The Trustee Act

The Trustee (Amendment) Act 2011 has strengthened the law relating to trusts and their administration by amendments which clarify and expand sections of the principal act and by making substantive amendments which have introduced new provisions:

Directed Trusts

Section 81A, provides that where a trust instrument contains a provision that an investment power is to be exercised by a trustee on the directions of another person (referred to in the section as the "power holder"), the trustee will not be liable for any loss arising from acting in accordance with those directions.

This section gives the settlor the ability to have more control over the trust's investment strategy e.g. allowing him or his appointed investment adviser to give instructions to a trustee and it also relieves the trustee of the duties of monitoring and being responsible for investments in which they may not have expertise.

Termination of interest of beneficiary upon trust being challenged

Section 87A, confirms the validity of "no contest" clauses. If the trust instrument so provides, the interest of a beneficiary will terminate upon the validity of a trust (including the validity of any disposition of trust property) being challenged "in whole or in part, in any court within or outside The Bahamas" whether the challenge is brought in good faith or with reasonable cause.

Settlors now have certainty that such clauses will have the desired effect.


Section 91A, provides for a trust instrument to allow for any dispute or administration question to be determined by arbitration and that the Arbitration Act shall apply to trust arbitrations in accordance with the provisions of a new Schedule to the principal act.

Section 91B, sets out the powers of the arbitration tribunal and the section applies except to the extent otherwise provided in the trust instrument.

The benefits of an arbitration procedure are clear and give the settlor the option of avoiding lengthy and costly litigation.

Rule Against Perpetuities Abolished

The Rule Against Perpetuities (Abolition) Act, 2011 has abolished the rule against perpetuities in relation to wills and trusts.

As a result, there is no longer a prohibition on trusts of "excessive duration" and trusts created on or after December 30 2011 do not require a perpetuity period to be incorporated into the trust instrument.

Although the rule is not abolished retrospectively, Section 4 (1) of the Act provides that in relation to any disposition of an interest in property made before the commencement of the Act, a trustee may apply to the Court for an Order declaring that the Act shall apply to the disposition.

In addition, as a result of amendments to the Trustee Act, Section 71 ("Power of Court to authorize dealings with trust property") of that Act now provides that application can be made to the Court by the trustees or by any person beneficially interested in relation to trusts created prior to 30th December, 2011 to extend the perpetuity period described in the trust instrument for any period not exceeding 150 years.

Therefore, the aforementioned parties who do not wish to approach the Court to apply the Act to pre-Act trusts are given an opportunity to extend the perpetuity period stated therein.

The rule against perpetuities having been abolished, settlors and testators now have greater flexibility in relation to estate planning and furthermore, trustees will be in a position to accumulate trust income for such period as they think appropriate given the particular needs of a trust.


These innovative provisions show a continued commitment on the part of The Bahamas to provide for clients and reinforce the position of The Bahamas as a leader in the area of private wealth management.