BVI Anti-Forced Heirship Rules

The new section 83A of the Trustee Act

The Trustee (Amendment) Act, 2003, which came into effect on 1 March 2004, repealed section 83 of the Trustee Act in relation to trusts established after that date and replaced that section by a new set of conflict of laws rules which are now contained in section 83A of the Trustee Act.  

The provisions of the new section 83A may be summarised as follows:

• The formal and essential validity of a disposition of immovable property, or tangible movable property, is determined in accordance with the law of the State in which the property is situated at the time of the disposition; capacity to make such a disposition is similarly determined.
  
  
• The formal and essential validity of a disposition of intangible movable property is determined in accordance with choice of law rules which are specified in a new Schedule to the Act (and in section 83A (8)).
  
  
• 
  Capacity to subject property to a trust (as distinct from capacity to dispose of the property) is determined in accordance with the law governing the essential validity of the trust.
  
  
• Where a person declares a trust of his own property, there is no requirement for compliance with the rules on formal or essential validity applicable to a disposition of property.
  
  
• Where, pursuant to the above rules, an issue falls to be determined by BVI law, the doctrine of “renvoi” is in applicable.
  
  
• Subject to the above rules, all questions arising with regard to the validity, construction, effect or administration of a trust, including powers, obligations, duties, liabilities and rights of trustees, and the existence and extent of powers, is determined by the proper law of the trust.
  
  
• The above rules for determining the “preliminary” issues which are excluded from the Hague Trusts Convention apply to trusts generally (other than testamentary trusts) and are not confined in their operation to trusts governed by BVI law.
  
  
• The new section contains robust, comprehensive and carefully crafted provisions protecting BVI trusts (and dispositions to their trustees) against “forced heirship” claims.  These provisions, which have been modelled largely on the equivalent laws of the Cayman
  
  
• Islands, the Isle of Man and The Bahamas (but subject to a number of refinements and modifications to reflect the Territory’s other laws), also prevent foreign judgments based on such forced heirship claims from being recognised or enforced in the Territory.  The Act provides that these new rules apply notwithstanding those of the other provisions of section 83A which are summarised above.
  
  
• Subject to one minor exception, section 83A only applies to trusts which have been created on or after 1 March 2004, with the result that section 83 of the Trustee Act continues to apply to
  
  
• trusts created before that date.  (The exception relates to trusts created before 1 March 2004, but the proper law of which is changed to that of the Territory after that date.)
  
  
• The above rules apply solely to trusts.

In relation to trusts, it is now believed that the Territory not only has in force an anti-forced heirship regime which is as robust as that of any other offshore trust jurisdiction, but probably also has some of the most refined and comprehensive conflict of laws rules in the world.

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