BAHAMAS Law and Practice Contributed by: Sean Moree KC, Vanessa Smith and Erin Hill, McKinney, Bancroft & Hughes
3.2 Recognition of Trusts Trusts are recognised and respected in The Bahamas; in fact, The Bahamas is regarded as one of the leading trust jurisdictions in the world. The legislative frame - work – including the Trustee Act 1998 (as amended), the Trustee (Choice of Governing Law) Act 1989, the Fraudulent Dispositions Act 1991 and the Purpose Trust Act 2004 – makes The Bahamas one of the lead - ing jurisdictions in the world in terms of trust formation and administration. 3.3 Tax Considerations: Fiduciary or Beneficiary Designation There are generally no tax consequences for a citizen or resident of The Bahamas who serves as a fidu - ciary or is a donor or beneficiary of a foreign trust, foundation or similar entity. However, trust companies do need business licences and would pay any taxes associated therewith. There may also be taxes associ - ated with the transfer of Bahamian real property and personalty into the trustee’s control. 3.4 Exercising Control Over Irrevocable Typically, Bahamian trusts and foundations will con - tain sections outlining the circumstances and param - eters surrounding the variation of the trust deed or foundation charter. For example, many trust deeds provide that a trustee can vary the trust deed with the protector’s consent. Planning Vehicles Variation of Trusts However, it is possible for individuals to apply to the court for the variation of a trust deed. Pursuant to Sec - tion 70 of the Trustee Act, the court can approve on behalf of certain persons (eg, minor and unborn ben - eficiaries) any arrangement varying or revoking any or all of the trusts or enlarging the powers of the trustees to manage or administer any of the property subject to the trusts, with the stipulation that the court may not approve an arrangement on behalf of any person if it would be “detrimental to that person”. Pursuant to Section 87 of the Trustee Act, no entitled beneficiaries can terminate or modify a trust if doing so would defeat a material purpose of the settlor in creating the trust, unless the settlor is living and also consents. The material purposes of the settlor may be
The transfer of real property upon the death of an indi - vidual does not attract tax. 2.6 Transfer of Assets: Vehicle and Planning Mechanisms Companies, trusts and foundations are commonly used for estate planning purposes in The Bahamas. However, the benefits associated with using such vehicles generally do not include tax advantages because of the structure of the various tax regimes in The Bahamas. 2.7 Transfer of Assets: Digital Assets There are no taxes currently in place in The Baha - mas that govern the transfer of digital assets for the purposes of succession. However, the government recently enacted the Digital Assets and Registered Exchanges Act 2024 (the “DARE Act”), which outlines the regulation and management of digital assets. 3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities The types of trusts commonly used in The Bahamas for tax and estate planning purposes are: • asset protection trusts; • charitable trusts; • purpose trusts; and • testamentary trusts. Foundations are also used and recognised in The Bahamas. The Bahamian Trustee Act 1998 was most recently amended in 2016 and provided for various updates, including: • granting the court the discretion to set aside an exercise of fiduciary power in various instances; • clarifying the scope of a release that an outgoing trustee could obtain; and • extending the protection under a trust instrument concerning the alienation of trust property.
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