BVI Trust
High Degree of Confidentiality
British Virgin Islands Trust
Opening a Trust in BVI
Establishing an offshore trust in the British Virgin Islands (BVI) is a popular option due to the combination of tax advantages and the security provided by its status as a British overseas territory with a stable political and economic environment.
BVI trust law is heavily influenced by English trust law but has evolved further, allowing for the creation of purpose trusts, extending the perpetuity period, and introducing the distinctive VISTA trust. The primary legislation governing BVI trusts is the Trustee Ordinance Act 1961 (commonly referred to as “the Act”), which has been updated through the Trustee (Amendment) Acts of 2013 and 2015. Additionally, the legal framework is supported by the Virgin Islands Special Trusts Act 2003, known as the “VISTA legislation”, which was last amended by the Virgin Islands Special Trusts (Amendment) Act 2013. While the foundational principles of BVI trust law stem from English trust law, modern legislative updates have made it a dynamic and flexible jurisdiction for establishing and managing trusts. Unlike many other legal systems, BVI trusts can last up to 360 years, except for charitable or purpose trusts, which may continue indefinitely.Setting up a Trust in BVI
Key Components of a BVI Trust
The Settlor
Once a BVI trust is established, the settlor relinquishes legal ownership of the trust’s assets. The settlor can also be a beneficiary and, in certain cases, may serve as a co-trustee. They may retain some level of control over the trust, such as the power to approve distributions, appoint or remove trustees, or revoke the trust. However, for the trust to remain valid, the settlor must genuinely give up ownership of the assets and cannot simultaneously be both the sole trustee and the sole beneficiary.
The Trustee
The legal ownership of the trust assets is transferred to the trustee, who is responsible for managing and administering the trust. Trustees must act solely in the best interests of the beneficiaries. The assets held in trust are considered a separate entity and do not become part of the trustee’s personal estate.
BVI’s legal framework offers considerable flexibility regarding trusteeship. A trustee does not need to be a BVI resident, and unless otherwise stated in the trust’s terms, there is no requirement for a minimum number of trustees, though the maximum is capped at four.
The Beneficiaries
Beneficiaries are those entitled to benefit from the trust’s assets. As noted, the settlor can also be a beneficiary. To ensure the trust is valid, the beneficiaries’ identities must generally be clearly defined. However, the trust document may allow for additional beneficiaries to be added over time. Beneficiaries may receive equal or unequal benefits, as specified in the trust deed or at the trustee’s discretion in the case of a discretionary trust. Additionally, the trust instrument may exclude certain beneficiaries from future benefits.
The Trust Fund
After the trust is initially funded, more assets can be added at any time. It is common to start a trust with a nominal amount and later add substantial assets. The BVI trust fund can include a wide range of real and personal property, except in the case of VISTA trusts, where assets are restricted to shares in specific BVI companies.
The Protector
The law explicitly allows for the appointment of a protector in the trust document. The protector’s consent is often required before the trustees can exercise certain powers or discretion. Trustees are protected from liability for losses if they act with the protector’s consent.
A protector may also hold powers such as determining the trust’s governing law, changing its jurisdiction, removing or appointing trustees, excluding beneficiaries, and granting or withholding consent for specific trustee actions. Unless the trust deed states otherwise, a protector is not liable to beneficiaries for their decisions and is not considered a trustee, even with the authority they hold.
BVI International Trust
British Virgin Islands trusts are highly regarded for their asset protection advantages and the absence of local taxes on income, capital gains, wealth, or estates for non-resident beneficiaries.
British Virgin Islands
+ BVI Trusts – Key Features
- Perpetuity Period: Trusts established in the British Virgin Islands can last for up to 360 years, except for Charitable Trusts, which can exist indefinitely.
- Property: There are no limitations on the types of property that can be held within a British Virgin Islands trust.
- Confidentiality: Since trusts in the British Virgin Islands are not subject to registration, details about the settlor and beneficiaries remain confidential and are only known to the trustee.
- Taxation: British Virgin Islands trusts are exempt from taxation as long as all beneficiaries are non-residents. Distributions made to beneficiaries are also not subject to any taxes within the British Virgin Islands.
- Asset Protection: While there is no specific legislation dedicated to asset protection in BVI trusts, they are generally considered secure for holding assets.
- BVI Private Trust Company (PTC): A BVI Private Trust Company, or “PTC”, is formed specifically to act as the trustee for a single trust or a group of related trusts. High-net-worth families and international business owners often choose PTCs when they prefer not to transfer assets to an external trust company or when setting up multiple family trusts.
+ Advantages of a BVI Private Trust Company
The settlor can retain significant influence over the trust’s management by appointing themselves, family members, or trusted advisors as directors of the PTC, allowing for greater oversight and involvement in key decisions. By using a PTC, the settlor can avoid engaging with external trustees, ensuring that sensitive family or financial matters remain confidential within a smaller, trusted circle. Besides several other benefits, a PTC allows the settlor to establish a long-term structure for the smooth transfer of wealth across generations, preserving family wealth and maintaining control over its management after their lifetime.+ Additional features of a British Birgin Islands Private Trust Company
There is no requirement for local directors or authorized representatives. Although the memorandum and articles of association for a BVI Private Trust Company (PTC) must be publicly filed, they do not need to disclose information about the directors, shareholders, or the trusts for which the PTC serves as trustee. The register of members is not required to be filed for a BVI PTC. However, the register of directors must be submitted, but it remains confidential and is not accessible to the public.British Virgin Islands Trusts
Practical Uses
A BVI trust is a legal structure, originally rooted in English law, where ownership of assets is transferred to a trustee while the benefits of the trust fund are preserved for the beneficiaries, according to the settlor’s instructions. The uses of trusts are continuously expanding, with flexibility and confidentiality being key advantages over other wealth management and transfer structures. Trusts have proven highly adaptable and are commonly used in financial planning. Below are some typical practical applications:
BVI Trust for Wealth Preservation
BVI trusts can be used to maintain uninterrupted ownership of key assets, such as a family business, within the family. By transferring legal ownership to a trustee, the family can continue to benefit from the assets without dividing ownership among multiple generations. Trusts help ensure that assets remain within the family, even after a beneficiary’s death, preserving them intact for future generations.
BVI Trust to Avoid Forced Heirship
When assets are transferred to a BVI trust during the settlor’s lifetime, they do not form part of the settlor’s estate upon death. This allows the settlor to bypass forced heirship laws, which may otherwise dictate how assets are distributed based on their domicile, residence, or nationality. Under Article 83 of the Act, inheritance laws from the settlor’s domicile cannot impact transfers of personal property to a trustee, ensuring the trust’s integrity.
BVI Trust for Succession Planning
A trust enables the settlor to relinquish ownership of assets, so when they pass away, probate and other formalities are not required to manage the trust fund. This provides a streamlined process for transferring beneficial ownership. For beneficiaries under discretionary trusts, their interests are beneficial stakes in the trust’s assets, which may help avoid taxes such as stamp duty or inheritance tax, depending on the beneficiary’s tax residency. Trusts can also hold shares in companies that own real estate outside the BVI, offering potential tax advantages by converting immovable property into movable interests. Additionally, trusts offer protection for inexperienced beneficiaries and provisions for those who may be financially imprudent.
BVI Trust for Asset Protection
Historically, trusts were used primarily to protect assets from risks. Today, they continue to provide security by safeguarding assets in politically stable environments. Trusts are a key component of financial planning for individuals, families, and businesses. Pairing a trust with an underlying company can convert an onshore asset into an offshore one, adding an additional layer of confidentiality. Trusts can also hold assets in jurisdictions that do not recognize trusts, appealing to lenders seeking asset security. They offer protection against strategic risks, such as confiscation or expropriation by the settlor’s home country. Modern trust instruments can even include provisions for transferring the trust’s governing law or administration to another jurisdiction if political or strategic issues arise.
The BVI VISTA Trust
This type of trust was created to address a common challenge in using trusts to hold shares in underlying companies. The issue stemmed from the settlor’s wish to maintain significant control over the company’s management, particularly with regard to investments, while the trustee remained responsible (and potentially liable) for safeguarding against losses caused by mismanagement or poor investment performance.
Uses and Solutions
A VISTA trust must include at least one trustee who is either a BVI company licensed under the Banks and Trust Companies Act or a BVI private trust company.
VISTA status is not automatically applied to all BVI trusts; it must be explicitly specified in the trust instrument, although non-VISTA trusts can be converted to VISTA.
VISTA is restricted to holding shares in BVI companies only. As a result, most VISTA trusts are structured to hold all assets through an underlying BVI company.
The trust deed can specify “permitted grounds for complaint”, allowing an “interested person” to request the trustee’s intervention in the company’s management through an “intervention call”.
Interested persons, directors, and potential directors of the underlying company have the right to petition the court if the trustee fails to meet its duties or obligations under VISTA.
If retaining the shares no longer aligns with the settlor’s intentions, any interested person can petition the court to permit the sale or disposal of the shares.
When determining the settlor’s wishes is necessary, there is a requirement to consult the settlor. If this is not feasible or if the settlor is deceased, the trustee must consider the settlor’s expressed wishes or the most reasonable interpretation of those wishes.
Specific Applications of VISTA Trust
A VISTA trust is especially beneficial for clients in the following situations:
The client wishes to maintain control over the trust assets.
The client plans to place shares and/or the underlying assets of a company into the trust.
The client prefers that trustees remain uninvolved or minimally involved in the management of the underlying company.
The client wants to ensure that the trustee cannot facilitate the sale of underlying assets, particularly in family-owned businesses where preserving shares is more important than maximizing asset value.
The client aims to prevent the trustee from having the ability or obligation to intervene in the company’s operations and its subsidiaries.
In essence, a VISTA trust simplifies the process of establishing a trust for shares in a BVI company and is ideal for clients who want to retain effective control over their BVI companies while benefiting from the advantages of using a BVI trust.
Additionally, the Act highlights the BVI’s leading role in the offshore sector by consistently advancing innovative solutions to cater to the needs of international clients.
Establishing a Trust in the British Virgin Islands
Services offered by Atrium & Associates
To establish a BVI trust, it can be formalized in writing either as a Settlement of Trust, which requires signatures from both the settlor and the trustee, or a Declaration of Trust, which only needs to be signed by the trustee. The trust becomes effective once the initial property is settled, with the option to add additional assets later.
We offer comprehensive assistance with preparing all necessary documentation. Our services include:
- Advising and coordinating with professional advisors in other jurisdictions to recommend the most effective trust structure for achieving the settlor’s goals.
- Drafting the trust instrument, letters of wishes, and forming underlying companies to hold the trust assets.
- Preparing and reviewing documents related to commercial transactions underlying the trust.
- Assisting the settlor in selecting a trustee for the BVI trust and preparing and reviewing all required documentation for the proper administration and operation of the trust and its underlying companies.
To proceed with establishing a British Virgin Islands trust, please reach out to any member of our team listed at the end of this client briefing.
Which services we do and do not do
What we do
Under our Services portfolio, we are EXCLUSIVELY engaged in assisting worldwide clients, either individuals or corporate entities, to set up their business overseas. In order to allow every client to properly register their business at an international jurisdiction, ATRIUM & ASSOCIATES provides all related services including company formation, assistance to locate local registered offices for their new business company, helping to open business bank account, and introducing client to local chartered accountants.
What we don’t do
ATRIUM & ASSOCIATES does not provide investment or financial advice, and any sort of financial business activity.
How can we help you?
Should you have any question, our Business Development Managers team will be ready to guide and assist you!
