A trust is a legally binding arrangement whereby a person (the settlor) transfers assets to a trustee (or trustees) who is entrusted with and takes legal title to those assets, and holds them for the benefit of named individuals or groups (the beneficiaries). These may or may not include the settlor but will not include the trustees. The key characteristic is the separation of legal ownership and beneficial interests in property settled into the trust.

The trust instrument

The trust instrument is the primary trust document which can take the form of a settlement (settlor is named) or a declaration of trust (settlor is not named other than perhaps as a beneficiary). This document defines the respective rights and duties of the settlor and trustees. The trust instrument will provide that the trustees have the power to manage the trust assets in accordance with the trust instrument and the strict obligations imposed on the trustee under Jersey Law.

Letter of Wishes

The settlor usually provides the trustees with a "letter of wishes", which is a guide as to how he would like them to deal with the trust assets, both during his life time and following his death. This document is not legally binding on the trustees, however, in normal circumstances, the trustees would follow the wishes expressed therein. This letter of wishes can be amended or replaced at any time by a new one if circumstances change.

The Trusts (Jersey) Law 1984

This Law applies to a trust and will be enforced by the Jersey Courts if necessary. It imposes fiduciary duties on trustees, regulates the administration of trusts and safeguards the rights of beneficiaries. A Jersey trust can have a 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. Similar laws regulating trusts exist in practially every jurisdiction that recognises trusts.

Confidentiality

There is no requirement under Jersey law and under most other jurisdictions (a notable exception is Malta) to register trust documents with any governmental office or agency except where a Jersey resident person is a beneficiary when it would be necessary to reveal the existence of the trust to the Jersey tax office. This guarantees complete confidentiality ensuring that the trust remains a private and discreet arrangement between the settlor, the trustees and the beneficiaries.

Parties to the Trust - The Settlor When a trust is created, the settlor divests himself of legal ownership of the trust assets. The settlor may also be a beneficiary and, in normal circumstances, his or her wishes would be viewed sympathetically (see Letter of Wishes, above).

The Trustees

Legal title to the trust assets must be vested in the name of the trustees and they are responsible for the administration of the trust. The trustees are required to act with due diligence as would a prudent person to the best of their ability and skill, or where professional trustees act, to a degree commensurate with their professional qualification, and all trustees must observe the utmost good faith. The trustees must exercise their powers solely for the benefit and interest of the beneficiaries.

The Beneficiaries

The beneficiaries are the named individuals or groups entitled to benefit from the assets or income from the assets held on trust and to whom the trustees have a duty to in administering the trust. For the trust to be valid there must be sufficient certainty as to the identity of the beneficiaries. The trust instrument will normally allow the trustees to add, remove and exclude beneficiaries or a class of beneficiaries at any time.

The Protector

It is not essential to appoint a Protector but in certain circumstances it may provide additional comfort to the settlor to appoint a trusted family friend or professional adviser to act as protector of the trust. His role is defined in the trust instrument and is usually limited to requiring the trustees to obtain prior consent from him before exercising certain powers e.g. disposition of trust assets and any changes in beneficiaries.

The Trust Fund

The trust fund is comprised of the assets transferred into the ownership of the trustees, and these assets may be in many forms, including moveable or immovable property, other than land in Jersey. A common arrangement is to establish a trust with a nominal amount and subsequently add more substantial assets.

The Discretionary Trust

Various types of trust have been developed over time but the irrevocable discretionary trust is the most widely used and provides maximum flexibility. It is often the most efficient structure for both settlor and beneficiaries. Under the terms of an irrevocable discretionary trust, the trustees are given wide discretionary powers as to how much and to which beneficiaries income and capital of the trust may be distributed.

The Benefits of Establishing a Trust

Trusts have been used for centuries for a wide range of purposes, including asset protection, estate planning and tax efficient holding of assets. Examples of possible benefits of trusts for private individuals and families include

• legitimate mitigation of taxation



• deferral of taxation



• protection of assets from appropriation in politically unstable countries



• avoidance of forced heirship provisions in the domestic jurisdiction



• succession planning for family-owned companies



• protection of assets from spendthrift family members



• significant mitigation of probate complexities for international estates
• consolidation of widely dispersed assets