Worksheet 3 problem questions

Question A:
Settlor A, who is resident in Barbados, creates a trust in Barbados. None of the trustees
are resident in Barbados. All the beneficiaries are resident in the United States. The trust
property consists of four acres of land in Bridgetown. Settlor A is of the view that his trust
is an international trust. Advise Settlor A.

Answer A
Issue 1:
The issue which falls to be considered is whether the trust created by
Settlor A is an international trust.
Principal & Authority:
The following principles and authority is relevant to the determination
of the issue
An international trust or trust means a trust in respect of
which
(i) the settlor is resident outside Barbados at the time of the
creation of the trust and at such times as the settlor adds new
property to the trust;
(ii) at least one of the trustees is resident in Barbados;
(iii) no beneficiary, other than certain exempted persons is a
resident of Barbados at the time of the creation of the trust and
at such times as the settlor adds new property to the trust; and
(iv) the trust property does not include any immovable property
situate in Barbados or an interest in any property so situate.
:Section 2 (1) (d) of the International Trusts Act of Barbados
states:

Application/Advise
Applying the law to the facts Settlor A is advised that the trust that he
created is not an international trust this is because the facts indicate
(1)Settlor was a resident of Barbados,
(2)none of the trustees is resident in Barbados
(3)The trust property consists of immovable property in Barbados
(4)Although all the beneficiaries were outside of Barbados, that alone was
not enough to make the trust an international trust.

Question B:
In October 2012, Settlor B, who is resident in the United States of America,
was aware that a judgment was going to be rendered against him by a United
States Court for five million dollars ($5 000 000). He immediately created an
offshore trust in Barbados transferring the legal title to his assets worth seven
million $7 000 000 to the trustee Mr. T. The trust is governed by the laws of
Barbados. The settlor is a beneficiary under the trust. Under the laws of the
particular state of the United States where Settlor B is resident, self-settling
trusts are against public policy. In addition, the burden of establishing an
intent to defraud under the relevant legislation is upon the debtor and not on
the creditor seeking to set aside the deposition. Given his knowledge of US law,

Creditor X, in 2016, commenced proceedings in the courts of Barbados to set

aside the disposition of seven million dollars ($7, 000 000).
Advise Creditor X.

Answer B:
Issue 1
The issue which arises for consideration is whether the courts of Barbados to
set aside the disposition of seven million dollars.

.
Was the trust a sham?
Does the burden of proof shift to creditor X
Can the judgment of the US court be enforced by the court in Barbados?

Question C:
Settlor C is concerned that, under the laws of the country where he is now
resident, his wife Grabby is entitled to one half of his estate and his children
are entitled to the other half. Preferring to give three-quarters of his estate to
Miss Cayman Islands, a young lady he fell in love with because of her bright
white teeth, Settlor C creates an offshore trust in the Cayman Islands and
transfers a substantial part of his assets there. Miss Cayman Islands is the sole

beneficiary. Grabby learns of the trust and initiates an action in The Cayman
Islands on the basis that the property transferred to the trust was a fraudulent
disposition as the effect of that disposition would mean that she would not be
able to inherit Settlor Cs property.
Advise Settlor C

Answer C:
Issue:
The issue which arises for consideration is whether the heirship right
conferred by the law grabby is resident constitutes an obligation or liability
for the purposes of the fraudulent dispositions law of the Cayman Islands.
Rule
The following principle and authority is relevant to the issue; An heirship
right conferred by foreign law in relation to the property of a living person
shall not be recognized as constituting an obligation or liability for the
purposes of the fraudulent disposition law or for any other persons: s 92
Trust Law Cayman Islands
Application
Applying the law to the facts sector c Is advised that Gabbys heirship right in
relation to property of her husband will not be recognized as constituting an
obligation, for the purposes of the fraudulent dispositions law, this is because
that right was conferred by a foreign law

Question 4
Settlor D, a resident of the United States, does not wish the Inland Revenue Service in the United
States to tax him further. He creates a trust in Barbados. In the trust instrument Y is listed as the
trustee but there is an arrangement that in fact Settlor D would be the trustee and would manage
and administer the trust. As part of the arrangement, Y would only sign documents at the
direction of Settlor D. Settlor D is the beneficiary of the trust, he has retained powers to revoke
and appoint trustees and he has placed a major part of his assets into the trust. The trust
instrument contains a duress and a flight clause. Y dies six months later and Settlor D appoints Z
as trustee. Z knows nothing of the previous arrangement. Two years later, P brings an action in
the Barbados court asking the court to declare the trust a sham. Advise Settlor D
Answer 4
Issue:
The issue which arises for consideration is whether the court would declare
the trust to be a sham
Rule:
The following principles of laws and authority are relevant to the
determination of the issue at hand
1st: in order to find the sham, the court must find the both the settlor and the
trustee true intention should be otherwise than as set out in the trust deed
which they moth executed: in the matter if the esteem settlement (abacus ci
ltd. as trustee v ) Rimer J stated I respectfully regard the approach adopted
by the royal court of jersey in RE esteem settlement 2003 as correct in is not
only squarely in line with the guidance given by the court of appeal in Snook
v London and west riley investment ltd; Hitch v stone it also appears to me
to be correct in principle when a settlor creates a settlement he purports to
divest himself of assets in favor of the trustee and the trustee accepts them
on the basis of the trust of the settlement, the settlor may have an unspoken
intention that the assets are in fact to be treated as his own and that the
trustee may accede to his every request on demand, but unless that
intention is shared by the trustee or later becomes so shared I fail to see how
the settlement can be regarded as a sham Munby J in A v A agreed with the
reasoning of Rimer J that in the case of a settlement executed by a settlor

and a trustee it is insufficient in considering whether it is a sham to look

merely at the intentions of the settlor it is essential also to look at those of
the trustee
2nd: Professor Antoine has listed a number of indicators of an offshore sham
trust, she has observed that while these factors will be evidence of a lack
real intention to create a trust on their own they may not be sufficient the
indicators include;
(1)The degree and extent of control by the settlor
(2)Evidence of self settling whereby the settlor become the beneficiary
(3)The retention of powers by the settlor to revoke and appoint
trustees
(4)The creation of the trust solely of tax purposes and the lack of a
genuine business purpose
(5)The placement of all or the major part of ones assets into the trust
3rd: a trust that was initially a sham may subsequently loose that character
where a new trustee does not know that the trust was a sham and accepts
appointment believing the trust to be entirely genuine and intending to
perform his fiduciary duties conscientiously and strictly in accordance to
what he believes to be a genuine trust deed: Munby J in A v A
Application:
Applying the law to the facts settlor D is advised that it is likely that the court
in Barbados will not declare the trust to be a sham as there is no common
intention shared by settlor D and trustee Z that the true position should be
otherwise than set out in the deed in which they both executed. Although the
facts indicate that initially the trust was a sham as both the settlor D and
trustee Y had entered into a particular arrangement, that settlor D would be
the trustee and would manage and administer the trust, the trust would have
lost the sham character as trustee Z appears to have accepted the
appointment believing the trust to be entirely genuine and intending to
perform his fiduciary duties conscientiously and strictly in accordance with
what he believed to be a genuine trust deed.