1. TRUST ADMINISTRATION Paul B Davis, Higgs & Johnson
THE NASSAU CONFERENCE | FINANCIAL SERVICES BOOTCAMP

2. WHAT IS A TRUST?
A relationship allowing an individual or entity (a settlor) to transfer legal title of assets to a third party (the trustee)

3. WHAT IS A TRUST? Separation of legal and equitable ownership
Administration of assets for the benefit of beneficiaries
Financial and Non-Financial Assets

4. WHY USE A TRUST?
01 ESTATE PLANNING
02 ASSET PROTECTION
03 TAX PLANNING

5. ESTATE PLANNING 1
A trust instrument can address who, what, when and how much each beneficiary will/may receive
Avoids the probate process 2
Avoidance of forced heirship (Trusts (Choice of Governing Law) (Amendment) Act, 2016) 3

6. ASSET PROTECTION Legal title transfers to trustee
Fraudulent Dispositions Act 1991
S. 4(1) - Dispositions of property made with an intent to defraud creditors are voidable
Burden of proof lies on creditor
Limitation period of two years
Trustees Act
S. 39/40 – Protective Trusts /Spendthrift Provisions

7. FOREIGN GUARANTOR TRUSTS
TAX PLANNING
FOREIGN GUARANTOR TRUSTS
SPLIT TRUST STRUCTURE

8. In case of Settlor’s death
SPLIT TRUST
Settlor
Revocable
(up to capital added
adjusted by inflation
Irrevocable
Capital Trust
Income Trust
PREFERRED
Shares without
Voting right
In case of Settlor’s death
COMMON
Shares with
Voting right
Beneficiaries
of Settlor’s Estate
Investment Company
Investments
Class of
Beneficiaries

9. TYPES OF TRUSTEE INSTITUTIONAL TRUSTEE PRIVATE TRUST COMPANY
INDIVIDUAL TRUSTEE

10. INSTITUTIONAL TRUST COMPANY
Regulated by the Central Bank
Risk management procedures
Substantial Funds/Professional Indemnity Insurance
High levels of expertise
Full administrative staff – efficiency of service
Variety of services/products offered

11. PRIVATE TRUST COMPANY
Acts as trustee only for a single trust or a group of related trusts created by or at the direction of the designated person(s).
Designated person - an individual named in the designating instrument. All other settlors under the PTC must be related to the designated person.

12. PRIVATE TRUST COMPANY
Not required to be licenced under the Business Licence Act, 2010
Not required to be licensed by the Central Bank
Must have a Registered Representative (and a Special Director)
Benefits
Control
Flexibility
Increased Privacy
Continuity vs individual trustee

13. INDIVIDUAL TRUSTEE PROS Privacy Trusted friend/advisor CONS
Personal liability
Continuity

14. AVOIDING LIABILITY: BREACH OF TRUST
Occurs when a trustee does any act which he ought not to do, or fails to do any act which he ought to do with regard to the administration of a trust or the beneficial interest arising under a trust.
Examples:
Failure to exercise a proper discretion
Unauthorized investments
Manipulating investments to benefit one beneficiary at the expense of another
Failure to responsibly manage the trust fund

15. RESERVED POWERS TRUSTS
TYPICAL STRUCTURES 01 02 03
PURPOSE TRUSTS
DISCRETIONARY TRUSTS
RESERVED POWERS TRUSTS

16. DISCRETIONARY TRUSTS
Edge v Pensions Ombudsman [2000]
“… unless they can be seen to have taken into account irrelevant, improper or irrational factors, or unless their decision can be said to be one that no reasonable body of trustees ….. could have reached, the judge cannot interfere.”
Bartlett v Barclays Bank Trust Co Limited [1980]
“A higher duty of care is plainly due for someone like a trust corporation which carries on a specialized business of trust management.”

17. RESERVED POWERS TRUSTS
Trustee Act sections 3 and 81
Section 81(A)

18. Powers Reserved to the Settlor
s. 3 Trustees Act – (any one or more of the following powers)
Revocation;
Appointment over any part of the trust property;
Amendment;
Addition or removal of trustees, protectors, or beneficiaries; and
Powers to direct the trustee in connection with the exercise of any of their powers or discretions

19. Reserved Powers of the Settlor/Protector
S. 81 Trustees Act - (without limitation)
determine the law which shall be the proper law of the trust;
remove or appoint trustees;
exclude any beneficiary;
add any person as a beneficiary;
give or withhold consent to specified actions of the trustee;

20. Section 81(A)
If a trust instrument provides that an investment power shall be exercised by the trustees as and when directed by another person and, in the absence of a direction, shall not be exercised; and
that section 81(A) shall apply to the investment power,
Trustees shall not be liable.

21. INVESTMENT RISK MANAGEMENT
Scenario 1
Fully Discretionary Trust
Trustee appoints Settlor to manage investment but trustee does not monitor investment performance
Negligent appointment?
Ongoing monitoring?

22. INVESTMENT RISK MANAGEMENT
Scenario 2
Fully Discretionary Trust
Trust Company appoints professional manager
Less likely to be a negligent appointment
Monitoring obligations?

23. INVESTMENT RISK MANAGEMENT
Scenario 3
Directed Trust
Statutory requirement - s. 81A Trustees Act
Less frequent monitoring
Trustees are not liable for losses arising as a result of:
acting in accordance with a direction; or
failing to do anything in the absence of a direction

24. Section 82 – Managing Trustee
A trust instrument may contain provisions by virtue of which the exercise of any of the trustee's powers may be reserved to a managing trustee and no other trustee shall be liable for any of the decisions, acts or transactions of the managing trustee in so far as they amount to exercise of powers reserved by the trust instrument to the managing trustee.

25. PURPOSE TRUSTS
A trust set up for the achievement of a particular purpose authorized by the trust instrument.
Governed by the Purpose Trusts Act 2004
Used for holding high risk assets, i.e. trading companies, art collections etc.

26. AVOIDING LIABILITY - SUMMARY
For each structure a proper analysis should be carried out to determine appropriate risk allocation and selection of the most appropriate vehicle/provisions.
Diligent administration of the structure.

27. PAUL DAVIS PARTNER