THE JERSEY TRUST

Jersey as a Trust Jurisdiction Jersey Trust characteristics

The Bailiwick of Jersey’s Trusts are governed by the A Jersey trust may be revocable or irrevocable. If a trust
Trusts (Jersey) Law of 1984. is revocable, the Settlor reserves the right to terminate
the trust and regain ownership of the trust assets held on
The legal characteristics of a Jersey Trust trust on the date revocation takes effect. If this is the
case, however, tax authorities may argue that the Settlor
A trust is a legal arrangement which distinguishes between has in fact always controlled the trust fund and careful
the legal and the beneficial ownership of property. Legal advice is required if a trust is to be revocable in nature.
ownership is transferred to a trustee who manages and An irrevocable trust cannot be revoked. Generally, this is
administers the property on behalf of the trust for the the form of trust settled under Jersey law.
benefit of specific Beneficiaries, or for the furtherance of
certain purposes. It is an arrangement intended for the Protectors
safekeeping, management and eventual disposal of
property. The Settlor of a Discretionary Trust may wish to ensure
certain controls are placed around the key powers of the
Trust Components trustees. This can be achieved by requiring the trustee to
obtain the consent of a third party before exercising such
The Settlor or Grantor of the trust is the owner of the powers. Such a third party is known as a Protector of the
assets that are to be placed on trust. The Settlor and the trust. The rights and obligations of a Protector vary from
first Trustee create the trust and may also benefit under its trust to trust and are normally set out in the Trust Deed.
terms. The Trustee is the individual or company to which Often, the Protector is a close friend, relative or
the legal ownership of the property is transferred and who professional adviser of the Settlor. Common powers
is authorised to hold, administer and distribute such assets which are made subject to Protector consent include the
in accordance with the terms of a comprehensive trustee’s power to appoint new trustees, the addition and
document, the Trust Deed. This sets out the terms on removal of Beneficiaries and the distribution of capital
which the Settlor and the Trustee have agreed that the from the trust assets.
Trustee will hold and administer the trust assets. The
Trust Deed identifies the Beneficiaries of the trust, that is, Trust Period
those persons intended to benefit from the trust assets or
the purposes the trust was established to further. The A trust settled under Jersey law may exist for a limited or
Trust Deed usually only refers to an initial nominal sum unlimited period.
settled on the trust, but its terms apply equally to
subsequent property settled on the trust. Jersey Taxation of Trusts

Whilst some Settlors wish to specify in the Trust Deed the In Jersey, the taxation rules for trusts are relatively
precise circumstances in which Beneficiaries are to be straightforward, provided that the Beneficiaries of the
given the income and/or capital of the trust fund, since a trust are not resident in Jersey. In general terms the
Trust Deed cannot be changed once the trust is settled, position is as follows: trusts with no Jersey resident
most settlors prefer to give trustees sufficient flexibility to beneficiaries are only liable to tax on Jersey source
take account of changes in circumstances of both existing income; by concession, Jersey bank deposit interest is
and future Beneficiaries. Called a Discretionary Trust, this not treated as Jersey source income when received by
gives the trustees wide powers to administer the assets and trustees of a trust with no Jersey resident beneficiaries;
to distribute them at their discretion. The trustees will and if a beneficiary of a trust with no Jersey resident
usually be guided by regular letters of wishes from the beneficiaries becomes resident in the Island, action must
Settlor which set out the settlor’s wishes regarding the way be taken to vary the trust, for example by restricting
the trust assets are to be administered and distributed. that individual to benefit from an isolated fund in the
Although not legally enforceable, the trustee is almost trust, if the trust’s entire income is not to become subject
always guided by a letter of wishes from the Settlor, which to Jersey income tax.
can be sent as often as required. The wishes expressed in
the letter cannot lie outside the permitted actions laid out
in the Trust Deed.
1

The information in this document is provided for information only and does not constitute and should not be construed as an offer or solicitation to engage in any activity mentioned within it. The information is
provided solely on the basis that you will make your own decisions and it does not take account of anyone’s objectives, financial or fiscal situation. Nothing within this document shall, or is intended to, constitute
financial, legal, accounting or tax advice. It is strongly recommended that you seek professional advice before making any decision. Any decision that you make should be based on an assessment of your risks in
consultation with your relevant adviser.
Practical uses of Jersey Trusts - Privacy and Confidentiality

Jersey trusts are generally used by individuals and The Trust Deed is a private document to which the
companies for personal, business and investment activities. Settlor and the first trustee are the only parties. The
It is important that any structure is properly established, Trust Deed does not have to be filed with any public
and professional advice is sought in each jurisdiction which body in Jersey and information relating to the trust is not
affects the Settlor, the Beneficiaries and the trust assets. accessible to outsiders.
The following examples outline some of the practical ways
in which trusts can be used: - Prevention of Division of Assets

- Asset management and protection An individual who has built up sizeable private assets
may have some children who are interested in the
Settlors capable of handling their own investments may be management of those assets and some who are not. The
concerned about the ability of their heirs to do so after individual may wish to benefit the children equally but
their death. A trust can be established reserving would not like any of them to be able to dispose of their
investment powers to the Settlor during his lifetime. On interest in the assets to non-family members. Such
the death of the Settlor, either a person nominated by the arrangements can be achieved via the establishment of a
Settlor or the Trustee may assume responsibility for the trust. Family assets may also take the form of works of
investment of the trust assets. Settling assets onto trust can art or real estate which, by their nature, cannot be
also serve important asset protection functions, so long as divided but from which several individuals should
the trust is not established with the intention of defrauding benefit. Such property can be held in trust for the
specific creditors and the Settlor does not reserve to Beneficiaries without disturbing the underlying property.
himself unrestricted powers to revoke the trust or Finally, if the Settlor, their children or any future
otherwise recover trust assets in the future. Transferring Beneficiary are involved in contentious divorce
assets to a trustee on the terms of a Discretionary Trust proceedings, in the vast majority of cases the trust assets
can serve to ensure that the assets are not available to (but not any income received) would be deemed to lie
creditors and that the assets are protected in the event of outside of the property of the Beneficiary and would
family breakdown among Beneficiaries. thus be protected.

- Avoidance of probate formalities - Prevention of Asset Rundown by Profligacy

Assets owned by an individual usually pass on death in In some cases, following generations have been known
accordance with the terms of a will. If the assets are held in to run down a family’s assets due to issues such as
a wide variety of countries it may be necessary to obtain a addiction or poor lifestyle choices. A trust structure can
grant of probate to the will in each country where assets allow a trustee to help in the management and
are located. This can be onerous, expensive and time- preservation of wealth by controlling the manner in
consuming. In addition, there may be estate duties and which trust assets are spent.
taxes payable before the estate can be settled and the
assets distributed to the heirs of the deceased. However, if Summary
such assets are held in a trust, they can continue to be held
for the benefit of succeeding generations in accordance A Trust can be an extremely useful instrument in estate
with the terms of the trust instrument. The death of the planning and a mitigation of current and future risks,
individual should have no detrimental consequences for thus ensuring that assets carefully accumulated over
the continued operation of the trust. many years remain protected. Key is having a good
relationship with the trustee.
- Forced Heirship

An individual from a country with rigid legal or religious

inheritance laws may wish to arrange for a distribution of
assets on his death different to that required under the
local law. By establishing a trust outside that country in
Jersey, a desired distribution plan can often be formulated
and implemented. 2

The information in this document is provided for information only and does not constitute and should not be construed as an offer or solicitation to engage in any activity mentioned within it. The information is
provided solely on the basis that you will make your own decisions and it does not take account of anyone’s objectives, financial or fiscal situation. Nothing within this document shall, or is intended to, constitute
financial, legal, accounting or tax advice. It is strongly recommended that you seek professional advice before making any decision. Any decision that you make should be based on an assessment of your risks in
consultation with your relevant adviser.