BVI Trusts and Succession Planning: Options and Structures

When it comes to trusts and succession planning, the British Virgin Islands (“BVI”) is a well-established jurisdiction of choice. BVI has a robust legal and regulatory environment providing a comprehensive framework for trusts and other succession planning structures, helping high-net-worth and ultra-high-net-worth families preserve their legacy for the next generation.

A key advantage of BVI for wealth preservation and succession planning is its legal system. Based on English common law, BVI trust laws offer innovative solutions to legal issues that have posed challenges in other jurisdictions. BVI has a competitive trusts industry combining expert practitioners and developed jurisprudence. The Maples Group BVI practice is well placed to assist in establishing BVI trusts and to advise high-net-worth and ultra-high-net-worth families and their other advisors.

The Maples Group can also provide comprehensive compliance support and advice, including regulatory requirements and tax reporting. This affords clients the global recognition and stability of domiciling in a British overseas territory while supporting wealth preservation and succession planning objectives for the family’s next chapter.

Considerations for clients

BVI trusts offer clients confidentiality, potential tax efficiencies and a clear framework for succession and inheritance. BVI does not levy capital gains, estate, gift or income taxes on trusts, provided none of the beneficiaries are BVI resident and the trust neither owns land in BVI nor conducts business in the territory.

The overall tax treatment of a trust will depend on the circumstances of the settlor, trustee and beneficiaries, as well as the laws of any relevant jurisdictions. However, BVI is well regulated and has implemented FATCA, CRS and other international transparency initiatives, offering a well-regarded financial services environment for trust assets.

Which structure works best for you?

Often the appropriate trust structure is driven by advice from onshore advisors. The Maples Group works alongside clients’ other advisors to develop tailored solutions that meet clients’ needs while providing flexibility for life’s unexpected developments.

• The discretionary trust offers great flexibility, typically with certain controls to prevent excessive innovation. The trustee has discretion over distribution to beneficiaries, including the manner and timing of payouts, generally subject to protector consent and other restrictions.
• Accumulation and maintenance trusts allow settlors to accumulate income over a set period, adding to the trust capital to be distributed to beneficiaries at the appropriate time.
• For some clients the fixed-interest trust is most appropriate, for example where the client only intends to fund the trust on death.

Generally, a trust should be administered by a professional, licensed trust company. This provides certainty as to the jurisdiction of administration, the comfort of a regulated environment with professional indemnity insurance, and the benefits of expert professional trustees in a complex field.

Trust regulations specific to BVI

The Private Trust Company (“PTC”) is a BVI company limited by shares or guarantee that acts as trustee for specific groups and individuals, typically related parties, without receiving compensation. A PTC meeting the requisite requirements can serve as the sole trustee of a BVI purpose trust or Virgin Islands Special Trusts Act (“VISTA”) trust. The PTC must solely provide unremunerated or related trust business. Related trust business must involve qualifying trusts where each beneficiary is either related to the settlor (immediate family members including spouses, descendants, siblings, parents, uncles, aunts, first cousins, nieces and nephews) or a charity. A PTC is excepted from requiring a trust licence under the BVI Banks and Trust Companies Act.

One common challenge for families is the potential strain arising from the trustee holding legal title to the family business and having oversight duties. These trustee duties are typically modified by Anti-Bartlett clauses in conventional trusts.

Unique to BVI, the VISTA trust goes further in preventing the trustee from interfering in the family business. VISTA trusts allow business owners to place company shares into a trust without handing over management to the trustee. The trustee holds legal ownership of the trust assets while the family continues running the company – to the eventual benefit of the trust.

VISTA trusts offer “office of director rules” and “permitted grounds of complaint”, which define when the trustee can inquire into the company’s financial situation and the conditions under which the trustee can assume a management role. All trustees, whether of VISTA or other trusts, cannot be absolved from their obligations regarding the prevention of money laundering and other criminal activity.

How can the Maples Group assist with BVI trusts?

Leveraging our legal and specialised fiduciary teams, the Maples Group serves clients with dedicated individuals experienced in working with companies and high-net-worth families to identify the most suitable trust structure. Our on-the-ground team in BVI serves as trusted fiduciary experts on BVI entities, including private companies, limited partnerships, funds and trusts, ensuring compliance with local regulations throughout the lifecycle of each structure.

Please do not hesitate to get in touch with our specialist team who can guide you through this process.

This article is provided for informational purposes only and does not constitute legal, tax, investment or other professional advice. For legal regulatory disclosures, please visit https://maples.com/legal-notices.