Forgotten gem

Sunday, 01 September 2013
Carlyle K Rogers analyses Anguilla’s underused trust regime.

Anguilla’s trust legislation is modern, flexible and creative, yet underused. The legislation contains asset-protection features and special provisions that make Anguillian trusts attractive estate-planning and wealth-management tools.

The domiciliation and administration of an Anguillian trust is governed by three pieces of legislation: the Trusts Act (TA), the Fraudulent Dispositions Act (FDA) and the Trust Companies and Offshore Banking Act (TCOBA). The anti-money laundering/financing terrorism regulations (AML/TF) issued under the Proceeds of Crime Act have an ancillary impact on due diligence and the reporting of suspected criminal activity, but do not otherwise affect the legislation.

Where a prejudiced creditor claims a disposition has been made at an undervalue or with intent to defraud, actions cannot be brought more than three years after the date of the disposition

Regulatory regime

Under s10 TCOBA, anyone wishing to be a trustee of an Anguillian-domiciled trust requires a licence. The only exceptions are banks in Anguilla that have a domestic banking licence and attorneys-at-law when they are engaged in trust business solely in the practice of law. The licence is issued by the Financial Services Commission (FSC), Anguilla’s independent regulatory body, which has powers to enforce the AML/TF regime to which all trustees must adhere.

Of specific note is s13(1)(b) TCOBA, which allows for the issue of a restricted trust company (RTC) licence. An RTC is Anguilla’s version of a private trust company (PTC). The PTC/RTC regime existed long before similar legislation in jurisdictions such as the BVI and is flexible enough, in conjunction with specific provisions of the TA, to achieve wealth-planning objectives and allow the establishment of trusts for commercial purposes.

The trust regime

An Anguillian trust is created when property is received by, or vested in, a trustee, to be held by that trustee in accordance with the terms of the trust. Subject to the TA, the trust is valid and enforceable in Anguilla. A unit trust must be in writing, but otherwise a trust may be created by oral declaration, written instrument (including a will or codicil), conduct or operation of law, or in any other way.

No formalities or technical expressions are required for the creation of the trust as long as the settlor’s intention is clear. However, a trust involving land in Anguilla, other than one arising by operation of law, is unenforceable unless evidenced in writing.

The rule against trusts for perpetuity has been abolished, along with the rules on accumulations. Irrespective, all trusts are valid except to the extent specified under the TA. Trusts for immoral or illegal purposes; those settled under duress, fraud, mistake, undue influence or misrepresentation; and those with no ascertainable beneficiaries (unless it is for charitable purposes) are invalid.

The TA provides that, despite the Reciprocal Enforcement of Judgment Act, claims by foreign courts over matrimonial dispositions, succession rights or forced heirship rules, creditor’s claims in insolvency actions, and the imposition of foreign taxes or duties are not recognised. As per the FDA, where a prejudiced creditor claims a disposition has been made at an undervalue or with intent to defraud, actions cannot be brought more than three years after the date of the disposition. This is a central asset-protection feature of the Anguillian trust regime, and is a balance between the six-year limitation period of some jurisdictions and the two-year timeframe of others. The burden of proof is on the creditor making the claim and, as it is a civil action, the test is on a balance of probabilities.

Any person who, under the laws of Anguilla, has the capacity to own or transfer property can be a settlor of a trust. The settlor may also be a trustee, a beneficiary or a protector of the trust.

Special statutory provisions

Anguilla’s trust regime is creative because its domestic legislation incorporates a host of attractive features that are contained in disparate common-law regimes. Statutory provisions include the creation of protective/spendthrift, commercial/purpose and variant trusts; letters or memoranda of wishes; and specific powers of tracing trust property.

Varieties of trust

A protective or spendthrift trust is one that makes the interests of the beneficiaries subject to termination, restriction, diminution, alienation or dealing in the interest of that trust if the beneficiary becomes insolvent or any of their property becomes liable to seizure or sequestration for the benefit of creditors.

Where the purpose is specific, reasonable and capable of fulfilment, and not immoral, unlawful or contrary to public policy, and where the trust terms allow the appointment of a protector and a successor protector, the TA allows the creation of commercial/purpose trusts that can be enforced by the Attorney General if the protector is unwilling or unable to act.

A settlor may create a variant trust – a type recognised by the law or rules of their religion or nationality, or customarily used by their community – if there is a recital to that effect in the trust instrument and it has been approved by the Attorney General by order published in the Gazette. The trust instrument may be in a language other than English, if the deed includes a translation.

Letters of wishes and powers of tracing

Letters or memoranda of wishes can be given by the settlor or beneficiaries. The TA makes it clear that such letters impose no fiduciary obligations or duties on the trustee.

Statutory powers of tracing allow the chase and recovery of trust property, but recognise the rights of equity’s darling.

The office of the protector

The protector has power to enforce the trust and other powers subject to the terms of the trust deed, including the power to remove and appoint a new trustee. The TA states that a protector, while owing fiduciary duties to the beneficiaries, is not seen as having the same duties and obligations as a trustee.

The powers and duties of trustees

Trustees owe a duty to act with due diligence and good faith, to the best of their skills and abilities, and as reasonable and prudent people would. There is also a duty to supply information, including to beneficiaries subject to the trust deed; a duty of confidentiality; a duty of impartiality; and a duty to act together. Trustee powers include investment, appropriation, maintenance, advancement, appointment, revocation and variation.

Termination and variation of trusts

Where a trust lapses or terminates, or there are no beneficiaries and none can be found or be appointed in the future, the property will be held on trust for the settlor. The rule in Saunders v Vautier has been codified so that beneficiaries of full age and capacity can call on the trustee to hand over the trust property. Where a protective trust exists, the rule does not apply as the interest is impaired by the terms of the trust deed. The TA allows variation under the terms of the trust or by the court on an application by a settlor, protector or beneficiary.

Relief in favour and indemnification of trustees

In specific circumstances a beneficiary may relieve a trustee for breach of trust or indemnify the trustee from this breach. The court may relieve a trustee of liability where the trustee acted honestly and reasonably, and should fairly be excused for the breach or for omitting to obtain directions. The rule in Hastings-Bass is thus codified. It is yet to be seen how recent UK decisions will affect the rule’s use in jurisdictions, such as Anguilla, that retain the Privy Council as their final court of appeal.

Extensive powers of the court

The court has wide powers to give directions and otherwise administer the affairs of trusts. The court has jurisdiction wherever the proper law of the trust is Anguillian, there is an Anguillian trustee, trust property is located in Anguilla, administration of the trust is done in Anguilla and the court thinks it is appropriate. The court can make orders involving the administration of the trust, beneficiaries, settlors and enforceability of the trust. Anyone can apply to the court for directions about the management of the trust, with leave.

Governing law

A foreign trust is enforceable, but foreign case law is not. If the deed says the law of the trust is Anguillian, that gives the local courts jurisdiction.

Conclusion

Anguillian trusts are practical and adaptable, and can be structured to suit specific aims. For example, variant and purpose/commercial trusts can achieve many different goals. Given the wide powers to seek court guidance, settlors and beneficiaries can be assured of ways to deal with any problems. 

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Carlyle K Rogers

Carlyle K Rogers TEP is a barrister-at-law and managing Director of Stafford Trust.

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