With strict confidentiality provisions and minimal reporting requirements to authorities, the Bahamas’ regulatory framework has a long-standing reputation of being attractive to high-net-worth individuals and families with multi-jurisdictional connections. Equipped with a wide range of wealth management and estate planning structures, the Bahamas offers flexibility tailored to HNWs’ needs.
Principles of Wealth Planning Structures
When establishing a structure such as a trust or foundation, an individual – known as the settlor or donor - transfers the ownership of their assets to the structure; these become property of the trust or foundation and are managed according to its governing documents.
Trusts are private legal arrangements, where a settlor agrees to transfer the ownership of assets to a trustee for the benefit of the trust’s beneficiaries. Under Bahamian legislation, settlors are allowed to retain certain powers if they wish, providing a degree of control over the assets. Robust rules preserving confidentiality apply, and trusts created after 30 December 2011 can last indefinitely.
Foundations combine features of companies and trusts. These are separate legal entities established for a specific purpose, governed by a Foundation Council, and have their own bylaws and charter. The entity can represent itself in legal proceedings, allows the same protection and confidentiality trusts offer, while also providing the flexibility, perpetuity and governance associated with corporate structures.
Using Trusts and Foundations in Real Scenarios
Planning ahead with trusts or foundations helps individuals structure wealth and manage succession effectively. The choice depends on factors such as asset location, cross-border connections and philanthropic objectives.
Here are two examples of how factors are considered when establishing structures for an individual or family:
Succession planning for families with multijurisdictional ties
Scenario: A family with members living in the US, Canada, and the UK wants to establish a structure that allows for centralized management of family wealth while respecting the tax and legal requirements of each jurisdiction. How can a Bahamian trust or foundation provide a solution that balances these needs?
Centralized management of family wealth could be successfully realized through a foundation.
A foundation acts as a vehicle that holds assets for succession planning. Its flexible governance framework can be specifically tailored to specific objectives, and the donor can retain control and influence by serving on the Foundation Council, which will ensure that the foundation acts in alignment with the goals for which it was established.
Given their corporate nature, foundations may benefit from tax exemptions. Foundations are particularly suited for long-term planning, and they can also allow for family legacy building ensuring that family values, wealth and assets endure beyond the lifetime of one individual.
Asset protection for high-profile professionals
Scenario: A high-profile professional, such as a doctor or lawyer, is concerned about potential future lawsuits and wants to protect their personal assets from legal claims. How can a trust or foundation offer robust asset protection, while allowing for continued growth and management of their wealth?
Both trusts and foundations provide strong asset protection, however trusts are particularly suited for individual asset protection.
Once the trust is established and the assets are transferred to the trustee, they are protected from future claims and creditors, subject to strict anti-fraud provisions. Creditors can only challenge under specific circumstances, such as:
- The creditor was owed prior to the date of establishment
- The transfer of assets to the trust was undervalued
- There was an intent by the Settlor to defraud
Any action from a creditor must be brought within two years of establishment of the trust. The key advantages of a trust in such cases are the privacy offered and the avoidance of probate upon death of the settlor, as the assets can be transferred quickly and efficiently to the beneficiaries.
The Bahamas also allows reserved powers for settlors, such as the ability to amend or revoke the trust, appoint beneficiaries and direct certain trustee actions. These features provide flexibility without compromising the trust’s validity.
Foundations also protect assets by transferring ownership to the entity, which manages them according to its charter. However, foundations require registration and a certificate of incorporation, which may be less appealing for clients seeking a simpler structure.
Setting up a Bahamas Trust or Foundation
Our Bahamas office was established in 1991 and is one of the leading trust and corporate service providers in the jurisdiction, licensed to provide corporate and fiduciary services.
Reach out to our team at bahamas@tridenttrust.com for more information about Bahamian trusts and foundations.