Jersey Overhauls Trusts Regime To Attract More Private Clients

Wendy Spires

19 October 2012

The UK Privy Council has approved several amendments to Jersey’s trusts law which are intended to add to the jurisdiction’s attractions for private clients.

The amendments, contained in the Trusts (Amendment No 5) (Jersey) Law, were adopted by Jersey’s government in November last year. Having been approved by the Privy Council the new law will be registered in the Royal Court on or before 2 November, coming into force seven days later, said Jersey Finance, the island’s promotional body.

The main amendments to Jersey’s trust regime are as follows:

· The introduction of a definition of purpose: this change introduces a definition of purpose which includes the acquisition, holding, management or disposal of property. As such, it will be possible to establish “ownership only” purpose trusts.

· The limitation of actions or prescriptions: this amendment limits a trustee’s liability (subject to fraud or recovery of trust property claims). While previously virtually indefinite, now action against trustees will only be possible up to 21 years after the alleged breach of trust. The limitation does not however apply to foreign trusts where their proper law is the law of a jurisdiction to which the Hague Convention extends.

· The 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.

· More protection from foreign interference: the amendment is designed further to strengthen Jersey’s trust vehicles from attack by foreign courts.

· The ability to “reasonably” remunerate professional trustees: this will apply 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 authorised by the terms of the trust or by Order of the Royal Court.

· Improvements to the 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.

· A clarification on the practice of 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.

“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,” said Geoff Cook, chief executive, Jersey Finance. "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.”

Jersey’s amendments to its trust regime can be seen as another development in the “arms race” rival jurisdictions engage in to enhance their attractiveness on the global stage. Jersey’s fellow UK Crown Dependency Guernsey has for example introduced its own version of foundations, an addition to its “toolkit” which practitioners will start to use from early next year.