Jersey Trusts
The Law of Trusts in Jersey
The legal system in Jersey developed from ancient Norman French law and the Island has never had a comprehensive legal framework of trust law in the same way as England and the other English speaking offshore financial centres. This omission was rectified by the enactment of the Trusts Law 1984, which codifies Jersey trust law for the first time. Where the Courts need extra guidance they turn to English law. The Trusts law 1984 imposes fiduciary duties on trustees, regulates the administration of trusts and safeguards the rights of beneficiaries. A Jersey trust can have duration of up to 100 years and Jersey is a party to the International Hague Convention of the Law applicable to Trusts and on their recognition.
Jersey trust law is flexible- The trusts themselves and the trustees’ other powers may be written in any way and provide as much flexibility as is required for the full range of trusts, from fixed interest trusts to discretionary trusts
- The settlor may retain appropriate and carefully defined powers over the trust, including the power to revoke or vary the trust
- The trust may include a clause enabling the proper law of the trust to be changed from Jersey to that of another offshore jurisdiction
Forced Heirship
Jersey law has statutory provisions to protect the trustees of Jersey trusts against foreign laws of fixed inheritance, commonly called forced heirship. Where a person domiciled outside Jersey transfers property to a Jersey trust during his lifetime, he is deemed to have had the capacity to do so if, at the time of the transfer, he was under the law of his domicile of full age and sound mind. In general, rules relating to inheritance or succession in the law of the transferor's domicile cannot affect the validity of the transfer to the Jersey trust.
Taxation in Jersey
Jersey trusts are exempt from Jersey income taxation provided that:
- Income arising to the trust has a non-Jersey source
- All the beneficiaries of the trust are non-residents of Jersey
- By concession, Jersey bank interest paid to Jersey trustees is also exempt from Jersey taxation, where all the beneficiaries of the trust are non-residents of Jersey
Jersey has no gift tax, capital gains tax or estate tax.
Possible uses of Jersey TrustsJersey trusts have such a wide variety of applications that it is impossible to categorise their every use but it is possible to identify some general areas of application:
- Avoidance of probate procedures and forced heirship regimes
- Provision of tax-efficient employee benefits
- Accumulation of a tax-free gross fund for the benefit of wealthy families
- Consolidation of assets
- Succession and tax planning
- Protection of assets from illegitimate seizure or sequestration
- Strengthening the claims of offshore residence status for companies through offshore trust ownership of company shares
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