The Trusts (Guernsey) Law, 2007, became effective from Monday 17 March 2008. It replaces the Trusts (Guernsey) Law, 1989, as amended.

Non-Charitable Purpose Trusts

It has introduced non-charitable Purpose Trusts. Under the legislation it is made perfectly clear that trusts established to hold property or to exercise functions without conferring benefit on any person are valid.

Purpose Trusts are commonly employed to incorporate Private Trust Companies (PTCs) which in turn act as trustees to specific trusts (or group of trusts).

Removal of limits on the length of a trust's duration

The Trusts (Guernsey) Law, 1989, limited the duration of Guernsey trusts to 100 years even though the rules against perpetuities had never formed part of Guernsey law. The new law reverts to the status quo ante and removes the previous 100 year time limit for Guernsey trusts, allowing perpetual trusts to be created.

It will of course be possible for the draftsman of a trust to provide for a limited trust period where, for example, it is necessary to consider the application of a foreign rule against perpetuities in relation to the transfer of assets from a foreign trust to a Guernsey trust.

The revised legislation also permits assets to be decanted from one trust to another even where the second trust is of a longer duration than the first.

Clarification of the Position of Retiring Trustees

The new law creates a non-possessory lien over trust assets in favour of the retiring trustees and simplifies the ability of a previous trustee to enforce an indemnity given in its favour where it is not a party to the document by which the indemnity is given. This should facilitate speedy changes of trustee.

Clarification of the circumstances under which information has to be given to Beneficiaries

Under the new regime it is recognised that there can often be good reasons for some beneficiaries to be denied information relating to the trust. The 2007 law has been drafted in such a way that the terms of the trust may expressly exclude discretionary beneficiaries' rights to information but without denying the overriding right of any beneficiary to apply to the court for information. The person seeking the information which the settlor has taken the trouble to deny him would have the burden of proving why disclosure was necessary. It remains the case that the trustee must be accountable for his trusteeship.

Abolishment of Liability of Directors of Corporate Trustees

Under the 1989 law, directors of corporate trustees based in Guernsey or acting as trustees of Guernsey law trusts are personally liable as guarantors in respect of damages or costs awarded against the corporate trustee for a breach of trust. The 2007 law repeals this clause in its entirety. Directors will remain personally exposed in relation to any breach of trust claim initiated before the Royal Court prior to the date when the new law comes into effect.

Limitation Periods and Alternative Dispute Resolution (ADR)

Changes have been made to the effect that no action founded on breach of trust may be brought against a trustee after the expiration of 18 years immediately following the date of the breach.

Any order, judgment or finding of law or fact of the Court in an action against a trustee founded on breach of trust is binding on all beneficiaries of the trust whether or not yet ascertained or in existence, provided they were represented either personally or as a member of a class. There are similar provisions for ADR procedures.

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