On May 27, 2015, the Nevis Island Assembly enacted the Nevis International Exempt Trust (Amendments) Ordinance, 2015 (the “Trust Amendments”), effective July 1, 2015. The Trust Amendments modernize the Nevis International Exempt Trust Ordinance, 1994 (the “Ordinance”). Amendments include additions and revisions of various definitions, provisions that increase the asset protection aspects of a trust and ensure that trust administration will not be interrupted by an injunction or litigation, clarification of the application of the fraudulent transfer rule, provisions that facilitate the administration of a trust, provisions permitting a settlor to establish a directed trust, provisions restricting the rights of beneficiaries to trust information, the elimination of the Rule Against Perpetuities and the Rule Against Accumulations, a provision permitting a statutory tenancy by the entireties trust (“STET”) and an increased bond requirement for creditors who challenge an international trust.
Discretionary Trusts
Section 8A was added to better define the rights of a creditor of a beneficiary (including the settlor) of a discretionary trust. It greatly limits the rights of a creditor to reach a beneficiary’s interest in such a trust. This section also specifically permits a trustee to make payments on behalf of the beneficiary without incurring any liability to a creditor and prevents even the remote possibility of any such attachment, garnishment or interference.
Creditors’ Rights
Section 9A was added to clarify that creditors will only have a right to a beneficiary’s interest in a trust if that beneficiary has either a lifetime or testamentary general power of appointment, that is, a power to appoint the trust property to the beneficiary, the beneficiary’s estate, the beneficiary’s creditors, or the creditors of the beneficiary’s estate, however, and most importantly, only to the extent that the beneficiary exercises such power.
Additionally, Section 9B was added to clarify that creditors only have a right to a settlor’s interest in a trust if the settlor retains a power to revoke the trust and to appoint the trust property to the settlor, the settlor’s estate, the settlor’s creditors, or the creditors of the settlor’s estate, however, only to the extent the settlor exercises such power.
Section 13 was amended to provide a statutory duress provision applicable to all international trusts whereby any person granted the power under the terms of a trust to demand or request any act on the part of a settlor, beneficiary, trustee, protector, or other person, or who has the authority to approve, veto or compel any action or exercise any power that could affect an international trust, may ignore demands or requests given by or the result of persons acting under duress, including pursuant to any legal process, court, administrative body, etc.
Section 22 was amended to clarify that the Court may not issue a Mareva injunction, Anton Piller order, or any similar remedy.
Section 35A automatically removes a trustee or protector of an international trust that is subject to any other court’s jurisdiction, outside the High Court of St. Christopher and Nevis.
Fraudulent Transfers
Subsections (3) and (4) of Section 24 were amended to clarify the application of the fraudulent transfer rule. The revision to subsection (3) of Section 24 implements a fixed one year window beginning with the date the creditor’s cause of action accrues. Subsection (5)(b) of Section 24 was revised to expand the list of powers that a settlor can retain without having an intent to defraud a creditor imputed to the settlor.
Facilitating Administration
Section 35B allows the trustee of an international trust to combine two or more separate trusts into a single trust or divide a single trust into two or more separate trusts provided that such action does not impair the rights of any beneficiary or adversely affect the purpose of the trust or trusts. Section 36 was amended to allow a trustee to act pursuant to a resolution and to appoint an agent to act on its behalf. Section 42(1) was amended to add limited liability companies and multiform foundations to a list of entities that may act as a trustee of an international trust.
Directed Trusts
Trust Protectors were given expanded powers, including the authority to consent to a trustee’s request for a court to vary the purpose or terms of a charitable trust (Section 11 (2) and (3)), direct a trustee to make distributions, approve distributions made by a trustee, and/or direct the trustee to make particular investments (Section 9 (3)).
Waiver of Notice/Accountings
Section 35C(1) provides that the terms of a trust deed may expand, restrict, eliminate, or otherwise vary the rights and interests of beneficiaries, including the right of beneficiaries to be informed of their interests in the trust for any period, the grounds for removal of a trustee, the circumstances, if any, in which the trustee must diversify investments, and a trustee’s powers, duties, standard of care, rights of indemnification and liability to persons whose interests arise from that instrument.
Elimination of Rule Against Perpetuities
Section 5(1) eliminates the Rule Against Perpetuities and permits a trust to continue forever if the terms of the trust provide that the trustee has the unlimited power to sell all trust assets or if one or more persons, one of whom may be the trustee has the unlimited power to terminate the trust. Sections 5(3) and (4) eliminates the Rule Against Accumulations.
Statutory Tenancy by the Entireties Trust
Section 56(2) permits the settlors of an international trust to fund it with tenancy by the entireties property. Following funding, the underlying property held in such trust will remain tenancy by the entireties property. Tenancy by the entireties is a form of ownership between married individuals still permitted in many jurisdictions in the United States. In some of those jurisdictions personal property can be owned in tenancy by the entireties. Still, in most of these jurisdictions a judgment creditor of only one spouse cannot satisfy its judgment against a debtor-spouse’s interest in property held in tenancy by the entireties. Permitting such property to retain its characteristic as tenancy by the entireties property adds significant asset protection for a settlor.
Bond
Section 55 was amended by increasing the amount of the bond required by a creditor before bringing an action governed by the Ordinance to Two Hundred Seventy Thousand Eastern Caribbean Dollars. This increase was made to help eliminate frivolous claims against the trustees of international trusts.
By Jonathan E. Gopman, Esq., Jan Dash, Esq. and Michael Sneeringer, Esq.
