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Trusts (Amendment No 4) (Jersey) Law 2006

The fourth and most significant amendment to the Trusts (Jersey) Law 1984 (the ‘Law’) came into force on 27 October 2006. Overall, the changes to the Law have clarified and addressed various key areas to ensure that Jersey trusts continue to be both flexible and secure and that the Island remains at the forefront of the offshore jurisdictions. The most important changes are:

Application of law

The ‘new’ Article 9 substantially protects and strengthens the position of Jersey law trusts from attack from other jurisdictions on questions such as:

the validity or interpretation of a trust
the validity or effect of any transfer or other disposition to a trust
the capacity of a settlor
the administration of the trust (in Jersey or elsewhere)
the existence and extent of trustee powers

by declaring that foreign law does not apply to these issues.

Defence against attack from forced heirship provisions (succession rules) or anti-trust legislation is afforded by Article 9 (4) which clearly states:

‘No foreign judgement with respect to a trust shall be enforceable to the extent that it is inconsistent with this Article irrespective of any applicable law relating to conflicts of law.’

Validity of trusts where powers reserved by the settlor confirmed

Certain settlors are understandably concerned about transferring assets from their ownership to be held by trustees over whom they have limited control. Whilst trusts with settlor reserved powers have existed in Jersey for some time, Article 9A provides Jersey law with legal certainty in this area by allowing a settlor to reserve either a beneficial interest in the trust property or substantial specified trust powers without adversely affecting the validity of the trust. Examples of the powers which may be retained by a settlor are:

to revoke, vary or amend the terms of a trust
to advance, appoint, pay or apply income or capital of the trust property
to give binding directions to the trustee in connection with the purchase, retention, sale management, lending, pledging or charging of the trust property
to appoint or remove any trustee, protector or beneficiary
to appoint or remove an investment manager or advisor

Duration of a Jersey trust

Previously the maximum duration of a Jersey trust was 100 years. The new Article 15 provides that unless the trust instrument states otherwise a trust may now continue for an unlimited period. However, it is important to note that the Law is not retrospective and so the trust period stated in the trust instrument of any current trust will continue to apply and cannot be extended. Interestingly, it would appear from Article 15(3) that, subject to the terms of the trust, it may now be possible for trustees to advance or appoint from a time limited trust to a trust with an unlimited trust period. Professional advice should of course be sought before relying on this provision.

Liability of a director of a corporate trustee repealed

Article 56 was repealed in its entirety. The result is that a director of a corporate trustee shall no longer be personally liable as a personal guarantor for any damages or costs awarded against the corporate trustee for a breach of trust. However, in order to maintain a licence from the JFSC the vast majority of trust companies must have a certain level of net assets and maintain significant professional indemnity insurance, which has always been the real protection for clients so there is no prejudice to their position.

Trusts for charitable and non-charitable purposes

The new Article 47A provides statutory certainty as to the circumstances when the doctrine of cy-pres is applicable (this is the doctrine whereby the court will direct that the intention of the settlor/testator be carried out as nearly as possible in the way they desired when it is not possible to carry out their wish in the particular way they specifically wanted). It confirms that the doctrine will apply to the application of trust property which is held for non-charitable purposes as well as charitable purposes. The Attorney General, at the behest of the trustee, may now apply to the court which may declare that the trust property shall be held for such other charitable or non-charitable purpose "as the court considers to be consistent with the original intention of the settlor".

Limitation of actions

The new Article 57(3A) provides clarification that any action founded on breach of trust may only be brought by a trustee against a former trustee within three years from the date on which the former trustee ceased to be a trustee of the trust.

Disclaimer of interest

A new Article 10A has been inserted which permits a beneficiary to disclaim, either permanently or for a temporary period, the whole or any part of his/her interest under the trust whether or not they have so far received any benefit. Significantly, a beneficiary may now disclaim their whole interest for a specified short period, which may be beneficial for their personal tax planning purposes.

As you can see the changes are far reaching and have been widely acclaimed by all members of the finance industry and the legal profession. Should you have any queries regarding the changes or any other trust issues then please do not hesitate to call or email.

Advocate Richard Pirie – 01534 601755 Email
David Dorgan – 01534 601757 Email
Carl O’Shea - 01534 601750 Email

THIS ARTICLE IS FOR INFORMATION PURPOSES ONLY AND NOT BY WAY OF LEGAL ADVICE. PROFESSIONAL LEGAL ADVICE SHOULD BE SOUGHT BEFORE ANY ACTION IS TAKEN.