Belize Trusts & Partnerships

Incorporation procedure, uses of trusts and legislation.

The Belize Asset Protection Trust: Legislative background

The Belize Trust Act was enacted in 1992. It expressly excludes trusts created in Belize from the operations of this Section. Subsections (6) and (7) of Section 7 the Trust Act provide as follows.

7 (6) where a trust is created under the law of Belize, the court shall not vary it or set it aside or recognize the validity of any claim against the trust property pursuant to the law of another jurisdiction or the order of a court of another jurisdiction in respect of:

  • the personal and proprietary consequences of marriage or the termination of marriage.
  • succession right (whether testate or in-testate) including the fixed shares of spouses or relative; or
  • the claims of creditors in an insolvency.

Subsection (6) above shall have effect notwithstanding the provisions of section l49 of the Law of Property Act, section 42 of the Bankruptcy Act and the provisions of the Reciprocal Enforcement for Judgments Act.

As noted earlier; section 149 of the Belize Law of Property Act (which is excluded by section 7(7) of the Trust Act) re-enacts the provisions of the Statute of Elizabeth. To a reader familiar with the statutory and common law background against which the Belize Trust Act was enacted it is immediately obvious, therefore, that a trust created under the law of Belize is excluded from the provisions of the law of fraudulent conveyance (as regards claims arising under any foreign law).

Subsection (2) of Section 7 of the Trust Act is a further source of misconception amongst practitioners. This section provides that a trust shall be invalid and unenforceable to the extent that the court declares that the trust was established by duress, fraud, mistake, undue influence or misrepresentation. Here to, a reader familiar with the law of Belize will recognize that "fraud" in this context means "an action of deceit at common law". It is distinct from the statutory provisions originally enacted in the Statute of Elizabeth and now contained in the Belize Law of Property Act, which render void-able voluntary conveyance made with intent to defeat creditors.

The other circumstances that has resulted in misconceptions regarding the Belize Trust Act is, as noted, the radical and innovative approach of the drafters of the Act. Practitioners who are familiar with having particular issues addressed in a particular way in the trust legislation of other jurisdictions are disoriented by Belizes departure from traditional solutions.

Thus, for example, most of the asset protection trust jurisdictions attempt to deal with fraudulent conveyance claims by mandating a statutory limitation period and imposition of other procedural requirements for the prosecution of such claims. The period may vary from six years (the standard limitation period for most actions) to two years in the case of more aggressive asset protection jurisdictions such as Nevis, the Turks & Caicos and the Cook Islands. In effect, in these jurisdictions the law of fraudulent conveyances continues to apply to trusts created in the jurisdiction, subject however to time constraints in effect a half-way house approach.

Belize, on the other hand, adopts an entirely different approach. Rather than applying a statutory limitation period to the Statute of Elizabeth provisions, it excludes these provisions altogether. In this context the question of whether the Settlor intended to defeat the claims of the creditor is irrelevant. In the absence of actual fraud, in the establishment of the trust, the assets of a Belize trust cannot be attached to satisfy the judgment of a foreign court based on any foreign law. This is so even if the transfer is done with the specific intention of defeating the claims of creditors, and whether the claim and/or the judgment arose before or after the trust was created.

This unequivocal position of the Belize legislation is of great assistance to judges who have to consider specific applications of the Belize Trust Act.

Understanding the operations of the Belize Trust Act (and particularly its asset protection features) requires both detailed knowledge of the legal background against which the legislation was enacted, and the careful study of those features of the Act that depart from traditional solutions. As recent judicial decisions have demonstrated, however, the advantages conferred by the Belize Trust Act may well be worth a detailed study of its innovations.

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