BELIZE INTERNATIONAL TRUSTS
Trusts in Belize are governed by the Trusts Act, Chapter 202 of the Laws of Belize, with substantial amendments in regards International Trusts introduced by the latest Belize Trusts (Amendment) Act 2007.
Generally based on the Guernsey Trusts Law of 1989 but with various modifications and innovations, the trust laws of Belize currently represent one of the strongest and most flexible asset protection trust legislation in the world.
Belize asset protection trust is commonly used in conjunction with the Belize International Business Company. By using a trust to hold shares in the IBC, an additional layer of legal protection is provided for the owner.
Fidelity Overseas Ltd is a licensed Trustee and Registered Agent in Belize, in position to provide a full range of trust formation and company formation services.
GENERAL DEFINITION AND HISTORY OF THE TRUST
A Trust is a specific legal relationship, mostly known in the Common law. By means of a Trust, the owner of certain assets ("Settlor") transfers these assets to an independent other party ("Trustee"). The Trustee, in turn, is legally bound to maintain and manage these assets for the benefit of another person or group of persons ("Beneficiaries").
The core principle of the Trust lies in the separation of the legal title (ownership) of the asset from the benefits derived from that asset. The control over the asset (right to dispose with) is also separated from the benefits derived from that asset.
As a legal instrument, the Trust dates back to Middle Ages or even earlier. It continues to be widely used in all jurisdictions whose legislation has been developed on the basis of the British Common law.
The modern Civil law, as adopted nowadays in many countries of the world (notably, most of the continental Europe), has a more concentrated concept of "property", to which the notions of Trust are largely incompatible. Nevertheless, the Trust continues to serve well as asset protection and estate planning instrument for millions of individuals all over the world, regardless of their country of residence.
Definition. The Trust is defined in section 2 of the Belize Trusts Act as follows:
"A Trust exists where a person (known as a "Trustee") holds or has vested in him, or is deemed to hold or have vested in him, property which does not form, or which has ceased to form, part of his own estate.
- for the benefit of any person (known as "a beneficiary") whether or not yet ascertained or in existence;
- for any valid charitable or non-charitable purpose which is not for the benefit only of the Trustee; or
- for such benefit as is mentioned in sub-paragraph (a) and also for any such purpose as is mentioned in subparagraph (b)."
PARTIES TO A TRUST
is the person who creates the Trust by placing a certain asset that s/he owns into the Trust, i.e. by transferring that asset to another person (Trustee) along with clear instructions that the asset be held for the benefit of a third party. The Settlor may be either an individual or a legal entity.
is the entity to which the legal title to the asset is transferred by the Settlor. While in full control of the trust assets, The Trustee is under a legal obligation to maintain the trust property in the best possible manner for the benefit of the Beneficiaries. The Trustee is legally precluded from using the trust asset for his own ends.
is the third party for whose benefit and profit the trust asset is held and managed by the Trustee. The Beneficiary or Beneficiaries may be either specifically named in the Trust Deed or may be a sufficiently defined group of persons (for example "all children and grandchildren"). As a particular twist, the Settlor of a Trust may also be named as the Beneficiary. The Trust may also be created for charitable purposes.
is not a mandatory party to all Trusts, but may be chosen by the Settlor. The function of the Protector is to supervise the Trustee, thus providing additional assurances to the Settlor that the trust assets are properly managed. In extreme circumstances, the Protector may remove or replace the Trustee. The function of the Protector may be undertaken by the Settlor or the Beneficiary, although usually it is vested in a trusted friend or advisor of the Settlor.
CIVIL PROPERTY RIGHTS VS THE TRUST
The continental Civil law presumes that all the main component rights associated with a property must ultimately reside in one person – the owner. In Civil law, it is the owner of the property who holds the formal legal title to the property, can defend, dispose with, control and use the property, and can also enjoy all the profits and benefits from the property. He may delegate any of those rights temporarily to other persons, but ultimately all these rights reside with the owner. If a person lacks one or several of these characteristics in respect to a certain asset, s/he will not be considered a true owner of that asset.
The Common law concept of Trust is something entirely different! In Trust, there is a clear and permanent separation between the primary components of a property. The most distinct feature of a Trust is the clear separation of the legal ownership (title) of the asset from the beneficial ownership of the asset. While the Trustee is the holder of the legal title to a Trust, the rights to the benefits and gains from the trust assets lie with the Beneficiary. The Trustee has formal rights to dispose with the asset, but these rights are pre-determined by the Settlor by means of the Trust Deed. The Settlor is clearly NOT the holder of the legal title to the Trust, however he can prescribe how the Trust assets shall be used and who shall receive the gains and benefits from the Trust property. To confuse things further, the Settlor may be (but not always is) a Beneficiary to the Trust, either alone or together with any number of other Beneficiaries.
ADVANTAGES AND APPLICATIONS OF THE TRUST
The main benefit of a trust is that it allows the formal ownership of an asset to be legally separated from the enforceable rights of beneficial use and enjoyment of that asset. Because of this particular characteristic, trusts are a widely used for asset protection and estate planning.
An "offshore trust" (a Trust established in an offshore tax haven – like the Belize International Trust) provides the additional benefit of no taxation.
Some of the most common applications of offshore trusts are as follows:
Assets transferred by the Settlor to a Trust no longer form part of the estate owned by the Settlor. Therefore, potential creditors of the Settlor do not have recourse to such assets. As the trust assets are not considered to be the property of the Settlor, the Settlor can not be indicted for not reporting or declaring such assets. For asset protection purposes, it is important that the Trust is established well in advance, ideally at a time when the Settlor could not even anticipate the existence of the future creditors. The Trust established to defeat existing creditors may be found to be fraudulent and, therefore, invalid.
As trust assets are not deemed to be the property of the Settlor, trusts are often used to hold assets that would otherwise have to be reported or declared by the Settlor in his country or residence. In particular, trusts are widely used to hold shares in an IBC or in other offshore assets where the true ownership must be kept away from public scrutiny. This way, a legal additional level of confidentiality is provided for any offshore-based business.
Trust assets are not considered to be property of the Settlor. Hence, all profits and capital gains earned by the Trust would normally be taxable according to the laws regulating the Trust. These would usually be the laws of the country where the Trust is established. Belize International Trusts, in particular, are expressly exempted by the law from all income and corporate taxation. No estate, inheritance, succession or gift tax, nor any stamp duty is applicable to Belize International Trusts either. As such a Trust can clearly be a tax-free instrument for wealth preservation and accumulation. However, the beneficiaries of a trust should be aware that any income or benefit they receive from trust (even from an international or exempt trust), may still be taxable "in their hands", at receipt of such income. In this respect, professional tax advice should be sought at home by any individual receiving income from a trust.
Estate planning and probate avoidance.
In most jurisdictions the estate of a deceased must go through a probate procedure. This may be a lengthy and costly process, also involving undesired publicity during the distribution of the estate. By establishing a trust, the probate can largely be avoided, because the ownership to the trust assets has been transferred during the life of the Settlor. Hence, the death of the Settlor does not influence the Trust assets in any meaningful way and the Trust continues an uninterrupted operation for the benefit of the beneficiaries after and beyond the demise of the Settlor. Through a Trust, a person may lay precise plans for providing a source of income for his remaining family, make provisions for the education of children or for emergency situations in the family. A trust is arguably the most appropriate and flexible instrument for making arrangements of this kind.
Avoidance of forced heirship.
For various reasons, an individual may not wish his property to pass outright to his heirs, and may wish instead to make some other arrangements. However, in many countries the law does not permit a person to freely dispose of his property in the event of his death. Rather, the law may prescribe that certain heirs (usually, the closest blood-relatives) may not be excluded from inheritance and must receive a predetermined minimum share of the estate – even if the deceased would not have wished them to receive anything. As trust property will not be deemed to constitute part of the Settlors´ estate, such property will not also be subject to any such forced heirship rules. In essence, a Trust may largely fulfill the function of a Last Will and Testament, without being subject to onerous regulations.
Estate planning and long-term preservation of assets.
An individual may wish to ensure that the business built or the wealth accumulated over a lifetime is not divided up among the heirs and consumed irresponsibly, but retained to accumulate further, with provision for payments to members of the immediate family as the need arises. If the shares in the business are transferred to the Trustees prior to death of the owner, the Trust can be used to prevent the unnecessary liquidation of a family company. The terms of the Trust Deed may then include detailed provision for payments to be made to members of the family from dividend income received by the Trustees but that the Trustees retain the shares and keep the company running save in special circumstances justifying sale or liquidation. This approach may be particularly advantageous where the remaining family may have little business experience of their own or where they are unlikely to agree on the way forward for the business.
TAX ADVANTAGES OF THE BELIZE INTERNATIONAL TRUST
A Belize International Trust and its trust property is permanently exempt from income and business tax, estate, inheritance, succession or gift tax and all instruments relating to the trust property or to transactions carried out by the trustee on behalf of the trust are exempt from stamp duty. Moreover, the trustee of a Belize International Trust shall be regarded as not resident in Belize and shall be exempt from exchange control with regard to the trust property and to all transactions carried out by the Trustee on behalf of the Trust.
QUALIFICATION FOR A BELIZE INTERNATIONAL TRUST ("OFFSHORE TRUST")
As defined by the Belize Trusts Act, an "International Trust" or "Offshore Trust" is a trust where:
- the settlor is not resident in Belize;
- none of the beneficiaries are resident in Belize;
- the trust property does not include any land situated in Belize;
- the law of Belize is selected as the proper law of the trust ; and
- in case of a purpose trust, the purpose or object of the trust is to be pursued or performed outside of Belize.
As opposed to domestic trusts under the Belize Trusts Act, which do not require a written form and official registration to be valid, International Trusts must be in writing, properly filed and registered with the Registrar of International Trusts in Belize.
The following information is registered and maintained by the Belize Registrar of International Trusts in respect to every International Trust:
- Name of the trust;
- Date of settlement of the trust;
- Date of registration of the trust;
- Name of the trustee;
- Name of the protector (if any);
- Name and address of the trust agent.
Purpose of the trust may also be stated in the application, but is not mandatory.
Notably, the Registry does not require the Trust Deed itself to be filed, neither does it require to reveal any details whatsoever about the settlors and beneficiaries of the trust, nor any information about the trust assets.
An International Trust is registered in Belize by means of the Trust Agent filing a specific application form and affidavit, following which the International Trust is issued with a numbered certificate of registration.
While remaining sufficiently confidential and simple, the procedure of mandatory registration of International Trusts in Belize ensures that the interests of the would-be settlors and beneficiaries of the trust are best served by providing them with a written confirmation that their International Trust has been properly established in accordance with a certain set of legal standards. This way, the official registration basically provides an additional assurance of the enforceability and integrity of the International Trust.
The Belize Trusts Act provides for substantial confidentiality provisions in respect to all trusts registered or created in Belize. At the same time the Act sets forth a number of provisions under which the settlor, the beneficiaries and the protector of the trust may obtain sufficient information as regards the state of affairs of their Trust.
Generally, the trustee of a trust has a duty of confidentiality. Subject to limited exceptions as provided in the Trusts Act and subject to the terms of the trust, the trustee of a trust shall keep confidential all information regarding the state and amount of the trust property or the conduct of the trust administration. (Chapter 28.(2) of the Act.)
At the same time, a Trustee is bound to provide full and accurate information as regards the state and amount of the trust property and the conduct of the trust administration to (a) the Court; (b) the settlor or protector of the trust; (c) in the case of a trust established for a charitable purpose, to the Attorney General; (d) subject to the terms of the trust, any beneficiary of the trust who is of full age and capacity; and (e) subject to the terms of the trust, any charity for the benefit of which the trust is created.
As regards International Trusts which require mandatory registration by the Registrar of Trusts, the Registrar shall not disclose any information contained in the Register to any person without a written authorisation of the trustee or the trust agent. Exceptions are written requests made by the Director of the Belize Public Prosecutions Office, the Director of the Belize Financial Intelligence Unit, the Commissioner of Police or other regulatory or enforcement authority in Belize, certifying that such information is reasonably required to facilitate a criminal investigation, prosecution or proceeding, whether in Belize or elsewhere, including an investigation into locating the proceeds of crime and any proceedings for the enforcement of a confiscation or forfeiture order made in Belize or elsewhere.
Notably, the Registrar of International Trusts does not hold any information as regards the trust assets, the names of the settlors, beneficiaries or other parties to the trust (except for the Trustee) or any other substantial financial or personal information as regards of any International Trust – hence, such information can also not be obtained from the Registrar, even if requested by a regulatory authority. All such information is only held on file by the Trustee, and subject to stringent confidentiality provisions as described above.
LEGAL PROTECTION (FRAUDULENT CONVEYANCES)
Belize is one of the few if not the only country where immediate protection is available against the so called "proceedings for fraudulent conveyances". There is no minimum period of time for which the Trust must be established before it cannot be attacked. Unlike trust legislations in other offshore jurisdictions which simply reduce the period of limitation for initiating proceedings for fraudulent conveyances or transfers, the trust law of Belize has actually repealed the provisions against fraudulent conveyances in relation to a trust. Such protection is immediate and while it can be set aside for duress, fraud, mistake, undue influence, misrepresentation or incapacity of the settlor, it cannot be set aside even if made for the avoidance of claims by spouses, heirs and creditors.
As prescribed by Article 7(6) of the Trusts Act, where a trust is created under the law of Belize, the court shall not vary it or set it aside or recognise the validity of any claim against the trust property pursuant to the law of another jurisdiction or the order of a court of another jurisdiction in respect to – (a) the personal and proprietary consequences of marriage or the termination of marriage, (b) succession rights (whether testate or intestate) including the fixed shares of spouses or relatives, or (c) the claims of creditors in an insolvency.
Further, the reciprocal enforcement of judgments legislation does not apply to a trust in Belize so that fresh proceeding would need to be brought in Belize in every instance involving a Belize trust.
REGULATION OF TRUST FIRMS IN BELIZE
The Belize International Financial Services Commission (pursuant to the International Financial Services Commission Act, Chapter 272 of the Laws of Belize, licenses and supervises Trustees in Belize).
All practitioners in the offshore industry, including Trustees, must be licensed by the Commission before engaging into any of the international financial services. The Commission is the regulatory body for the offshore sector and has developed a rigorous set of criteria that an applicant must satisfy before being licensed. In particular, any Trust firm must prove a high standard of staff competence and integrity, have adequate internal system of controls and procedures and must be substantially capitalized.
ESTABLISHMENT PROCEDURE FOR AN INTERNATIONAL TRUST IN BELIZE
The primary document for the establishment of a Trust is the Trust Deed.
The Trust Deed (or "Deed of Settlement") is a written instrument or contractual agreement which sets out in detail the duties of the trustee, the names of the beneficiaries and the assets which are the subject of the trust. The Trust Deed may contain all the necessary detail of confidential provisions as regards to how the trust assets must be maintained, managed and how any of the trust benefits must be distributed, invested or administered. In principle, the Trust Deed is a unique legal document, custom-made for each individual trust situation, although certain standard wordings are usually available and often employed.
In order to qualify for the tax exemption, the Belize International Trust must correspond to certain limitations and rules, as prescribed by the Trusts Act. In particular, every deed of settlement (trust deed) creating an International Trust in Belize must be signed by the Settlor and the Trustee, and every declaration of trust shall be signed by the Trustee, and such signatures, if made outside Belize, must be authenticated before a notary or other authority authorised by the law of that jurisdiction to administer oaths.
A Belize International Trust is not required to have a Belize-based Trustee. However, in order for the trust to qualify as a Belize International Trust, Belize law must be selected as the governing law for the trust, and a licensed Trust Agent in Belize must be appointed. Fidelity can provide both the services of the Trustee and of the Trust Agent.
In order to satisfy the requirements of the law, the Trust Agent in Belize must maintain on his file the following (confidential) information:Name of the trust.
Date of settlement of the trust.
Date of registration of the trust.
Name(s) of the trustee(s).
Name of settlor.
Name of protector (if any).
Names and addresses of all the beneficiaries.
Initial funds settled.
Additional funds settled.
Changes in beneficiaries.
Change of protector.
Original trust instrument (Trust Deed) and any amendments thereto.
As soon as all of these details are available, the Settlor, the Trustee or (most usually) the Trust Agent in Belize proceeds to file an Application for the trust to be registered as Belize International Trust.
The Application contains only the very basic data about the Trust. It does not contain any sensitive information about the identities of the settlor, the beneficiaries or any information whatsoever about the trust assets. This information remains only on file with the Trust Agent, protected by secrecy provisions. Of course, the filing of the Trust Deed is also not required to register an International Trust in Belize.
Along with the Application, an affidavit is submitted by the Trust Agent, verifying that all the information required to be kept by the Trust Agent (as listed above), is duly held and recorded by him in the appropriate record in his office.
Provided that the Application and the Affidavit are correctly drafted, signed and filed along with the applicable Government fee (USD 100 for initial registration), the International Trust wil be issued with a numbered certificate of registration.
Fidelity Overseas Ltd is an authorized Trust firm in Belize, licensed to provide Trustee and Trust Agent services for Belize Trusts. Please contact us for more information as regards the formation of exempt trusts and international business companies in Belize.
The following is an indication of the fees and other charges involved in the acceptance / establishment of Belize International Trusts, and the relevant annual running costs.
|Establishment of the Trust
Includes our time for drafting and settling a new standard form discretionary trust deed
and time required for standard compliance work; registration of the trust as a Belize
|Annual fee for provision of Trustee, if provided by us.||$ 950|
|"Take-on" fee for existing trusts.
Includes our time for getting familiar with an existing trust structure, reviewing the
relevant documents and, time required for standard compliance work; registration of
the trust as a Belize International Trust.
This fee may be higher if the trust structure or the compliance in the particular even is
unusually complex or time consuming. Such increase would be discussed and agreed
with the client in advance.
|Government Fee for registration of a Belize International Trust.||$ 100|
|Annual fee for provision of Trust Agent.
Retaining a Trust Agent in Belize is mandatory for all Belize International Trusts.
|Transfer/cancellation of Trust.
Requires 3 months notice.
|All other services will be charged for time spent at the standard hourly rates appropriate to the relevant members of staff involved, as follows:
$250 per hour
$150 per hour
$100 per hour
|Disbursements (telecommunications, courier delivery, copying, etc.)||at cost|
Legal fees may be involved in relation to custom-made trust deeds and complex trust arrangements.
Fees for non-standard services, which are based on time spent and the nature and complexity of the work involved, are generally discussed and agreed with clients in advance.
Certain administrative fees, such as telecommunications, copying, courier delivery of documents, may be applicable in addition to standard fees.
For more detailed knowledge on Belize International Trusts, please feel free to peruse the full official texts of the Belize Trusts Acts, which are are available in our "Downloads" section.