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VISTA Trusts (Examples of when used (for people with family-owned…
VISTA Trusts
Examples of when used
for people with family-owned businesses (especially for a sole director/ shareholder) who wishes to run their company independently as well as benefiting from a trust’s estate planning ability;
for people unfamiliar with the concept of trusts, as it allows them to have some comfort when transferring assets to a third party that they can continue to manage the underlying assets without their involvement;
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A Virgin Islands special trust (VISTA trust) is a form of trust particular to the British Virgin Islands (BVI) that can provide sought after comfort in some situations.
Traditionally a trust places a fiduciary duty on the trustee to ensure that a company, which the trust owns, operates under the ‘prudent investor rule’.
This rule requires the trustees to oversee the management of a company it owns, to ensure it operates in a prudent way. Not only should the trustee be consulted on matters in relation to the running of the company, it is part of the trustee’s fiduciary duty to guard against the company risking its assets. This often requires trustees to oversee and ensure an underlying company is conservative in its dealings.
The settlor can outline in the ‘office of director rules’ how and in what circumstances the trustee should use its voting powers to interfere in the management of a company. Powers such as removing and appointing directors and determining their remuneration can be stipulated in accordance with the settlor’s wishes.
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Whilst this only applies to a BVI company whose shares are so VISTA designated, such a company may hold non-BVI and non-VISTA shares which will then be covered under this VISTA exemption.
It is possible to step in and out of the VISTA provisions if the trust deed is drafted appropriately. This can be advantageous if there are occasions when the settlor wants the trustees to have more involvement.
A standard VISTA trust can be established for a period of up to 360 years, which assists with dynastic planning.
It is also possible to add shares from an existing BVI trust to a VISTA trust, so that they become subject to VISTA legislation.
The Saunders v Vautier rule ermits the beneficiaries of a trust (if they all agree, are adults and under no disability) to join together and bring the trust to an end. A VISTA trust may prohibit the application of this rule for a period of up to 20 years, thus allowing the settlor to ensure that the trust continues for at least this long. There are other ways to ensure that a VISTA trust continues for a longer period, such as having a wide class of beneficiaries including minors that would make the Saunders v Vautier rule extremely difficult to achieve.