Jersey Trusts

All Trust structures broadly follow the same principles, assets are transferred by the Settlor to a trustee who has a duty to manage them for the benefit of defined beneficiaries. With roots that can be traced back to the 11th century when crusading English knights left their estates in the care of trusted friends for safekeeping pending their return, the modern-day trust is a highly flexible vehicle offering a wide range of potential benefits and a large number of uses. The trust has remained very much the same since its early inception, being a tri-partite agreement between a settlor, a trustee and beneficiaries. However, the relationships between the various parties of the trust are now governed by clear laws, regulations and case law giving comfort to settlors and beneficiaries that assets held on trust will be safeguarded for the purposes intended. Whilst all trusts share similar core principles, there are particular distinctions between the three key types of trust – Discretionary, Fixed Interest and Accumulation and Maintenance.

Jersey trustees providing services by way of business are regulated by the Jersey Financial Services Commission and operate within a defined and governed regulatory environment. The jurisdiction’s reputation means clients can be confident in the probity of their trustees and the level of service they can expect.

Given its historical provenance, the trust is a concept much more familiar to common-law than to civil law jurisdictions. Residents of civil law jurisdictions may be more familiar with the principles of Foundations.

Types of Trusts

All trust structures broadly follow the same principles. There are, however, certain subtle distinctions between the three key trust types:

Private Trust Company (PTC)
A PTC is a privately owned company that is incorporated specifically to act as trustee of a single trust or group of family trusts and is not permitted to offer trustee services to the public generally. PTC structures offer a reason for ultra-high net worth individuals to establish and manage, often with the assistance of their trusted advisors, their own trust company.

Discretionary
This is the most commonly used type of trust. Named beneficiaries of a class of beneficiaries do not necessarily have a fixed interest or equal interest in trust assets but enjoy benefit levels at the discretion of the trustees. The trustee has discretion on payments being made from trust income (and sometimes capital), how they are made and to whom. This discretion is of particular benefit when there is a beneficiary unable to take care of his/her own interests – the trustee being able to make distributions according to individual circumstances.

Accumulation and Maintenance Trust income is used to look after young people while they are minors. Any residue income will accumulate and is added to the trust assets, which will be distributed to the beneficiaries on or before their 25th birthday.

Fixed Interest Trusts
This is a trust where the beneficiary has an automatic and immediate right to income arising from trust assets. Normally this beneficiary will have no rights to the trust capital that will often pass to a second beneficiary in the future. These trusts are often used to give a widowed spouse a life long income with capital assets passing to offspring on his/her death.

Benefits of Trusts

There are many advantages to using an offshore trust structure:

Estate planning
A trust structure can often avoid forced heirship issues which dictate in certain jurisdictions how assets are to be distributed on death. This can be particularly beneficial should there be a vulnerable family member who will require financial security into the future.

Family Wealth Preservation
This is the most commonly used type of trust. Named beneficiaries of a class of beneficiaries do not necessarily have a fixed interest or equal interest in trust assets but enjoy benefit levels at the discretion of the trustees. The trustee has discretion on payments being made from trust income (and sometimes capital), how they are made and to whom. This discretion is of particular benefit when there is a beneficiary unable to take care of his/her own interests – the trustee being able to make distributions according to individual circumstances.

Tax structuring
In certain situations, trusts can be used to shelter assets from capital gains, income and inheritance tax. We work with a number of specialist tax advisers who assist us in creating bespoke structures for clients to attain their specific objectives.

Asset Protection
Trust assets can at times be ring fenced to protect them from creditors.

Charitable Purpose
Trusts can be established for charitable funding purpose. These trusts will not have named beneficiaries but offer a good deal of flexibility for making charitable donations either on a fixed annual basis or at the discretion of the trustees.