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Q1 2013 Feature: Jersey Enhances Its Trust Law


New legislation to enhance Jersey's trusts offering is expected to make the jurisdiction a more attractive location for private wealth management, and this feature provides an overview of the main changes brought about by the amendment to the island’s trust law, which went into effect late last year.


Traditionally, trust management has been the mainstay of Jersey's financial services industry, and the jurisdiction has an extremely well-developed legal and financial infrastructure for trust management. With such a large established base of trusts, and a growing reliance on corporate work, the volume of trust litigation is becoming significant. Total trust assets looked after on the island exceed GBP100bn, excluding Collective Investment Funds.

Although Jersey law has its roots in French civil law, the Trusts (Jersey) Law 1984 codified an entirely 'Anglo-Saxon' body of trust law, resolving many uncertainties and increasing protection for beneficiaries. Subsequent amendments included the recognition of 'purpose' trusts in 1996 (the normal form of Jersey trusts is 'discretionary'). This has led to an increase in corporate use of Jersey trusts.

Jersey is a party to the Hague Convention on the Law Applicable to Trusts and Their Recognition. Jersey trust law explicitly excludes foreign inheritance laws and does not recognize foreign judgements. The creation of a trust is free from Government duty and there are no registration or audit requirements as such in Jersey, although the tax authorities of beneficiaries' jurisdictions (eg the UK) may require annual reports.

Jersey trusts may 'migrate' to other jurisdictions by changing trustees and the applicable law of a trust; likewise, foreign trusts may migrate to Jersey.

In the case where the beneficiaries of a Jersey trust are non-resident, income arising from sources outside Jersey is not liable to income tax in Jersey, nor are distributions to the beneficiaries. Interest on bank deposits made by the trustees of a non-resident trust is not taxed because of a government concession. The trustees of a non-resident trust are not required to make returns or provide accounts of the trust to the Comptroller of income tax. Trust accounts must be kept but do not require auditing.

A significant amendment to the 1984 law came into force on October 27, 2006. This introduced settlor-reserved powers, which provide greater statutory certainty regarding the level of control and influence a settlor may exercise, in appropriate circumstances, over the ongoing administration of assets placed into trust. The powers that may be reserved by the settlor include the power to appoint and remove trustees, to amend or revoke the terms of the trust and to appoint or remove an investment manager or investment adviser. The amendments also permit a trustee to delegate any of his or her trusts or powers if permitted by the terms of the trust.

Other amendments include conflict of law provisions meaning that the validity of a trust governed by Jersey law will not be affected by any rights conferred on anyone under a foreign law, the removal of the existing automatic ‘personal guarantor’ provisions for directors of corporate trustees, thereby making it more attractive to establish private trust companies in Jersey.

The New Amendment

The Trusts (Amendment No.5) (Jersey) Law was adopted by the Jersey government in November 2011 and was approved by the UK Privy Council on October 17, 2012. The Law was registered in the Royal Court on November 2, 2012, coming into force seven days later. Overall, the changes are designed to bring clarity and certainty in a number of key areas, in recognition of an industry shift away from simple trust structures to higher value and more complex vehicles.

The amendment introduces seven key changes, as follows:

Introduction of a Definition of Purpose: this change introduces for the first time a definition of purpose which includes the acquisition, holding, management or disposal of property. Accordingly, it will be possible to establish ‘ownership only’ purpose trusts.

Limitations of Actions or Prescription: a significant amendment that limits a trustee’s liability (subject to fraud or recovery of trust property claims), which previously was almost indefinite. It will mean that action against trustees will only be possible up to 21 years after the alleged breach of trust. The limitation does not apply to foreign trusts whose proper law is the law of a jurisdiction to which the Hague Convention extends.

Definition of a Protector: this amendment introduces a definition of the ‘protector’ as a person, other than a trustee, enforcer or beneficiary, who holds a power, discretion or right in connection with a trust.

Protection from Foreign Interference: the amendment is designed to further protect Jersey’s trust vehicles from attack by foreign courts.

Remuneration of Professional Trustees: this will permit professional trustees to be paid reasonable fees even when the trust deed is silent on the matter, but only in respect of services provided after the amending Law comes into force. Previously, trustees were only remunerated for their services if authorized by the terms of the trust or by Order of the Royal Court.

Position of Outgoing Trustees: this amendment relates to the transition when there is a change in trustee, giving the outgoing trustee the right to enforce a term of a contract providing reasonable protection against liabilities, i.e. indemnities, even though not a party to the contract.

Trustees Transacting with themselves on behalf of different trusts: this amendment provides clarity in expressly permitting trustees to contract with themselves in respect of two or more trusts for which they are trustee.

Reaction to the Changes

According to Geoff Cook, Chief Executive of Guernsey Finance, the promotional agency for the jurisdiction’s financial services industry, whilst specific in nature, the feeling amongst private wealth industry professionals in Jersey is that the changes contained in Amendment No. 5 will make Jersey a significantly more attractive destination overall for private client business.

“The international private wealth management industry is constantly evolving, and clarity and certainty are absolutely vital, so it is important that we continue to evolve our trust framework and ensure that our legislation is as robust as possible,” he said.

“Jersey is a world leader in the trust industry, ranked tenth and higher than any other offshore centre in the Global Financial Centres Index for private banking and wealth management. Its original trust legislation has been widely copied by other jurisdictions since it was introduced in 1984 and these latest amendments will build on that reputation to ensure that Jersey maintains its status as one of the most highly respected trust jurisdictions globally.”

Local practitioners in the area of wealth management certainly seem to agree.

In response to the new legislation Ogier, the offshore law firm stated: “In our view, the changes in Amendment No. 5 are extremely helpful. In particular, the possibility of creating ‘ownership only’ purpose trusts, the clarification in respect of trustees contracting with themselves, the 21-year long stop on actions against trustees, the ability for trustees to enforce covenants in their favour when they are not parties to the deed, and the provision allowing trustees reasonable remuneration where deeds are silent on the subject, all improve our Trusts Law.”

Bedell Cristin, an offshore law firm headquartered in Jersey, said that Amendment No. 5 introduces a number of enhancements to the 1984 Law in several key areas. “Of particular note is that Amendment No. 5 introduces certainty with regards to the use of ‘ownership only’ purpose trusts which should result in an increased use in these trusts, both for private wealth planning and in a commercial context.  Additionally, the protection afforded to Jersey law trusts from attack by foreign courts has been clarified and extended.”

“Recognizing the importance for beneficiaries of trusts being professionally administered and managed by those with appropriate skills, Amendment No. 5 provides assistance by allowing for professional trustees to be remunerated where the trust instrument itself contains no charging clause,” the firm continued. “Amendment No. 5 also confirms that trustees can enter into binding arrangements with themselves in their capacity as trustees of two or more trusts and adds to the protection afforded to outgoing trustees. The importance of ensuring that Jersey continues to be attractive for private wealth business is recognized and the changes introduced by Amendment No. 5 are welcomed.”

According to Channel Islands-based law firm Collas Crill, in summary, the changes in Amendment No. 5 “only go to strengthen and improve Jersey’s Trusts law. The changes provide certainty in areas which were previously questioned and introduce practical solutions (for example in respect of trustee remuneration) for the benefit of the trust industry as a whole.”


The coming into effect of these new changes have been timed particularly well as Jersey redoubles its promotional activities in new and emerging markets in the Middle East and Asia in an attempt to tap some of the region’s growing pool of untapped wealth.

For example, at the International Tax Conference in Mubai in January last year, “overwhelming interest” in Jersey’s products and services in the area of wealth management and structuring investments was shown at a Jersey Finance-sponsored networking dinner. Geoff Cook said: “We are making significant strides in developing the profile of Jersey in the key cities of Mumbai and New Delhi where Jersey Finance now has a permanent representative team and these two events were the culmination of an increasing marketing drive during 2011.”

While there are no specific Jersey figures available, there is evidence that Jersey's promotional activities in the country are paying off. The Reserve Bank of India estimates that inbound direct investment from the Channel Islands was USD516m in 2010, more than ten times the figure a year earlier.

For those seeking wealth management solutions in these emerging markets, changes such as the Trusts (Amendment No.5) (Jersey) Law should serve to make Jersey a more attractive jurisdiction in which to form a trust.



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The Report

Offshore Trusts Guide: Introduction

Offshore Trusts Guide: Jurisdictions

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