Trust Planning in the Bahamas
Cherie Butler is a Senior Trust Administrator at the Winterbotham Trust Company Limited, which offers various services including Trust, Corporate and Fund administration. She has been working in the financial services sector for nine years, spending almost two years at Winterbotham. During her experience in the trust industry, Cherie has had the opportunity to interact […]
Cherie Butler is a Senior Trust Administrator at the Winterbotham Trust Company Limited, which offers various services including Trust, Corporate and Fund administration. She has been working in the financial services sector for nine years, spending almost two years at Winterbotham. During her experience in the trust industry, Cherie has had the opportunity to interact with clients and their advisors on a day-to-day basis. Some of her duties include administering trusts and managing underlying companies for High-Net-Worth Individuals, while also assisting her team members with the day-to-day administration of their structures. Here Cherie shares her insights into the current state of trust planning in the Bahamas and tells us about her work within the sector.
In your opinion, how robust in the current legislation surrounding trusts in the Bahamas?
The current legislation surrounding trusts in the Bahamas is and remains very robust. The Central Bank of The Bahamas is our principal regulator; it regulates Banks and Trust Companies in The Bahamas to ensure that they meet the specific rules and regulations to operate as a licensed trust company. With the ever-changing legislation being implemented around the world, such as the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standards (CRS), the Bahamas has also had to adapt and update its legislation. Recently, The Bahamas Trustee Act was amended to align with international practices.
Do you believe there is potential for further significant legislative development in the trusts practice?
Yes, definitely. Trust services are offered by most international financial centres. Although the Bahamas is one of the premier offshore jurisdictions, there will be an ongoing need for further legislative developments in trust services, as the world is constantly evolving and new products and services are developing to meet client needs. Our industry organization, the Bahamas Financial Services Board, assists government in keeping up with these global changes. Trusts are traditionally known for their confidentiality, which was attractive to clients because they knew that their private information would not be disclosed to third parties. Unfortunately, the days of complete confidentiality are now over and transparency is paving the way to automatic exchange of information between countries. The Bahamas has adapted to the new legislative changes for FATCA by signing the Model 1 Intergovernmental Agreement with the US. We will also be adopting CRS with effect from July 2017.
What are the typical challenges that clients approach you with in relation to trust planning?
Some of the typical challenges faced in relation to trust planning are obtaining all of the required due diligence from the client. If a trust structure is very complex, it may be difficult to obtain all of the due diligence at the initial stage. It usually takes a lot of effort, time and persistence to receive all of the necessary documents. Other challenges that may arise are: determining whether an underlying company will be incorporated to hold the assets of the trust or will the trustee hold assets directly; who will be appointed the investment advisor over the trust / underlying company; and the benefits of appointing a protector.
What strategies do you employ when assisting individuals with trust planning? What are some of the key considerations that need to be taken into account to achieve a satisfactory outcome for your client?
Some of the strategies that I employ include understanding the client’s needs through various discussions to establish whether a trust is an appropriate structure for the individual and always advising the client to seek independent tax advice (sometimes in multiple jurisdictions) prior to establishing a trust. This will ensure that they are fully aware of any adverse taxes consequences that they may encounter as a result of creating a trust. I also ensure that clients are aware of the tax reporting requirements that the trustees have to comply with in light of FATCA and CRS. One of the main considerations that should be taken into account to achieve a satisfactory outcome for a client is to be open and honest about the trustee’s role within the structure. The client needs to be aware of how the trust will be administered and what to expect from the trustee.
What are the typical complications that are likely to arise in relation to establishment and administration of trusts?
Some of the typical complications that are likely to arise in relation to the establishment of trusts include determining whether a declaration of trust or trust deed is required, who the beneficiaries will be, whether the trust is discretionary or settlor directed, if a protector will be appointed and what powers will be reserved to that person. The process of establishing and finalizing a trust is very time-consuming because the client’s advisor and the account officer may have to review the trust instrument on a number of occasions before it is signed to ensure that all the necessary provisions are captured. With respect to the administration of trusts, one of the major complications that can arise for a trustee is inadvertently not following the provisions of the trust deed. This is very crucial as the trust deed governs what the trustee can and cannot do such as making distributions, investments and loans for a trust. How do you overcome them? First and foremost, you need to understand what the trust deed says. As much as possible we try to use our own deeds but we have many situations where the trust deed is drafted by an external person. Another way of overcoming complications is to educate the client on what a trust can and cannot do. This can be achieved by having ongoing conversations with the client and his / her advisor to explain the trust in detail. With regards to the administration of a trust, the trustee will have to ensure that the trust instrument is properly drafted and to include all of the necessary provisions such as removal and appointment of a successor trustee, distributions, and investments.
What motivates you about assisting clients with trust planning?
Being able to understand the client’s needs is very rewarding and intriguing because it allows me to interact with them on a daily basis, build long-term relationships and provide the best service I can to them. I am able to learn new things and enhance my knowledge about trusts. Also, knowing that I can provide solutions to client queries regarding the trust in a timely manner is very motivating because it lets me know that clients and their advisors trust and value my opinion.
What are the Winterbotham Trust Company’s key priorities towards its clients?
Winterbotham’s vision statement is very client-focused: “Your objectives. Our Objectives. Enabling your business to thrive.” In addition, as an organization we also have three “non-negotiables”: (1) we are a relationship-driven organization and not a product-driven organization; attention to detail and quality of service is paramount; (2) we continue to be a bank which is an integral part of our overall business; (3) trust is the foundation of our business, which is fundamental to everything we do (e.g. integrity, reputation, honesty, character of our staff). We believe in providing the best quality service to our clients by building and maintaining long-term relationships through consistent communication and honesty. We also seek to provide innovative solutions to our clients to meet their needs by improving the products and services that we offer as a financial service provider. We also believe in team work which is at the heart of our company. Our trust department at Winterbotham has a great team of professionals willing to work very hard to ensure that clients continue to be satisfied with our services.