Bermuda has long been recognised as an attractive and secure jurisdiction with a favourable taxation regime for private wealth management for international private clients. 

Taxation 

There have been few developments in relation to tax in Bermuda and so the present position is outlined below. 

From an international estate planning and trust perspective there are no real taxes applicable to non-Bermudians. There is no income tax, profits tax, capital gains tax, capital transfer tax or inheritance tax applicable to Bermuda residents or Bermuda companies (subject to points below and those outlined at 2.1 Estate administration). There are also no exit or similar taxes based on a resident’s wealth when ceasing to be resident and there are no other consequences of leaving the jurisdiction.

Bermuda has an extensive Stamp Duty regime which only applies, for the most part, to Bermudians and Bermuda property. For example, there is no ad valorem Stamp Duty applicable to trusts which receive or enter into transactions in non-Bermuda currency or assets. See Section 2.1 Estate administration below in relation to Bermuda Stamp Duty. 

Bermuda also has a Land Tax regime which applies to the owners of Bermuda property which is paid bi-annually and based on the ARV (annual rental value) of the property on a sliding scale. 

Gifts or transfers of Bermuda currency or property into a trust do attract Stamp Duty at increasing rates to a maximum of 15% on values exceeding BDA 1 million. 

Finally, for those businesses with employees in Bermuda there is a system of taxation on payroll. There are various reliefs, including for low earners and job creators.

Wealth Planning 

A core part of wealth planning for international clients in Bermuda is by the use of trust structuring (see Section 2). 

A corresponding part of wealth planning for international clients may include the preparation of a Bermuda Will, particularly for those who own Bermuda property. The applicable legislation is the Wills Act 1988 (as amended). In order to prepare a Will the individual must be over the age of 18, have testamentary capacity, be in writing and be signed by the testator in the presence of two independent adult witnesses (who must also be of sound mind). 

Bermuda has freedom of testamentary disposition and there is no forced heirship regime. 

There is no localised legislation or regulation. 

Please see Section 3 below. 

There is no localised case law. 

There is an increased use of Private Trust Company (PTC) and use of Purpose Trusts to facilitate commercial transactions and quasi-philanthropic activities. 

In response to the pandemic the Bermuda Government is now offering one-year, renewable, residency certificates for remote workers aimed at ‘digital-nomads’. There were also some tax reliefs available to the hospitality sector. 

Estate Administration 

Estate administration in Bermuda is similar in many respects to that of England & Wales. An application for a grant of probate is made by the person or persons named as executor in the Will of the deceased and is completed by the filing with the Supreme Court in Bermuda of an ‘Affidavit of Value’ setting out the value of the estate at death, together with an ‘Oath of Executor’ whereby the executor undertakes to comply with such directions as the court may give and distribute the deceased’s estate according to the Will. The original Will is filed at the court and becomes a matter of public record. 

The Affidavit of Value is largely concerned with Bermuda based assets owned by the deceased which are valued in Bermuda dollars and attract Bermuda Estate Duty (for example, Bermuda dollar denominated bank accounts, Bermuda shareholdings and Bermuda real property). 

The Stamp Duty applicable on death is on a sliding scale. There are exemptions available on death for gifts to a surviving spouse and a Bermuda registered charity. It is also possible to designate a ‘Primary Family Homestead’ which enables a person to designate a residential property as a primary family homestead and exempt that property from the applicable Stamp Duty on death. There are provisions to take advantage of this if no designation is made during life. 

Trust Administration 

Private Trusts

Bermuda’s trust law is largely based on English common law, including the doctrine of equity, but it has been enhanced and amended by Bermuda trust related legislation. The Trustee Act 1975 (1975 Act) is, for the most part (but subject to a number of modern amendments and improvements) identical to the England & Wales Trustee Act 1925. There is an emphasis on review and innovation to trust law in Bermuda to ensure it remains a competitive and modern choice for the wealth planning needs of international families and their advisers. There is a collaborative relationship between Bermuda’s legislature and private sector associations such as the Society of Trust and Estate Practitioners to enable regular and innovative reforms of trust laws with legislation that is both modern and facilitative. Below are highlighted some key legislative provisions. 

S24 of the 1975 Act provides a statutory power of advancement which can be widely applied (provided it is not specifically excluded by the trust deed). It is generally accepted that this allows incidental benefit to strangers to the trust without resulting in a ‘fraud on the power’ but the trustee should only exercise their fiduciary powers appropriately for the benefit of the beneficiaries.  

Ss47 and 48 of the 1975 Act provide the legislative basis for the variation of trusts and are again based on English law, but modified to suit modern applications. S47 – perhaps the most well-known and innovative feature of Bermuda trust law – requires the court to consider whether it is ‘expedient’ to confer upon the trustees the power(s) that they request and whether as a matter of law the court can confer those power(s) upon the trustee. One important point to note is that this does not require the consent of all capable beneficiaries, which has proven particularly useful in the context of tax planning in beneficiary home jurisdictions. Case law in relation to s47 has included applications to update modern charging provisions, vary beneficial interests, improve tax efficiency and vary investment powers (amongst other things). 

The Perpetuities and Accumulations Act 2009 (2009 Act) and Perpetuities Amendment Act 2015 (2015 Act). The 2009 Act abolished the rule against perpetuities for all trusts settled after 1 August 2009 except for trusts which include Bermuda land. The 2015 Act enables trustees of pre-2009 trusts (and trusts originally established in other jurisdictions which had an applicable perpetuity period or similar limited but are now governed by Bermuda law) to make more simplified, cost effective applications to the Bermuda courts to dis-apply or alter the perpetuity period or similar limitation on duration. The 2015 Act provides that such applications can be made on an ex parte basis and are dealt with quickly and cost effectively. 

The Trusts (Special Provisions) Amendment Act 2020 came into force in August 2020 and ss.10 and 11 introduced updated ‘firewall’ provisions. S10 provides a regime for the exclusion of non-Bermuda law in relation to certain questions concerning the creation of Bermuda trusts and the exclusive application of Bermuda law concerning the validity, construction, effects and administration of Bermuda trusts. S11 provides for the exclusion of orders of foreign courts which are inconsistent with the choice of law.

The Trusts (Special Provisions) Amendment No.2 Act 2020 provides that illegitimate children can be excluded from a trust if the trust instrument expressly states a contrary intention. For most other purposes in Bermuda the position of legitimate and illegitimate children was equalised in 2002.

Purpose Trusts 

The principal difference in the laws relating to trusts compared to English law are found in the Trusts (Special Provisions) Act 1989 (as amended) (1989 Act). The 1989 Act allows for the creation of non-charitable purpose trusts. These may have both charitable and non-charitable beneficiaries. 

A non-charitable purpose trust, for instance, can be used in a number of ways, such as:

• a quasi-philanthropic trust, where the objects are not exclusively within the technical legal definition of ‘charitable’; 
• in structured corporate finance transactions and securitisations; 
• to hold voting stock for a specified purpose;
• to own the share of private trustee companies; and 
• the creation of ‘off balance sheet’ orphan companies. 

Private Trust Companies 

The use of a PTC remains an extremely popular choice to act as the Trustee of a particular trust or group of trusts and the number of incorporations for such companies has increased significantly over the last few years. This enables the Settlor of a trust or group of trusts to retain control and uses corporate solutions to solve clients’ organisation and liability problems. In other words such PTC structures are developed to suit the particular client’s needs and enable efficient service without the interference and inefficiencies of overly bureaucratic regulation. 

Charitable Trusts

The Charities Act 2014 (as amended) regulates charitable trusts. These can be public or private and different regulatory regimes apply depending on the nature of the charitable trust. 

Regulation 

Bermuda has a robust regulatory and licensing regime for corporate trust providers under the Trusts (Regulation of Trust Business) Act 2019. Bermuda has also enabled the Economic Substance Act 2018 to comply with various EU requests. 

There is no localised legislation or regulation. 

Please see below, Section 3.3, in relation to the case of Ingham v. Wardman [2022] CA (Bda) 7 Civ.

There is no localised case law. 

There is an increased use of PTCs and use of Purpose Trusts to facilitate commercial transactions and quasi-philanthropic activities. 

Fortunately the pandemic has not impacted upon planning work in this area. 

There have been no legislative or regulatory developments in relation to estate and trust litigation but to provide some context the Supreme Court of Bermuda is the court of first instance in Bermuda with the right of appeal in certain circumstances to the Court of Appeal in Bermuda. The ultimate right of appeal lies with the Privy Council of the United Kingdom. Bermuda has an experienced judiciary and local counsel producing high quality judgements providing useful precedents with global reach. Unlike some other offshore jurisdictions, Bermuda allows KCs to appear in Bermuda courts.

There is no localised legislation or regulation.

Relevant case law to date

In the context of s47 of the 1975 Act, the case of GH v. KL [2011] SC (Bda) 23 Civ involved a Will Trust which did not meet the needs of the various family beneficiaries. The application under s47 involved a number of changes, none of which were opposed and some which achieved a better tax outcome for some of the beneficiaries and were neutral for other beneficiaries. The Court ultimately approved all the changes and in the judgment it confirms that the legislation “at least contemplates the possibility of the Court sanctioning a transaction which is expedient for one beneficiary and neutral for the others”. The Court also confirmed there was nothing to suggest importing a restriction preventing changes which achieved tax efficiency. A further important judgment in the context of s47 of the 1975 Act is the case of Re ABC Trusts [2012] SC (Bda) 65 Civ. Ian RC Kawaley CJ (as he then was) stated in respect of s47: “This power is actually broader than that conferred by the provisions of s48 which explicitly deal with variation alone”.

Confidentiality is a key concern for many internationally mobile and wealthy families. It is generally accepted that non-controversial trust cases are private and therefore applications should be held in private and judgments anonymised. In the case of the BCD Trust [2015] SC (Bda) 83 Civ, CJ Kawaley stated: “It seems to me that in this type of case it is inherently consistent with the public interest and the administration of justice generally that applications such as these should be anonymised and dealt with as private applications, where there is no obvious public interest in knowing about an internal trust administration matter”. 

Recent case law 

In the context of estate litigation the most recent decided case is Ingham v. Wardman [2022] CA (Bda) 7 Civ. This was a decision of the Court of Appeal of Bermuda with Bell, JA, providing the leading judgment. There was a lengthy judicial history to the matter which derived from an estate administration and steps taken in the administration by the executors as well as the grant of a Beddoe Order providing protection to the executors in respect of costs. 

The Court of Appeal in this case referred to Alsop Wilkinson v. Neary [1995] I All ER 431, which identified three types of disputes in which trustees might find themselves being a trust dispute, a beneficiaries dispute and a third party dispute. The Court of Appeal classified this particular case as that of a beneficiary dispute which therefore required that a trustee’s duty is generally to remain neutral, to offer to submit to the court’s directions, and to leave the parties that are in dispute to resolve their dispute as they may be advised. The Court of Appeal took the view that the executors had not remained neutral ‘but instead chose to engage in hostile litigation’. The Court of Appeal took the view that the executors had acted consistently with the advice provided to them. 

The Court of Appeal granted an indemnity costs order against the executors with personal liability and set aside the previously made Beddoe Order. This case highlights the need for executors, and by extension trustees, to remain neutral where such disputes arise. 

In the Matter of the X Trusts [2021] SC (Bda) 72 Civ is a recently decided case in respect of the role of the protector. Assistant Justice Dr Ian Kawaley referred, in his judgment, to the role as “a comparatively modern office … yet to be fully worked out by the courts”. In this case a dispute arose as to the proper role and function of the protectors, in particular in relation to their power of veto. The key issue to be determined was whether the role was akin to a watchdog (that is, to make sure the trustees’ decisions were valid and rational) or whether it was fully discretionary (such that the protectors could reach their own conclusions on the issues before them), referred to as the ‘Narrow View’ and the ‘Wider View’ respectively. Kawaley AJ held that, based on a contextual reading of the trust deeds, the Narrow View was favoured and, more generally, that unless the trust instrument expressly points to a fully discretionary role, it is likely that the normal inference will be that the role of the protector is one of review. 

The other leading Bermuda case law on the topic of Protectors is Re Information about a Trust [2014] BDA LR 5, which characterised the role as that of a ‘watchdog’ or a ‘monitoring one’. 

There is no localised legislation or regulation. 

Beneficiary disputes can take many forms but are often triggered by the death of a patriarch or matriarch meaning that long-standing disagreements come to the fore which make trust restructuring a sensible solution to facilitate harmonious future wealth planning. How these restructurings take place and the division of the assets can often cause disputes. Trustees should remain neutral in such disputes but may wish the ‘blessing’ of the Court under a Public Trustee v. Cooper application. 

The extent to which any trustees will be pursued for losses realised either as a result of the pandemic or the current economic down turn has yet to be seen. 

The major pandemic related development is the increased use of virtual hearings.