Reserved powers trusts in the British Virgin Islands

09 November 2020

Avoiding settlor control undermining the trust

On the one hand, a trust is often a useful arrangement for a settlor to divest ownership and control of assets to a trustee for legitimate succession planning or similar reasons. On the other, understandably, a settlor may have concerns around entirely losing control.

A related challenge has been the risk that the settlor retaining too much control could result in the trust being declared to be, for instance, invalid or illusionary. In 1993 the BVI enacted an amendment to the Trustee Act 1961 aimed at resolving this conundrum, as now contained in s86 of the Trustee Act (as amended).

Requiring consent or conferring control

Under s86:

  • A trust instrument may contain provisions by which the exercise by the trustees of any of their powers and discretions shall be subject to the previous consent of the settlor or some other person, whether named as protector, nominator, committee or any other name.
  • Further, there may be so conferred on the settlor or any such person any powers which might otherwise be vested in the trustee including, without limiting the foregoing, to do any one or more of the following:
    (a) determine the law of which jurisdiction shall be the proper law of the trust;
    (b) change the forum of administration of the trust;
    (c) remove trustees;
    (d) appoint new or additional trustees;
    (e) exclude any beneficiary as a beneficiary of the trust;
    (f) include any person as a beneficiary of the trust in substitution for or in addition to any existing beneficiary of the trust; and
    (g) withhold consent from specified actions of the trustees either conditionally or unconditionally.


S86 also provides statutory exculpations such that:

  • If so provided in the trust instrument, the trustees shall not be liable for any loss caused by their actions if a required previous consent was given.
  • A person exercising any of the powers in (a) to (d) and (g) above, unless otherwise provided in the trust instrument, is not liable to the beneficiaries for the bona fide exercise of the power.

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