Barbados, with its expansive treaty network, is no stranger to alternative planning structures. Whilst many of us in the industry are familiar with traditional structures, such as discretionary trusts with appointed beneficiaries, our expertise and skill sets also extend to non-traditional structures, including purpose and unit trusts, international and domestic companies, captive insurance companies, and private placement life insurance. However, with the Trustee (Amendment) Bill, 2012, and the Private Trust Companies Bill, 2012, both enacted in 2015, we have opened a much-awaited stream of opportunities through the Reserved Powers Trust (RPT) and the Private Trust Company (PTC).

Reserved Powers Trusts

The Trustee (Amendment) Bill, 2012, introduces into law RPTs, in which the settlor of the Trust can reserve certain powers which may give him some comfort around the management and control of the trust assets.

Key features and advantages of RPTs for the settlor include:

  • The ability to retain a level of control that allows him or her to provide direction in investment and administration decisions
  • The elimination of his or her real concerns over transferring full control to institutional trustees
  • Continued ongoing involvement, allowing him or her to provide direction in the event of a change of personal or family circumstances.

Private Trust Companies

PTCs have become very popular over the years. Key features/benefits include:

  • More easily understood - the corporate structure is much more readily understood by non-trust professionals and can be easily integrated into a family office structure;
  • Potentially lower fees – although, in practice, a professional trustee is engaged for the actual trust administration duties, the incorporation of the PTC to act as trustees tends to limit the liability of the professional trustee, which can often mean a cost saving to the family. Also, the PTC, as a company, will enjoy the full advantage of limited liability. Typically, the assets of the PTC itself are usually limited to its paid-up capital and whatever additional capital that may be employed to cover its operational expenses;
  • Diversity of the trust portfolio – the PTC, acting as trustee, usually has an intimate knowledge of the interests and goals of the family, which may include standard portfolio assets, as well as alternatives such as real estate, business, etc.  The professional trustee will be a bit reluctant to include these types of assets in the trust portfolio, as persons invested in the performance of the trust fund, whilst protected by the limited liability of a company, will be more inclined to diversify the trust assets in a non-standard way;
  • Succession planning – for large families, particularly those spanning generations, succession is a major challenge. Who takes over the family business? Who remains responsible for the many assets controlled globally? Through PTCs, younger generations can be engaged in the management with other family members, through training programmes or involvement in the decision-making process;
  • Continuity of trusteeship – having a PTC as trustee of a family trust avoids the need for future changes of trusteeship. For example, should there be a need to change service providers, rather than changing the trustee (which can include many different documents, including retirement and appointment deeds, and certain indemnities which must be agreed upon by all parties), the only documents coming into play would be the management agreement between the PTC and the licensed administrator.

Market Opportunities

Current market trends suggest that there is much opportunity for these alternatives. First, there is a clear shift in the professional trustee space, where banks and other major financial institutions are moving away from the complexity and risk associated with modern trusts. As a result, smaller, more specialised firms are filling this gap. Whilst these boutique firms can fill the gap, there is some discomfort that they do not necessarily have the same 'deep pockets' as the large financial institutions and often do not share the same global footprint. Using a PTC or RPT structure can mitigate this perceived risk for the client.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.