Private Wealth
Sterling, through its BVI licensed entity Sterling Trustees Limited, offers various services aimed at assisting clients with planning for the future and to help grow and preserve their wealth. Our experience enables us to assist in the formation of sophisticated multi—jurisdictional trust and foundation structures.
We provide a full suite of trust (including Private Trust Companies), foundation and related administration services, compliance requirements, preparation of periodic reports, establishment of subsidiary entities, maintenance of accounting records, and meeting with relevant parties such as settlors and beneficiaries.
The underlying assets of the trusts we administer include investment and operating companies, bank and brokerage accounts, properties, aircraft, and luxury yachts.
Trust Information
A trust is a legal relationship which allows an individual or a legal entity (the Settlor) to transfer assets to a third party (the Trustee) to be administered for the benefit of persons chosen by the Settlor (the Beneficiaries) in accordance with the provisions of a document (the Trust Deed). The concept is based on the separation of legal ownership of the Trust assets (which rests with the Trustee) from the beneficial ownership (which rests with the Beneficiaries).
Families have been using trusts for centuries to protect and preserve wealth. Trusts are extremely versatile and this accounts for their long-standing use in wealth management. Examples of trusts include Asset Protection Trusts, Purpose Trusts, Charitable Trusts and Single-Purpose Trusts.
The advantages of trusts include:
- Protection of property and other assets from legal actions and claims, including political actions, against the Settlor
- Confidentiality in that the trust is not normally registered
- Flexibility in the distribution of the client’s assets following his/her death
- Avoidance of probate
- Avoidance of disputes among heirs and beneficiaries by means of trust provisions and administration by the trustee
- Wealth preservation for future generations
- Maintenance of property for minors
The practical advantages of a trust are gained from the distinction drawn between the legal owner of the property, the trustee, and those people who have the benefit of the property, the beneficiaries.
Those unfamiliar with the trust concept are often concerned by the idea of transferring ownership of their property to a trustee. This concern can be alleviated if the trust concept and the distinction between legal and beneficial ownership is properly understood and it is clear that the trust is governed by reliable trust laws which can be enforced in a reputable jurisdiction.
Trust law imposes strict obligations on trustees:
- Trustees must follow the trust deed and are subject to strict rules governing the way in which their powers and discretion may be exercised. The courts regard a trust as creating a special relationship that places serious and onerous obligations on the trustee.
- Trustees must at all times exercise their powers in the best interest of beneficiaries of the trust and disregard the interests of others, including the Settlor.
- Trustees must act prudently in the management of trust property and will be liable if, by failing to exercise proper care, the trust fund suffers loss.
Trusts are commonly used to avoid forced heirship laws which are common in civil law jurisdictions.
Trusts can take many legal forms, such as:
a) Discretionary Trust
Most trusts we establish are discretionary trusts, where the trustee has wide powers and discretion to make transfers for the benefit of specified beneficiaries in such manner and amounts as the trustee decides. Discretionary beneficiaries do not have an interest in trust assets and have no power to compel the trustee to exercise its discretion in their favor. In order to assist the trustee in exercising its discretions, the settlor may provide a “Letter of Wishes” outlining how he wishes trust assets to be distributed. However, such a letter is only a guide and imposes no legal obligation on the trustee.
b) Bare Trust
Under a bare or “simple” trust, a trustee holds assets on behalf of a beneficiary who has the absolute right to the assets. They are often used to transfer assets to minors who lack the legal capacity to deal with those assets.
c) Fixed Interest Trust
Under a fixed interest trust, the trustee has no discretion over the distribution of assets: beneficiaries have a predetermined fixed interest in the trust assets.
Private Trust Company Information
A Private Trust Company (or “PTC”) is a company formed for the express purpose of acting as trustee of a specific trust or group of trusts. As such, individuals can retain control over the administration of their own trusts by establishing a PTC, rather than engage a third-party trustee.
In the Bahamas, a PTC is not regarded as carrying on trust business and is therefore exempt from licensing requirements.
While a PTC may only act as trustee for a defined class of trusts, there is no restriction on the number of trusts for which the PTC can act as trustee. Often a PTC is established for trusts settled by family members or for more than one trust established by one person.
The PTC has to appoint a regulated Bahamian service provider, such as Sterling, termed a “Registered Representative.” It must also have a “Special Director”, who is a person experienced in trust matters, and is usually an employee or officer of the Registered Representative.
The principal advantage is that the client can retain a high degree of control. Handing legal ownership and control of a person’s assets to a third party or complete stranger can be an issue for people who are not familiar with trusts. Provided the PTC is properly run, it should be possible to retain control without prejudicing the validity of the underlying trust.
The other main advantage is cost. By establishing a PTC, third party trustee fees, which can be substantial and are often based on the magnitude of assets in trust, can be avoided.
The ultimate ownership of the PTC is of the utmost importance because it may allow the owners, if they feel it necessary, to remove and replace directors or change the service provider. However, care must be taken to ensure that the settlor does not retain such degree of control to jeopardize the integrity of the trust or trusts.