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Belize and its Merits as a Trust Jurisdiction

Table of Contents

Overview

Introduction
Government/Legal System
Business and the Economy
Tourism

Belize as a Trust Jurisdiction

General Aspects
Asset Protection Aspects
Various Technical Aspects
Belize Court Upholds Confidentiality Laws

Overview

Introduction

Belize

Belize is a beautiful independent country located on the Caribbean seaboard of Central America. It has an area of approximately 9,000 square miles; 174 miles at its longest point by 68 miles at its widest point. It is a simple 2-hour flight from the USA, and offers several flights daily to and from Miami, Houston, and New Orleans. The total population is estimated at 250,000 with the major commercial center being Belize City with a population of approximately 80,000. Much of the population of Belize is ethnically diverse including descendants of the original Mayan culture and various mixtures of Caribbean people, Caucasians, Chinese, and East Indians. The primary language spoken is English. The climate is subtropical with an average temperature of 80 degrees. English is the official language, but many of the people are bilingual and also speak Spanish. Belize has a literacy rate of over 90%.

Government/Legal System

Belize has a long history of peace, stability and democracy. It became a British Crown Colony in 1862 and achieved complete self-rule in 1981. Belize is a member of the British Commonwealth, The United Nations, and the Non aligned-Movement. The political system is based on the Head of State British Westminster model with Queen Elizabeth II being represented by a Belizean Governor General. Executive authority is exercised by the cabinet under the leadership of the Prime Minister, subject to approval by a 29 member House of Representatives elected every five years. In addition there is an 8 member Senate with the majority appointed on the recommendation of the Prime Minister. The laws of Belize are derived from English common law supplemented by local legislation. The court system is also similar to that of England and contract and commercial law is based on the English model.

Photos courtesy of the Belize Tourism Board

Business and the Economy

The local currency is the Belize dollar which is tied to the US dollar with a fixed exchange rate of BZ $2.00 to US $1.00.

Telephone, telex, fax, internet, and e-mail communication to and from Belize are excellent, and direct telephone dialing facilities are available.

The Belize Government has promoted development by means of mixed economy in which the public sector has judiciously utilized foreign borrowing, mainly on concessional terms, for infrastructure development as well as for private sector support. Agricultural economic performance is based on sugar, citrus, and bananas. Other significant exports are garments and marine products.

The Ministry of Economic Development operates a comprehensive investment scheme which is available to Belizean and foreign investors alike. This provides for a tax holiday for up to 15 years and up to 100% exemption from trade taxes on import of capital equipment and raw materials. Under this investment scheme there are no restrictions on the repatriation of profits, dividends, fees, and capital (including capital gains) arising from foreign investments in the country provided all such investments are registered with the Central Bank.

Tourism

The Barrier Reef, the longest in the Western Hemisphere, offers a paradise for fishermen, divers, and snorkelers. Coral islands dot the 176 mile reef offering a haven for a variety of water sports. Inland Belize holds within its history a center of the Mayan culture with many archaeological sites throughout the country in various states of exploration. A major portion of the country is comprised of jungle and for the explorer, natural, untouched wilderness offers spectacular adventure. The balmy, subtropical climate with a cool Caribbean breeze invites the tourist anytime of the year to visit the coast. There are a variety of accommodations from international hotels and guesthouses to inland resorts of thatched-roof cabanas as well as restaurants providing a vast cuisine.

Photos courtesy of the Belize Tourism Board

Belize as a Trust Jurisdiction

General Aspects

Pursuant to the Belize Trust Act of 1992, trusts may be created in Belize either by oral declaration or by written instruments without any formalities or technical expressions. Unit trusts must be in writing and trusts relating to land in Belize cannot be enforced unless they are in writing. Non-charitable trusts may be created for a maximum of 120 years. Charitable trusts may be established with unlimited duration.

The trusts may state the proper law; if silent, then the law with which the trust has its closest connection at the time of creation shall be the proper law. If the proper law with which the trust has its closest connection does not provide for the type of trust created, then the law of Belize shall be the proper law.

A trust may be drawn with severability, and severable aspects of the trust may be governed by the laws of different jurisdictions. The trust may also provide that the proper law or the law governing severable aspects of the trust may be changed from one jurisdiction to another.

Importantly, where the proper law or the law governing a severable aspect of the trust is changed to the law of Belize, the law of the old jurisdiction cannot operate to make void or invalidate the trust or the functions of the trustee. The converse also holds true when the trust leaves Belize, the law does not apply to the trust so as to vitiate it nor invalidate the functions of the trustee.

Asset Protection Aspects

Use of a Belize trust allows a high level of asset protection because a Belizean court cannot vary or set aside a Belizean trust nor recognize the validity of any claim against a trust’s property based on the law of another jurisdiction, the order of a foreign court in relation to marriage or divorce, or claims by creditors in an insolvency. This provision insulates the assets of the trust notwithstanding the law relating to fraudulent transfers, the Bankruptcy Act, and the Reciprocal Enforcement of Judgments Act, which could ordinarily be used to reach such assets.

Settlors, Beneficiaries, and Purposes

Any person having capacity to own and transfer property may be a Settlor of a trust. The Settlor may also be the Trustee or Protector of the trust. The law provides for the creation of spendthrift trusts and abolishes the rule that a Settlor may not be the Beneficiary of a spendthrift trust. Both the Settlor and the Beneficiaries may give the Trustee letters of wishes in order to guide him in the exercise of his functions. The Trustee may or may not give regard to the letters, as no fiduciary duty is established merely by giving the Trustee a letter of wishes.

Charitable trusts may be created for various purposes, including the relief of poverty, the protection of the environment, the advancement of human rights, fundamental freedoms, education, and religion. A purpose may be regarded as charitable whether it is carried out in Belize or not, and regardless of whether it is beneficial to a community in Belize or elsewhere. Non-charitable purpose trusts may also be constituted under the Act. Such trusts must provide for the appointment of a Protector, in absence of which the Attorney General may appoint one.

Protectors and Trustees

Trusts may provide for a protector who may also be a Settlor, Trustee, or Beneficiary. In the exercise of his office, a Protector owes a fiduciary duty to the Beneficiaries or purposes of the trust, but he is not considered a Trustee. The minimum number of Trustees is one with a maximum of four except for charitable trusts, and a Trustee may also be a Settlor and a Beneficiary. Due diligence, observance of utmost good faith, acting to the best of one’s abilities and skills, and the standard of care of a reasonable and prudent man of business are required from all Trustees.

Simple Mechanisms for Removal and Resignation of Trustees

The Act sets out all the implied powers of Trustees. Interestingly, Trustees engaged in any profession or business are entitled to be paid their fees and charges for business and time spent in connection with the Trust. Also, corporate Trustees are entitled to remuneration agreed upon with the Settlor or Protector.

Wide powers are given to Trustees to advance funds for the maintenance and education of minors and beneficiaries generally. Trustees are similarly empowered to advance funds to Beneficiaries before their interest in the trust is vested.

Breach of Trust

Trustees are personally liable for loss, depreciation in value of trust assets, or loss of profits consequent on a breach of trust. However, in the case of a corporate Trustee the directors are not personally liable. Persons who receive property or income with knowledge of breach of trust are constituted constructive Trustees thereof. The usual powers of tracing are included and the periods of limitation and prescription are removed for actions against Trustees for fraud and recovery of property.

Variant Trusts

The Trust Act permits a non-common law Settlor to create a trust peculiar to his law, religion, or nationality. However, such an instrument must recite that it is a trust, and it must be of a type approved by the Attorney General by publication in the Gazette for it to be governed by the Act.

Registration

The registration fee is US$100.00, and if there is an amendment to the trust, that too may be registered at a cost of US$50.00. The registrar is required to issue a certificate of registration. An entry in the register of trusts is not open to inspection without the written consent of the Trustee. However, trusts need not be registered, and in the absence of registration, no public record of the Settlor, Beneficiary, Trustee, Protector, or trust activity will exist.

Exempt Trusts

To gain tax advantages, an exempt trust may be created if the following conditions exist in a particular year:

(a) neither the Settlor nor any of the Beneficiaries are residents in Belize during that year; and
(b) the trust property does not include any land located in Belize.

No income tax, succession tax, or stamp duty is payable in relation to income, death, or transactions relating to such trust. The Trustee of an exempt trust is treated as a nonresident for the purposes of Exchange Control Regulations as they affect his operations as a Trustee.

Authorized Trustee Investments

A wide variety of investment vehicles are listed in a schedule to the Act that give the Trustee clear guidance as to authorized investments. Subject to the trust, the Trustee need not restrict himself to the authorized investments, as the Act endows him with wide discretion as to investments.

Conclusion

The Trust Act of 1992 repeals the Trustee Act of 1923, thereby radically transforming trust law and certain concepts long settled in Belize. However, the new Act is schematically friendly and includes several unique features that help to establish Belize as an attractive trust jurisdiction.

Belize Court Upholds Confidentiality Laws

Belize City, Friday, January 20, 1995

In a landmark decision asserting Belize’s sovereignty as an offshore financial jurisdiction, the Supreme Court of Belize upheld the country’s confidentiality laws by revoking a previous court order set in motion by the Securities and Exchange Commission of the United States requesting that confidential documents, belonging to Swiss Trade and Commerce Trust, Ltd., be handed over to them.

In the case, Securities and Exchange Commission (SEC) vs. Swiss Trade and Commerce Trust, Ltd., Banner Fund International, Lloyd Winburn et al, Supreme Court Justice Troadio Gonzalez ruled that documents held by the Belize court belonging to Swiss Trade and sought by the SEC, be immediately returned to Swiss Trade and Commerce Trust, Ltd.

Lawyers for Swiss Trade said that what this means for Belize is that this aspect of confidentiality, which is an important feature of the offshore industry, has been upheld. “What this means is that any party who seeks to destroy the concept of confidentiality would have to contend with our system, which has demonstrated its ability to uphold the relevant laws,” Attorney Oscar Sabido said.

The decision is expected to have major international repercussions as the world financial community looks to Belize and its new offshore services industry. “It is certainly a shot in the arm of the offshore industry because of the fact that it is an industry which is just beginning,” Sabido said. A country’s ability to assert its sovereignty without the interference of outside forces is a major deciding factor in choosing a place to invest and protect personal property.

When asked for his comment related to the decision, Lloyd Winburn, Director of Swiss Trade & Commerce Trust, Ltd., in Belize, stated, “The Court’s decision confirms our reasons for establishing our company in Belize originally. The Law related to confidentiality has been tested and found to be not lacking clarity and strength. Any other ruling by the Court would have sent a signal throughout the financial world that Belize could not be trusted to protect assets, provide confidentiality of transactions or otherwise serve the needs of those who seek to do business away from their home jurisdiction.”

The decision clearly shows that the SEC stepped out of bounds in trying to obtain confidential information, the matter having been urged on both sides by learned Queen’s Council.

The case arose after the SEC appeared at Swiss Trade’s office on March 3, 1994 with the expectation that they would be able to just take the files and leave the country with them, with no regard whatever to Belizean law. The quick reaction of company employees prevented any further disregard for the law on the part of the SEC and their Belizean lawyer, Eamon Courtenay, who previously had been the lawyer for Swiss Trade.

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