A Q&A guide to private client law in Bermuda.
The Q&A gives a high level overview of tax; tax residence; inheritance tax; buying property; wills and estate management; succession regimes; intestacy; trusts; co-ownership; familial relationships; minority and capacity, and proposals for reform.
To compare answers across multiple jurisdictions, visit the Private client Country Q&A tool.
The Q&A is part of the PLC multi-jurisdictional guide to private client law. For a full list of jurisdictional Q&As visit www.practicallaw.com/privateclient-mjg.
The official financial year runs from 1 April to 31 March.
There are no relevant tax payment dates or deadlines as Bermuda does not have any taxes on:
Profits.
Income.
Dividends.
Withholding.
Capital transfers.
Capital gains.
An exempted company, permit company, exempted partnership or exempted unit trust scheme (an exempted undertaking) can apply to the Minister of Finance for a guarantee that, if such taxes were introduced, they would not apply to that exempted undertaking. Currently, this assurance is granted up until 31 March 2035, on payment of a fee.
There are no strict tests for domicile or residence in Bermuda.
See above, Domicile.
Entitlement to citizenship is determined by the Bermuda Immigration and Protection Act 1956, as amended.
Bermuda does not have any exit taxes.
Bermuda does not have any tax rules affecting temporary residents.
There are no taxes on capital gains or capital transfers.
There are no taxes on income and no withholding tax.
There is no tax on inheritance in Bermuda. However, stamp duty is levied on the deceased's estate at the rates set out in the Stamp Duties Act 1976 (see Question 8).
Lifetime gifts of certain Bermuda assets, for example, homes and shares in private Bermuda companies, are subject to stamp duty regardless of the nationality of the person making the gift. In certain circumstances, if gifts are made outside Bermuda and are not intended to be enforced in Bermuda, then stamp duty may not be charged on the transfer. Gifts of Bermuda property between spouses are dutiable (that is, subject to taxation), except where such gifts are made on death.
The following are subject to stamp duty at ad valorem (that is, related to the value of the asset) rates (Head 17, Schedule to the Stamp Duties Act) (for rates, see Question 8):
Gifts of immovable Bermuda dollar denominated assets (as defined in the Stamp Duties Act 1976).
Shares in local Bermuda companies which are not listed on the Bermuda Stock Exchange.
The stamp duty rates on death (see Question 7) are as follows (Head 2, Schedule to the Stamp Duties Act):
First BM$100,000: nil rate (the Bermudian dollar is pegged against the US dollar at a 1:1 rate).
Next BM$100,000: 5%.
Next BM$800,000: 10%.
Next BM$1million: 15%.
Further amounts: 20%.
Stamp duty on lifetime transfers of Bermuda dollar assets, other than cash, is calculated on the market value of the property as follows (Head 17, Schedule to the Stamp Duties Act 1976):
First BM$100,000: 2%.
Next BM$400,000: 3%.
Next BM$500,000: 4%.
Next BM$500,000: 6%.
Over BM$1,500,000: 7%.
Stamp duty concerning lifetime transfers of non-Bermuda dollar assets is set at 1% of the value of the asset, up to a defined maximum.
The first BM$100,000 of the value of a deceased's estate is nil.
There is no stamp duty on death on:
Non-Bermuda dollar assets.
Bequests to spouses.
Bequests to charities registered under the Charities Act 1978 or other bodies whose purposes are charitable, in the opinion of the Minister of Finance.
The value of any Bermuda residential property which has been designated as the deceased's primary family homestead under the Stamp Duties Amendment Act 2005.
An individual can make lifetime gifts to reduce stamp duty either by transferring to another individual or to a trust. Lifetime gifts are subject to lower rates of stamp duty, up to a maximum of 7%. The transfer can either be of an absolute or joint interest, or the individual can retain a life interest in the asset transferred. This is to retain some control and enjoyment of the asset while still limiting the impact on his estate on death. A debt can also be secured on an estate asset to reduce the stamp duty payable.
Stamp duty is payable on death on Bermuda dollar assets and on certain gifts, regardless of the status, nationality or domicile of the person (see Questions 7 and 8).
There is stamp duty on settlements or transfers to Bermuda trusts during an individual's lifetime.
The rate of stamp duty payable on the settlement of Bermuda property to a Bermuda trust is BM$250 plus the following (Head 40, Schedule to the Stamp Duties Act 1976):
First BM$50,000: nil rate.
Next BM$150,000: 5%.
Next BM$800,000: 10%.
Further amounts: 15%.
A non-Bermudian must obtain a licence to own Bermuda real estate (Bermuda Immigration and Protection Act 1956). A non-Bermudian must therefore obtain a licence to hold real estate in Bermuda before he can:
Purchase Bermuda real estate.
Inherit Bermuda real estate left to him by will or on intestacy.
There are also different fees depending on whether the real estate being purchased is a house or condominium. Currently, the licence fee for a house is 25% of the purchase price and 18% of the purchase price for a condominium. However, there is a standard licence fee for properties transferred by way of gift or inheritance.
Stamp duty is chargeable on the purchase and conveyance of Bermuda real estate at the following rates:
First BM$100,000: 2%.
Next BM$400,000: 3%.
Next BM$500,000: 4%.
Next BM$500,000: 6%.
Over BM$1,500,000: 7%.
There are no wealth taxes in Bermuda.
Land tax is payable each year and is assessed according to the annual rental value of the Bermuda property. A flat rate of 4.4% of the annual rental value applies to non-residential properties.
Certain properties in Bermuda can be purchased by non-Bermudians, provided they are over a particular annual rental value. A particular tax advantage that is commonly used is for an individual to purchase the Bermuda property through a trust. However, a licence to purchase and own the property is still required for a non-Bermudian (see Question 11), whether the property is to be purchased directly or through a trust.
Bermudians are not taxed in Bermuda on their non-Bermuda worldwide assets. Such assets (if any) will be subject to the taxes of the jurisdiction in which the real estate or other asset is located.
The US-Bermuda Tax Convention 1986 covers:
Relief from excise taxes of certain insurance enterprises in the US.
Deductibility of certain convention expenses for those from the US.
Mutual assistance in tax matters.
Under the convention, insurance profits are not taxable in the other country unless the profits of the enterprise are attributable to a permanent establishment in the other country. Bermuda is still a foreign sales corporation (FSC) designated territory for US tax purposes. An FSC is a company, incorporated outside the US and given special treatment under US tax regulations to promote the export of US manufactures.
The mutual assistance involves two areas:
Assistance in the prevention of tax fraud and the evasion of taxes by US taxpayers.
Developing appropriate conditions, methods and techniques for providing assistance.
The US and Bermuda governments have also entered a competent authority agreement dealing with the actual mechanics of requests for information (however this agreement is not a public document).
The US-Bermuda Tax Convention contains a special exception to the exchange of information rules. The exception applies to information protected by banker/customer confidentiality laws (in civil matters) and attorney/client privilege (in civil and criminal matters). The request for information must relate to tax fraud or evasion of taxes. The US in making a request for information must show that the request is relevant to the tax liability of a US taxpayer.
Bermuda also has an Agreement on Exchange of Information on Tax Matters with the US.
Bermuda has entered into three double tax agreements (DTAs) (with Bahrain, Qatar and the US). To date, the Bermuda Government has negotiated 35 Tax Information Exchange Agreements (TIEAs) with various jurisdictions including (but not limited to):
Australia.
Brazil.
Canada.
France.
Germany.
India.
Italy.
Japan.
Mexico.
China.
South Africa.
UK.
USA.
It is not essential for an owner of assets in Bermuda to make a will during his lifetime. However, it is advisable for a number of reasons including that:
Effective estate planning can result in the estate either avoiding the payment of stamp duty or having stamp duty significantly reduced.
Making a will avoids any confusion as to who should receive assets from the deceased's estate. If there is no will, the Succession Act 1974 sets out how the deceased's assets are to be distributed (see Question 28).
A testator can choose the law which will generally govern his will. In the absence of a declaration of governing law, movable property passes under the laws of the deceased's domicile. However, the laws of Bermuda apply to the devolution of immovable property (such as Bermuda real estate).
The formalities for making a will are that the testator must both:
Have the requisite mental capacity to make a will.
Be aged 18 years or older or married under that age.
Bermuda follows the common law when defining capacity. The testator must both:
Appreciate the nature of his act and the extent of his property.
Be able to identify the persons he should consider when disposing of his property.
All other wills or other testamentary dispositions must be in writing and signed by the testator in the presence of two independent witnesses, who must:
Be 18 years or older.
Be competent.
Sign the will in the presence of the testator (but not necessarily in the presence of another witness).
An executor can act as a witness without affecting the validity of the will. However, if the witness or the witness's spouse is also a beneficiary under the will, the gift to the witness or their spouse is void, but the balance of the will remains valid.
Holograph wills are valid if written entirely in the handwriting of the testator and signed by the testator at the end of the document.
There are no formalities for drafting a will that disposes of the personal estate (as opposed to real estate) of a member of the armed forces while in actual naval, military or airforce service, or a mariner or seaman at sea by a privileged will.
Any beneficiary interested in any part of an estate is entitled to renounce, disclaim, assign or transfer the whole or any part of such interest. If an interest is renounced or disclaimed, the interest passes as if the person renouncing or disclaiming it had died before the testator.
A will must be treated as properly executed in Bermuda if it has been executed in accordance with the laws of the jurisdiction where either (Wills Act 1988):
It was executed.
At the time of its execution or of the testator's death, the testator was either:
domiciled or had his habitual residence;
a national of that jurisdiction.
Wills must be treated as properly executed in the following circumstances:
If it is executed on board a vessel or aircraft and it conforms to the laws of the territory of registration or close connection of the vessel or aircraft.
To the extent that the will disposes of immovable property, if its execution complies with the laws where the property is situated.
So far as a will exercises a power of appointment, if the execution of the will conforms to the law governing the essential validity of the power of appointment.
The interpretation of a will must not be altered due to any change in the testator's domicile after the execution of the will.
Foreign grants can be resealed in Bermuda if they originate from:
The UK.
Any British possession, colony or dependency.
A Commonwealth member nation.
Any US state (including the District of Columbia).
On resealing, the foreign grant has the same force and effect in Bermuda as if it had been made by the Supreme Court.
A foreign grant from any other country is not recognised and enforced and an application for a grant of probate or letters of administration must be made to a Bermuda court. This application may need to be accompanied by an affidavit concerning the foreign law.
A non-Bermudian must obtain a licence to inherit Bermuda real estate left to him by will or on intestacy (see Question 11). The application for such a licence should be made as soon as possible to the Minister responsible for immigration.
The estate representatives are responsible for administering the estate. Probate is granted to executors appointed under the will by the Registrar of the Supreme Court. It signifies formal authority for them to deal with and administer the property of the deceased. Probate can be obtained under the Non-Contentious Probate Rules 1974 or, if the application is contentious, under the Rules of the Supreme Court.
If there are no named executors willing to administer the estate, section 18 of the Non-Contentious Probate Rules list those persons (in order of priority) entitled to apply for a grant of letters of administration with the will annexed.
However, in the case where an individual dies wholly intestate, the persons entitled to apply for a grant of letters of administration is in accordance with section 20 of the Non-Contentious Probate Rules.
The property of the deceased vests automatically in his estate representatives (after the grant has been obtained, in the case of letters of administration). They are under a statutory obligation to administer the estate in accordance with the deceased's will, or if there is no will, the intestacy rules.
Establishing title and gathering in assets (including any particular considerations for non-resident executors)?
Paying taxes?
Distributing?
The Non-Contentious Probate Rules sets out what must be submitted to the court, to obtain a grant.
A grant may not be required where no Bermuda dollar assets are involved. However, an application for a grant can be made where the deceased was either domiciled or ordinarily resident in Bermuda.
Stamp duty in Bermuda is payable on the net value of all of the deceased's Bermuda dollar assets (other than exempted assets) including (section 47, Stamp Duties Act 1976):
Real and personal property situated in Bermuda.
Vessels and aircrafts registered in Bermuda.
Most Bermuda denominated cash or investments and shares of a local company.
The estate is liable for the stamp duty, unless there is evidence of a contrary intention stated in the will. Stamp duty is normally payable within three months of the date of the grant of representation unless an extension of time to pay is granted by the Registrar of the Supreme Court.
The estate representatives are not obliged to distribute the estate until six months after the grant of representation or one year after the deceased's death, whichever is the later.
This generally depends on the jurisdiction in question.
The deceased's heirs can challenge the manner of administration of an estate. The court can also set aside and vary any will which does not make proper provision for dependants, which include all of the following:
A spouse.
A former spouse.
Children.
Grandchildren.
If the beneficiary is a charity, the Attorney General can bring proceedings on the charity's behalf.
There are no fixed or statutory rights of inheritance under Bermuda law. Therefore there is no forced heirship regime.
There is no forced heirship regime (see Question 24). A person is generally free to dispose of their assets as they wish by writing a will. However, they should have regard to any possible claims that could be made under the Succession Act.
Not applicable.
Not applicable.
See Question 15.
There are no decided cases in Bermuda as to the application of the doctrine of renvoi concerning the succession to immovable property. It is likely that the Bermuda court would find the English authorities persuasive in their application of total renvoi to questions of succession to foreign immovable property. If the application of total renvoi was impractical, it is thought that the court would apply the domestic law of the situs of the immovable property (the situs of property is where the property is treated as being located for legal purposes).
The Succession Act determines the order of succession to real and personal property on intestacy or partial intestacy. The legislation only deals with property which is capable of being left by will and property over which the deceased could exercise a general power of appointment. It does not apply to property which is transferred automatically by operation of law or contract (for example life insurance proceeds or jointly held property).
The right to benefit from intestacy depends on the relationship with the deceased. Generally, an estate is shared by relatives in the highest category to the exclusion of relatives in a lower category.
The intestate's spouse has a preferred claim over all other categories of beneficiaries, being absolutely entitled to the personal chattels, but may have to share the residuary estate with the deceased's issue, parents, siblings of the whole blood and the children of such siblings.
An order can be made on intestacy as well as where there is a will for financial provision from a deceased's estate for the benefit of certain persons. These persons include (section 14, Succession Act):
A spouse or former spouse (who has not yet remarried).
A child of the deceased.
A grandchild who was maintained by the deceased immediately before his death.
Generally, an application must be brought within six months of the date of issue of the grant of representation to the deceased's estate. However, an application can be made to the Supreme Court to extend this period.
Trusts are recognised in Bermuda. The general principles of trust law are derived from English common law and equity and therefore have historically evolved from English trust law. These principles are supported by local legislation which is also mostly drawn from English statute.
The Trustee Act 1975 (as amended) and the Trusts (Special Provisions) Act 1989 (as amended) are the principal statutes governing trusts in Bermuda.
Trusts created under Bermuda law can be used for typical private client purposes, including:
Tax minimisation.
Estate planning.
Succession planning.
Asset protection.
Charitable giving.
Bermuda trusts are also commonly used in commercial transactions, including:
Employee benefit/pension/share option schemes.
Unit trusts.
Insurance trusts.
Trusts in asset finance structures.
Voting trust agreements.
Purpose trusts to ring-fence liabilities or assets.
To hold intellectual property.
The full range of trusts can be established in Bermuda including discretionary trusts, fixed interest trusts and charitable or non-charitable purpose trusts.
Bermuda does not impose income, capital gains or capital transfer, inheritance, or any other tax on Bermuda trusts.
Stamp duty is levied on certain trust documents containing Bermuda property under the Stamp Duties Act 1976 (as amended). Specific exemptions exist for exempt companies, local trustees, and transactions that do not involve Bermuda property. There is a nominal amount of stamp duty payable on certain trust documents where the trust fund holds non-Bermuda property.
The residence status of a trust is generally established by its governing law.
Under Bermuda law, the trust's governing law can be expressly stated to be that of Bermuda (section 5, Trusts (Special Provisions) Act 1989). Where this is stated, the Bermuda courts have jurisdiction in relation to the trust, irrespective of whether the trust has any significant connection to Bermuda. Therefore, it is not necessary for the trust to have a trustee resident in Bermuda, for it to hold Bermuda situs assets (see Question 27) or for the settlor to have any connection with Bermuda.
If the governing law is not provided for by the trust deed, the trust is governed by the law with which it is most closely connected. In ascertaining this, the following factors are taken into account (section 6, Trusts (Special Provisions) Act 1989):
The place of residence or business of the trustee.
The situs of the trust property.
The place of administration of the trust.
The objects of the trust and the places where they are to be fulfilled.
The Supreme Court has jurisdiction over a trust in any of the following circumstances, where:
The trustee is resident in Bermuda.
The trust property is situated in Bermuda.
The administration of the trust is carried on in Bermuda.
The court thinks it appropriate.
Bermuda recognises trusts which are governed by the laws of another jurisdiction and which are created for the benefit of foreign persons.
There are no tax consequences under Bermuda law of a trustee relocating to or from Bermuda (although there may be non-Bermuda tax considerations for the trustee).
Where a Bermuda trustee retires in favour of a foreign trustee, nominal stamp duty may apply to supplemental trust documents and conveyances of non-Bermuda property.
Does the law provide specifically for the creation of non-charitable purpose trusts?
Does the law restrict the perpetuity period within which gifts in trusts must vest, or the period during which income may be accumulated?
Can the trust document restrict the beneficiaries' rights to information about the trust?
Bermuda was at the forefront of the development of the purpose trust. The purpose trust was first introduced in Bermuda by the Trusts (Special Provisions) Act 1989 (and later refined in 1998) which allows for a non-charitable purpose trust to be created, provided that the purpose or purposes of the trust are:
Sufficiently certain to allow the trust to be carried out.
Lawful.
Not contrary to public policy.
Bermuda has abolished the rules against perpetuities and accumulations, for trusts formed after 1 August 2009, other than to the extent that such trusts own Bermuda land (Perpetuities and Accumulations Act 2009). This will improve the use of Bermuda trusts for commercial transactions and dynastic trust structures.
The rule against perpetuities and accumulations continues to apply to trusts formed before 1 August 2009, although it is possible to apply to the Bermuda Court to attempt to extend the trust period of any such trust.
Beneficiaries have a right to hold a trustee to account for the management of the trust. It is difficult to restrict beneficiaries' rights to information through express provision in the trust deed, as a beneficiary has a right to seek disclosure of trust information. If refused by the trustee, the beneficiary can apply to court. The court has discretion as to whether to allow disclosure.
The right to seek disclosure of trust information is part of the court's inherent jurisdiction to supervise the trust. Disclosure will be ordered where, on balance and taking into account all competing interests, it is appropriate to do so. A beneficiary does not have a proprietary right to disclosure of trust documents (Schmidt v Rosewood Trust Limited [2003] 2 AC 709). The question of disclosure of trust information is always a matter of the court's discretion, and the issue of confidentiality can be overridden in appropriate cases (Breakspear v Ackland [2008] EWHC 220 (Ch)).
A trust validly created under the laws of Bermuda can only be set aside in accordance with the laws of Bermuda, irrespective of the laws or judgments of other jurisdictions, including those related to heirship rights and personal relationships (section 11, Trusts (Special Provisions) Act 1989).
Where a trust is validly created under Bermuda law, the court will not recognise an order of a foreign court made in relation to divorce proceedings which seeks to interfere with the Bermuda trust. The validity and integrity of the trust would be upheld.
Bermuda has aimed to maintain a reasonable balance between the interests of a well-intentioned settlor and of the settlor's legitimate creditors (including existing and future creditors), by adopting the concept of the eligible creditor.
An eligible creditor has a period of six years to initiate proceedings, to unwind a trust. Proof is required, on a balance of probabilities, that when an individual transferred assets to the trust, the dominant purpose of the transfer was to put those assets beyond the reach of creditors. If the creditor was not, at the time of the transfer, a person to whom the transferor owed an obligation, the court must be satisfied that the creditor was reasonably foreseeable by the transferor as a person to whom he may owe an obligation in future.
A creditor is an eligible creditor if he is a person to whom:
On or within two years after the date of the transfer of the assets to the trust, the transferor owed an obligation which remains unsatisfied on the date of the proceedings.
On the date of transfer, the transferor owed a contingent liability, and the contingency has since occurred, with the liability remaining unsatisfied.
The transferor owed an obligation due to a claim he made against the transferor, and the cause of action giving rise to the claim occurred prior to, or within two years of, the transfer.
Generally, property in Bermuda can be held as tenants in common or joint tenants. On death, stamp duty is payable on an affidavit of value filed to obtain a grant of representation (see Question 7). If assets are held as joint tenants, ownership automatically passes to the surviving joint tenant on death. Unless there are other assets held in the deceased's sole name which may require a grant of representation, an affidavit of value is not required and stamp duty can be avoided.
The Succession Act does not recognise the rights of a common law or same-sex spouse. Further, it does not distinguish between spouses who live together as husband and wife and those who do not.
See Question 37.
Married?
Divorced?
Adopted?
Legitimate?
Civil partnership?
There is no main definition of marriage or divorce in Bermuda as there are various pieces of legislation that relate to these terms, for example, the:
Marriage Act 1944.
Matrimonial Causes Act 1974.
Adoption of Children Act 1963.
Wills Act 1988.
See above, Married.
Legitimate, adopted and illegitimate children are treated the same for intestate succession purposes (Children Amendment Act 2002). The Succession Act also extends the entitlement to a child en ventre sa mère (that is, conceived but not born at the time of the intestate's death).
See above, Adopted.
See Question 37.
The legal age of majority in Bermuda is 18 years (Minors Act 1950). A minor cannot hold property in Bermuda in his own name.
A trustee can pay or apply the whole or any part of the income or capital entitlement (vested or contingent) of a minor beneficiary to or for the benefit of the minor (Trustee Act 1975). The payment or application can be made to:
The parent or guardian of the minor.
The minor personally, if he has reached the age of 16.
In both cases, the payment or application can be made to the attorney, parents, guardian or receiver (see Question 41) of a minor. A receipt by a parent, guardian, attorney or receiver discharges the trustee from any liability for the payment or application.
Where an individual loses capacity but has not executed a valid power of attorney covering this situation, the Supreme Court can either make the required decision, or appoint someone to make decisions on behalf of the individual who has lost capacity (known as a receiver under the Mental Health Act 1968). After considering the individual's case, the judge makes an order deemed necessary in respect of the individual's property and affairs. Under a receivership order, accounts must usually be filed annually with the Registrar of the Supreme Court, evidencing all transactions involving the incapacitated individual's income and expenses.
Bermuda follows the common law when defining capacity. Essentially, the donor of an enduring power of attorney must:
Appreciate the nature of his act and the extent of his property.
Be able to understand that the donee of the enduring power of attorney will have the power to make distributions or transfers of their assets while they are still living.
An individual can delegate all decisions and authority relating to his property and financial affairs using an enduring power of attorney. The enduring power of attorney can be drafted so that it only takes effect if the individual becomes mentally or physically incapacitated and unable to properly manage his property and financial affairs. An enduring power of attorney can also be registered at the Registry General in Bermuda.
An enduring power of attorney governed by Bermuda law will be recognised whether or not it is executed in or outside Bermuda. Generally, a power of attorney prepared under a foreign law should be reviewed from a Bermuda law perspective to ensure that it will be recognised in Bermuda.
Bermuda has an active local Society of Trust and Estate Practitioners (STEP) branch which, together with other industry committees, lobbies for regulatory and legislative improvements to private client law.
There are currently proposals to update the Trustee Act, the Trusts (Special Provisions) Act and to amend the Perpetuities and Accumulations Act and the Children Amendment Act 2002. The introduction of foundations law is also being considered. Furthermore, specific reserved power legislation is being discussed, as is the possible introduction of a unique Bermuda designer trust.
Description. Bermuda laws online is a database of Bermuda's statutes and statutory instruments. It contains both consolidated laws as amended up to 31 May 2012 and annual laws from 1993. The legislative material of this site does not yet have official sanction. The site is provided by The Ministry of Justice and the Attorney General's Chambers.
T +1 441 298 3299
F +1 441 298 3394
E vlschrum@applebyglobal.com
W www.applebyglobal.com
Qualified. Bermuda, 1999; England and Wales (solicitor, non-practising), 1998
Areas of practice. Trusts; estate planning and administration; probate; unit trusts.
Recent transactions
T +1 441 298 3561
F +1 441 298 3306
E nchand@applebyglobal.com
W www.applebyglobal.com
Qualified. Bermuda, 2011; British Virgin Islands, 2006; England and Wales (solicitor, non-practising), 1997
Areas of practice. Trusts; estate planning and administration; cross border estates; unit trusts; charities.
Recent transactions
T +1 441 298 0995
F +1 441 298 1855
E cksmith@applebyglobal.com
W www.applebyglobal.com
Qualified. Bermuda, 2008
Areas of practice. Trusts; estate planning and administration; probate; charities.
Recent transactions:
