Exercising Trustee Discretions in Barbados

Discretionary family trusts are one of the most common types of discretionary trusts to manage wealth and minimize tax concerns. They are used to hold assets and income and to distribute them among the beneficiaries. They are called ‘discretionary’ because, in accepting office, trustees have very wide powers to decide who will receive benefits from the trust.

Although trustees are given a wide discretion1 to make decisions and manage trusts, trustees are bound by certain duties including becoming familiar with the terms of the trust instrument and exercising their powers in the best interests of the beneficiaries.2 Trustees are also subject to a personal obligation to hold and to deal with the trust property for the benefit of the beneficiary of the trust,3 and the burden of proof will fall on the Claimant beneficiary to prove, on a balance of probabilities, that the trustee breached his duties.

However, a trustee exercising a discretionary power is not bound to disclose to the beneficiaries, the reasons in arriving at a decision. If, however, the trustee does give reasons, the soundness of that decision can be reviewed by a Court.4

Given the fiduciary nature of the role of a trustee; regardless of the unfettered discretion in the trust and any wishes of the settlor/testator, trustees must act in ‘good faith’ and for the benefit of the beneficiaries.5

However, in Barbados, there is no clear criteria which will guide a trustee in exercising his or her discretion in ‘good faith’. Nevertheless, the courts across the commonwealth have provided trustees some guidance to act in ‘good faith’.

What should trustees do/consider to act in good faith?

  • Seek legal advice when necessary to fulfil their duties effectively

  • Not let personal disapprovals undermine their actions6

  • Consider the settlor’s wishes7

  • Exercise their powers in accordance with the purpose for which the power was conferred8

  • Consider the financial implications of their decision9

  • Consider the potential risks and consequences of their decisions and take steps to manage them10

  • Not act arbitrarily11

  • If in doubt, apply to the Court to confirm their opinion or any decision they intend to make12

1 These discretions are guided by the terms of the trust deed, and the Trustees Act, Cap. 250, the Trusts (Miscellaneous Provisions) Act, 2018-49 and the Evidence Act, Cap 121

2 Harvey v Olliver (1887) 57 LT 239.

3  Schmidt at [60].

4  Re Londonderry Settlement.

5  Karger v Paul [1984] VicRp 13.

6   Klug v Klug [1918] 2 Ch 67.

7  Abacus Trust Co (Isle of Man) v Barr [2003] Ch 409.

8 Re Marsella (2019) VSC 65.

9  Sieff v Fox [2005] 1 WLR 3811.

10  Partridge v Equity Trustees Executors and Agency Co Ltd 1947 – 1029 HCA B, 75 CLR 149.

11   Ibid at 9

12   Public Trustee v Cooper (2001) WTLR 901.