Trust structures under Bermuda legislation

Bermuda's Trusts (Special Provisions) Act describes trusts for beneficiaries or specified purposes and sets out related roles and rules. It also addresses reserved powers, governing law, and the duration of non-charitable purpose trusts.

How the Act describes a trust

The Act defines a trust as a legal relationship created during life or at death, when a settlor places assets under a trustee's control for a beneficiary or a specified purpose.^[1]

The statutory description gives trust assets a separate status from the trustee's own estate. Title is held by the trustee or someone acting on the trustee's behalf. The trustee has power and a duty to manage, employ, or dispose of the assets under the trust terms and legal duties.^[1]

The legislation recognizes trusts created voluntarily in writing and other trusts of property arising under Bermuda law or a judicial decision. It does not limit the Act's application to one named form of beneficiary trust.^[1]

A trustee may also have rights as a beneficiary, and the settlor may reserve or grant rights and powers. The Act states that these features do not necessarily conflict with a trust's existence.^[1]

Reserved powers and roles

Listed powers include revoking some or all trusts, varying the instrument, directing distributions of income or capital, and giving directions about trust investments. They also include appointing or removing trustees, protectors, enforcers, or advisers, and adding or excluding beneficiaries or purposes.^[1]

The list also covers changing governing law or the forum for administration, and requiring a trustee to act only with another person's consent or direction. A person does not become a trustee solely because they hold one of these powers. The statute permits the instrument to state that a power holder has no fiduciary duty.^[1]

For trusts created after the relevant amendment commenced, the default depends on who holds the power. A settlor or beneficiary holding a power while not the sole trustee holds it personally and non-fiduciarily unless the trust provides otherwise. In other cases, the powers are fiduciary unless the trust provides otherwise.^[1]

Purpose trusts and duration

A Bermuda purpose trust may serve one or more non-charitable purposes if each purpose is sufficiently certain to be carried out, lawful, and consistent with public policy. The instrument creating it must be in writing.^[1]

The Act disapplies the rule against excessive duration, also called the rule against perpetual trusts, to a purpose trust. Specifically, that rule does not limit the period during which the trust's capital may remain unexpended. This provision does not set a separate accumulation period or a general maximum term for other kinds of trust.^[1]

On an application by a person appointed under the trust, the settlor (unless the instrument provides otherwise), or a trustee, the court may approve a scheme changing the purposes or varying the trustees' powers. Purpose trusts that do not meet the statutory requirements are invalid, subject to the section's qualification for trusts created under another law.^[1]

A purpose trust cannot hold an interest in Bermuda land, directly or indirectly. That restriction appears in the purpose trust part of the Act.^[1]

Governing law and administration

A settlor's express or implied choice in the trust instrument or writing generally selects the governing law. If no law is chosen, the Act selects the law with the closest connection, assessed by the designated place of administration, asset location, trustee residence or business, and the trust's objects and where they are fulfilled.^[1]

The governing law applies to validity, construction, effects, and administration. The Act specifically includes trustee appointment and removal, delegation, investment authority, duration and income accumulation limits, trustee-beneficiary relationships, variation or termination, asset distribution, and accounting duties.^[1]

A severable part of a trust, particularly an administrative matter, may be governed by a different law. The statutory framework therefore distinguishes the law governing a trust generally from a law selected for a separable aspect.^[1]

Questions and answers

Can a Bermuda trust have reserved powers?

Yes. The Act lists powers that may be reserved to a settlor or granted to another person, including powers over trust terms, distributions, appointments, and investments. Holding such a power alone does not make a person a trustee.^[1]

What purposes may a statutory purpose trust serve?

It may serve non-charitable purposes that are sufficiently certain to carry out, lawful, and consistent with public policy. The trust must be created in writing.^[1]

Does the Act set a perpetuity period for purpose trusts?

No. The rule against excessive duration does not apply to a purpose trust, so it does not limit how long the trust's capital may remain unexpended.^[1]

Who may apply to enforce a purpose trust?

The listed applicants include a person appointed under the trust, the settlor unless the instrument provides otherwise, and a trustee. Another person with sufficient interest may apply, and the Attorney-General may apply under the condition stated in the section.^[1]

Which law governs a Bermuda trust if no law is selected?

The Act uses the law with which the trust is most closely connected. It identifies administration location, asset location, trustee residence or business, and the trust's objects and their fulfillment locations as relevant factors.^[1]

Related glossary terms

Charitable trust: A charitable trust holds property for charitable purposes, and trust laws relate it to purpose trusts and to the other categories of trust used in planning.
Trust: The Hague Convention describes a trust as a relationship in which a settlor places assets under a trustee's control for beneficiaries or a specified purpose.
Settlor: A settlor is the person who creates a trust or places property into it.