Purpose Trusts And Their Use In Special Purpose Insurance Vehicles

Background on Purpose Trusts

The private discretionary trust is the most widely known form of trust where trustees are given a fund of money to manage and distribute amongst certain named or described beneficiaries who are typically individuals, often in a family context. Bermuda does however also recognise that a trust may be established in circumstances where assets are held by a trustee to manage and expend solely in the fulfilment of a certain purpose rather than for the benefit of named beneficiaries. These trusts are known as purpose trusts. Bermuda was the first offshore jurisdiction to provide for these trusts by statute over 30 years ago with the introduction of the Trusts (Special Provisions) Act 1989 (the "Act"). The purposes can be charitable or non-charitable. The criteria to be met is that the purpose(s) must be sufficiently certain to allow the trust to be carried out, lawful and not contrary to public policy. The concept has been developed