Article – Further Amendments to Jersey’s Trust Legislation – Trusts Amendment 7
The Trusts (Amendment No.7) (Jersey) Law 201- (“Trusts Amendment 7”) is expected to come into force later in 2018. It will clarify rather than substantially revise the Trusts (Jersey) Law 1984 (“Trusts Law”).
The principal changes:
Article 1 – new definition of “officer”
In recognition that modern trusts operate in conjunction, not just with corporations, but also other vehicles (LPs, LLPs SLPs etc.), this new definition confirms that relevant provisions of the Trusts Law apply to that wider scope of legal entities, and natural persons connected with them.
Art 9A – settlor reserved / granted powers and interests
Article 9A sets out the nature of powers that can be reserved / granted by a settlor.
Trusts Amendment 7 will clarify, among other things, that:
- not just some only, but all, of those listed powers can be reserved or granted;
- the ability to reserve / grant powers in relation to underlying entities in which the trust holds an interest extends not only to underlying corporations, but also other entities – e.g. LPs, LLPs SLPs etc.;
- the reservation or grant of a power does not of itself constitute the power holder a trustee.
Article 29 – disclosure of information
Article 29 deals with disclosure of trust information and documentation.
Trusts Amendment 7 introduces a new Article 29 which confirms that a trust’s terms can restrict beneficiaries’ access to documents which relate to or form part of the trust accounts.
In recognition of the need to protect both principles of confidentiality and of accountability to beneficiaries, (and potentially competing interests of different beneficiaries, trustees and others), this new Article 29 introduces provisions aimed at balancing a beneficiary’s right to request disclosure, against a trustee’s right to refuse it.
It recognises the court ‘s power to make discretionary orders relating to requests for trust information or documentation.
Article 38 – accumulation and advancement
Article 38 sets out rules for how trustees deal with accumulation and application of trust income.
Trusts Amendment 7, clarifies and widens the options for trustees regarding the accumulation and distribution of income, and the characterisation of trust receipts as either capital or income.
The default requirement to distribute income not accumulated is replaced. Instead, income is to be retained as income for so long as and to the extent that:
- income is not distributed / required to be distributed by the trust terms;
- no trust to accumulate income and add it to capital, or retain it as income, applies or is exercised.
It confirms that there is no time limit within which powers to accumulate income / add it to capital, or to distribute it or retain it as income, must be exercised.
New Article 43A – Security
This new Article 43A clarifies the legislative entitlement to “reasonable security” in the context of ceasing to be a trustee, distributing trust property, or a trust’s termination or revocation.
For Jersey trusts, a contractual indemnity from the recipient of trust funds in favour of the trustee has become the market standard mechanism by which to deal with trustees’ potential personal exposure to trust liabilities.
Article 43A acknowledges that, clarifies which persons (e.g. trustees and their officers) may rely on such an indemnity, and confirms that the doctrine of privity of contract will not operate to prevent those not party to such a contractual indemnity being able to enforce it.
Article 47 empowers the court to approve variations to a trust, or enlarge the trustees’ management and administrative powers, but only on behalf of persons who cannot do so themselves (e.g. minors or unascertained beneficiaries).
Trusts Amendment 7 extends the court’s powers, enabling it to give approval on behalf of persons who cannot be found despite reasonable efforts, and on behalf of a member of a beneficial class the size of which makes it unreasonable to contact that member.
Extending the court’s powers will enable advantageous changes to trust arrangements which might otherwise be frustrated or delayed because beneficiaries cannot be located, or the class of beneficiaries is particularly wide.
The changes which Trusts Amendment 7 will bring are evolutionary rather than revolutionary. They add clarity and further flexibility to Jersey’s trusts legislation, ensuring that it remains a jurisdiction at the forefront of international wealth planning.
Main contact: Mason Birbeck
Mason Birbeck is an expert in Trust Law. If you require any clarification on this briefing please contact him.