Setting up a Trust in Belize
Setting up a trust in Belize derives from the 1992 Belize Asset Protection Trusts Act, which is sometimes also referred to as the Belize Trust Act. This is a comprehensive and carefully-worded piece of legislation that broke new ground in asset legislation at the time. Belize has since amended this already formidable piece of legislation to give individuals who wish to establish a trust in this Caribbean country an asset protection instrument that is potent as it is comprehensive.
There are three main reasons why Belize statutes are superior to other asset protection trust jurisdictions:
- A Belizean court will not set aside the trust nor asset transfers into a trust that has been legally established in Belize. This protection is granted regardless of foreign judgments. While this is often true in other offshore trust locations as well, Belize frames this legislation in strong and unequivocal language that leaves no room for dissent or any kind of creative interpretation.
Section 7(6) of the Belize Trusts Act pointedly says the following:
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 to —
(a) the personal and proprietary consequences of marriage or the termination of marriage;
(b) succession rights (whether testate or intestate) including the fixed shares of spouses or relatives; or
(c) the claims of creditors in an insolvency.
Section 7(7) of the Belize Trusts Act further strengthens this provision:
Subsection (6) above shall have effect notwithstanding the provisions of section 149 of the Law of Property Act, section 43 of the Bankruptcy Act and the provisions of the Reciprocal Enforcement of Judgments Act.
The bottom line is that rather including a statute of limitations on fraudulent conveyance, limiting the time in which a creditor can bring a fraudulent transfer claim for assets placed into a trust, the attorneys who wrote the Belize Asset Protection Trust Act opted to eliminate the option of making fraudulent transfer claims entirely. Therefore, the assets are effectively protected once they are placed into the Belize trust.
So, instead of needing to have placed assets into the trust 2 to 6 years prior to a possible challenge, as provided in other jurisdictions, the protection in Belize is immediate.
- Typical creditor remedies such as a fraudulent conveyance charge or the issuance of a Mareva injunction are specifically addressed and subsequently rendered powerless by Belizean law. The Mareva injunction was named for a well-known 1975 case in the UK, Mareva Compania Naviera SA v International Bulkcarriers SA, 2 Lloyd’s Rep. 509 (1975).
In other jurisdictions, such as the Cook Islands, the Mareva injunction can freeze trust assets until a court decides the fate of the case before it. What this means is that the very resources needed to fight a legal battle are rendered unavailable until after the battle is over.
This is supported by case law as shown by SEC vs. Swiss Trade and Commerce Trust, Ltd., Banner Fund International, Lloyd Winburn et al. (Belize Sup. Ct. 1994). In it, Supreme Court in Belize by declaring that the asset protection trust statutes in the Belize Trusts Act override a creditor’s plea for a Mareva injunction.
In the Cook Islands, however, Bank of America v. Brian Weese et al, Case No. 03-C-01-001892 (Cir. Ct. Baltimore County) (2001) (related U.S. proceedings) allowed the bank to freeze a Cook Islands trust’s assets even before a judgment was granted. The High Court in the Cook Islands has allowed several Mareva injunctions against Cook Islands trusts. Whereas, the jurisdiction may provide for a protective bent in favor of its financial services industry, the Cook Islands is a self-governing country in free association with New Zealand. As provided, the majority of the judges are from New Zealand. So, they do not have the same compassion on the island’s trust industry as might members of the local judiciary.
Nevis has also opted to eliminate the Mareva injunction as a remedy its 2015 amendment to the Nevis International Trust Ordinance (NIETO).
23(9) – Mareva Injunctions and Anton Piller orders are not available remedies under the NIETO.
- Belize, itself, is an oil-producing stable Caribbean paradise with a robust population of 350,000 (vs. 30,000 in the Cook Islands and 11,000 in Nevis). It has a well-established central bank and its own judiciary. It has its own currency that is tied to the US dollar. It has its own financial infrastructure and provides what history has shown to be a safe and stable asset protection trust environment.
Belize Asset Protection Trust Strength
The Belize Trust Act categorically states that a trust, created under Belize laws, cannot be changed or set aside in favor of a claim against the trust assets coming from a foreign jurisdiction. The validity of the trust will be upheld against any such claims with regards to marriage or divorce, forced heirship, or creditor claims in cases of bankruptcy or insolvency. Like other offshore jurisdictions, a creditor will be required to plead his or her case in a Belizean court – a court governed by asset protection laws that are extremely debtor-friendly.
To be clear, Belize did not draft its trust laws purposely to brazenly flout the judgment of foreign courts. However, as a sovereign nation, it has the right to insist on carrying out its own laws expressly written to safeguard the trust assets that have been placed under its protection and within its jurisdiction.
Because Cook Islands has been providing asset protection services for a much longer period of time than Belize, it has one of the strongest case law histories when it comes to asset protection legislation. This means its trust laws have had to withstand an onslaught of creditor claims. Case law shows that it has successfully protected the trusts and other asset protection instruments the trust has housed (such as LLCs owned by the trusts). The trust case law history of Belize is not as extensive, which means it has faced fewer challenges from creditors. This could largely be due to the unequivocal and unyielding Belize asset protection laws currently adhered to throughout the island.
Additionally, as long as a trust is created freely (that is, the settlor is not under duress) and is not subject to errors or fraud, it is deemed effective from the date of its proper formation. The terms contained in the Trust Deed are enforceable at once and assets fall under the protection of Belize trust laws at the moment of the funding of a Belize trust. There is no vesting period; your assets are immediately protected from creditor claims.
Keep in mind, the assets need to be placed in a financial institution beyond the reach of the creditor. If the trust is in Belize and the assets of the trust are in a bank account in the U.S., for example, the judge retains jurisdiction over U.S. bank accounts whether that bank account is held in the Belize trust or not. So, the institution that houses the funds must be beyond the reach of the courts. This, by the way, does not need to be Belize. So, the bank and/or investment account housing the funds can be located in a strong, safe financial institution in Belize, Switzerland or other location that will not allow for the enforcement of foreign judgments. In addition, the funds should not be in a bank that has corresponding U.S. branches, otherwise the local judiciary will hold the local branch financially hostage until the foreign branch coughs up the funds. There are many robust and secure international banks and brokerage houses that fall into these secure categories.
Setting up a trust in Belize makes sound financial sense on many levels. The Belize Trust Act was formulated to provide trust settlors with an asset protection instrument that is extensive, potent, and virtually unassailable. No Belizean court will vary a Belize trust or set it aside to satisfy a foreign court order in relation to marriage or its dissolution, forced heirship, or bankruptcy cases.
Common legal remedies that creditors often use to gain access to trust assets, including a fraudulent transfer charge or a freeze order, are not recognized in a Belizean court. For all intents and purposes, these remediation instruments are powerless against a Belize trust that has been set up properly. In fact, as current Belize trust legislation stands, there is practically no legal recourse a creditor can take that will give him or her access to the assets of a Belize trust and use them satisfy a debt, notwithstanding a foreign judgment in his or her favor.
In addition to all this, Belize has long enjoyed a relatively stable political and economic environment as well as a healthy banking industry. Taken together, these factors make Belize an ideal juridical location for an asset protection trust. Its long coastline, caressed by the warm waters of the Caribbean, makes it an ideal physical location as well. To have and enjoy the best life has to offer – isn’t this what asset protection is about? And thanks to this small but fiercely independent Caribbean nation, you can have just that.