Bermuda trust laws encourage corporate and high net worth individuals and their financial advisors to develop innovative legal structures utilizing Bermuda domiciled trust vehicles to either minimize global or fiscal risks, protect world-wide assets or control those assets from a tax neutral environment with little government intervention or filing requirements at a reasonable cost. This Memorandum outlines some of the innovative trusts utilized by clients and the advantages in so doing with diagrams depicting various trust structures.

Purposes
A trust or settlement domiciled in Bermuda can be used by non-residents of Bermuda to achieve a broad range of purposes:

	asset protection
	accumulating income
	holding property (or world wide assets)
	estate planning
	investment schemes
	holding shares of active business

Bermuda Special Purpose Trust
The special purpose trust is essentially a trust which is established for a specific purpose as opposed to being for the benefit of specific beneficiaries. This concept was introduced in The Trust (Special Provisions) Act 1989 which requires the purposes of such trusts to be specific, reasonable, possible and not immoral or contrary to public policy or law.

The trust deed creating the special purpose trust must provide for the appointment of an enforcer or protector who has the ability to ensure the terms of the trust are adhered to and the disposition of surplus assets of the trust upon its termination.

Special Purpose Trusts may continue for a duration of 100 years or such shorter duration as specified in the Deed.

Discretionary Trusts
A discretionary trust is a trust in which the beneficiaries have no interest until the discretion of the trustees is exercised in their favour. In such trusts, the beneficiaries have no absolute current right to direct the trustees to pay them an ascertainable part of the net income or property of the trust and the ultimate choice as to which beneficiary within a class will eventually enjoy the trust property is left to the trustees.

Protector Discretionary Trust
A discretionary trust which has appointed a Protector who has special powers to change the trustees and the jurisdiction of the trust is called a Protector Discretionary Trust.

Fixed Trusts
A fixed trust is a trust in which a beneficiary or class of beneficiaries has a current fixed entitlement to an ascertainable share of the net income, if any of the Trust Fund or Trust Property and his or her right as a beneficiary can be enforced against the trustees.

Formation Procedures
At present there are no governmental disclosure requirements relating to the formation of discretionary or special purpose trusts in Bermuda.

Subject to the client being acceptable to the trustee, no information on the settlor beneficiary or protector need be filed or disclosed to the Bermuda governmental authorities unless the trustee intends to hold the assets in a Bermuda exempted company, which will require disclosure of the names of the trustees and the beneficiaries together with bank references on each.

Freedom From Taxation
Such trusts have been useful vehicles for non-residents of Bermuda who, depending upon their jurisdiction of origin or residence, may be able to minimize the incidence of tax on assets held by the trustees of a Bermuda trust. Bermuda does not impose any form of taxation on the trust capital or income arising from trust assets and there is no withholding tax imposed on capital or income payments made to beneficiaries of a Bermuda trust.

Bermuda trusts are no longer subject to stamp duty except in relation to the dispositions of Bermuda Property.

To download the Trust Proposal Form in PDF format, please click here.