries or purpose
- A power to change the governing law and the forum for administration of the trust
- A power to restrict the exercise of any powers, discretions or functions of a trustee by requiring that they shall only be exercisable with the consent, or at the direction, of a person or the persons specified in the trust instrument.
In addition Section 2A(3) provides that a trustee shall not, by reason only of compliance with a valid exercise of any of the powers set out above, commit a breach of trust or other fiduciary or equitable duty. Also, the same subsection provides that in the event that a trustee has been prevented from acting in accordance with the powers referred to above or any exercise of those powers by reason of applicable law or insufficient rights or powers in relation to trust property, then the trustee shall not, by reason only of such failure to act or non compliance, commit a breach of trust or other fiduciary or equitable duty.
A unique provision of the Act not found in other offshore jurisdictions comes in the form of Section 2A(4) which enables a settlor to choose to limit the persons to whom trustee duties are owed to the power holder during the power holder’s lifetime. The section states that where a power holder is able to revoke, or where s/he has a general power of appointment, or has a present beneficial interest in respect of all or part of the trust property, the trust instrument may provide that for so long as the settlor, beneficiary or other holder of power is not the sole trustee, the trustee shall owe no duty to any other person in relation to all or such part of the trust property. This may assist in the realm of considering how to restrict sensitive trust information. However, it is yet to be seen how this subsection will operate in practice and what impact it will have in the context of trustees limiting disclosure of trust information and/or accounting to those people to whom the trustee owes no duties.
Section 2A(5) provides that that no person (other than a person in whom trust property or an interest in trust property is vested and who is formally appointed as a trustee) shall be deemed to the a trustee by reason only of the grant or reservation of powers listed above. Section 2A(6) uniquely provides that a trust deed can expressly state that a power holder is not subject to a fiduciary duty. Section 2A(7) further provides in the absence of any contrary provision (in a Bermuda law governed trust created after the Act), all powers granted or reserved are presumed to be personal and non fiduciary in nature, unless the power holder is the sole trustee. These provisions will be of encouragement to settlors who practically want to the freedom of choice with respect to disposition of assets without the negative glare of the courts.
All in all the Act represents a positive development in the field of trust law in Bermuda. It offers tools to a settler that are more refined than in other off shore jurisdictions.
Fozeia Rana-Fahy is Chair of Bermuda Business Development Agency Trust & Private Client Group Executive.