Offshore Trusts Report: Bahamas
Legal Framework and Formation Rules and Fees
Bahamian trust law is based on English common law, and the Bahamian
Trustee Act 1893. In the last 15 or so years the Bahamas have extended
and adapted their trust laws, most recently with a new Trustee Act
1998, to accommodate a wider market, which is not necessarily interested
so much just in tax avoidance, but also in the efficient management
of wealth in a more general sense.
Legislative amendments to allow for the formation of Private Trust
Companies were put forward in May 2007.
Other legislation includes The Trust (Choice of Governing Law)
Act 1989 and the Fraudulent Dispositions Act 1991. The Trustee Act
1998 repeals the Trustee Act 1983 and the Variation of Trusts Act
The Trust (Choice of Governing Law) Act 1989 gives protection to
Bahamian trusts and their settlors in civil law countries against
forced inheritance claims. The Act makes Bahamian law the proper
law of a trust if the deed so declares, and makes the trust immune
to foreign judgements.
The Fraudulent Dispositions Act 1991 establishes a
two-year limitation period for creditors' attacks on asset protection
trusts; the attacker has to prove fraud against the settlor.
Trusts (other than those holding Bahamian real estate)
with non-resident beneficiaries are exempt from all taxes, including
stamp duty on transfers into trust. Under the 1998 Act, new trusts
need to be stamped with a $50 Bahamas revenue stamp (at the time
of writing), which can be bought for cash and does not involve any
The Trustee Act 1998 is an important piece of legislation
which updates Bahamian trust law on many fronts. Some of the more
important provisions are as follows:
A settlor can retain a wide range of powers without falling
foul of 'sham' trust legislation;
Trustees are given wide statutory investment and management
powers unless the trust deed negates them;
Trustees' indemnities are recited in the statute;
A wide range of trust purposes are encompassed, including
The role of Protector is recognised;
There are extensive disclosure provisions;
Exemption from all taxes and from stamp duty (an initial
stamp is required on all trust deeds, however);
Exemption from registration except where an interest in Bahamian
property is to be protected;
Exemption from exchange control regulations for non-resident
The Act was to have included legislation covering
purpose trusts; this was enacted separately as the Purpose Trust
"There are many estate planning exercises and
other commercial transactions that can legitimately and properly
take advantage of this kind of structure," observed Alfred
Sears, the then Attorney General. These uses include:
The holding of shares of a private company, which is expressly
authorised by the Act. In this structure, the settlor and members
of his family and his advisors may be appointed directors of
the private trust company and thereby assume some responsibility
for the management of the trust. This is often useful when the
assets of the trust are of an unusual nature.
A trust which has both philanthropic and charitable purposes.
Asset purchase or financing transactions to provide security
for an entity which finances the purchase or to keep the asset
and corresponding liability from appearing on the purchaser’s
Separating voting from economic control.
Temporary avoidance of controlled foreign corporation rules.
Debt Subordination to provide ranking of priority among creditors.
Discretionary trusts to perpetuate a particular corporate