Update on enhancements to BVI Trust and Probate law
The stakeholders in the BVI financial services industry have always taken great pride in constantly reviewing and looking to improve its offshore legislation. In keeping with this, the BVI has recently produced new legislation to modernise BVI trust legislation and simplify its probate procedures. Following is a summary of the most important of these changes.
Court variations to beneficial entitlements
The amendments provide the High Court with additional powers to vary the terms of a trust without the need for the consent of the adult beneficiaries. The High Court can approve such variations where it considers it expedient in all circumstances to do so. Various checks and balances have been built into the new provisions to prevent abuse but it is envisaged it could be very useful in certain situations where having to exercise powers in a certain way may be disadvantageous to beneficiaries.
Rule in Hastings-Bass
The rule in Hastings-Bass allowed certain decisions by trustees to be unscrambled on the basis that they had unintended consequences. The amendments to BVI law make it clear that the High Court has the power to set aside trustee mistakes. It will be particularly useful in situations where trustees have made poor decisions in relation to the exercise of a power, where such decisions have led to disadvantageous consequences to beneficiaries of a trust.
The amendments expand the reserved powers provisions already contained in s 86 of BVI trust legislation and makes it explicit that a settlor’s decision to reserve powers does not invalidate the trust, prevent its terms taking effect or cause any of its property to become part of the settlor’s estate on death. In addition the changes make it clear that the grant of powers by the settlor to others will also not invalidate a trust.
Conflict of laws ‘firewalls’ provisions
The firewall protections afforded by s 83A, making it clear that any questions arising in relation to the trust will be determined by BVI law rather than under potentially less favourable foreign laws. This is particularly useful in providing protection against forced heirship and matrimonial claims from foreign jurisdictions.
Third parties dealing with trusts
Due to the very nature of a trust, third parties and trustees were often reluctant to enter into contracts using a trust structure. In 2003 legislation was enacted which provided both third parties and trustees various protections when entering into a contract which reduced the perceived risks involved into entering into such contracts. However the changes only applied to trusts established after the legislation was enacted. The current amendments allow trusts established before March 2004 to take advantage of the changes made in the earlier legislation.
Probates (Resealing) Act, 2021
Prior to the amendment it was only possible to reseal a grant of probate in the BVI from a limited number of jurisdictions. The changes mean that a greatly extended list of jurisdictions will now be able to have a grant of probate resealed in the BVI pursuant to a simplified procedure. The new jurisdictions, which total 67, include Hong Kong, India, Singapore and the USA.