By Siobhan Riley
Jersey Finance
Significant enhancements have been made to Jersey's Trusts Law recently. It will be the fifth time the Trusts (Jersey) Law 1984 has been amended and, whilst specific in nature, the changes will make Jersey an even more attractive destination for wealth management.
The prevailing themes of Amendment No 5 to Jersey's Trusts Law are clarification and certainty. This can be seen in a number of the amending provisions.
Definition of purpose
Non-charitable purpose trusts were introduced to Jersey's Trusts Law in 1996. Practitioners have debated whether a trustee merely holding a particular asset (such as shares in a company) could be considered, without more, to constitute a genuine 'purpose'. Amendment No 5 clarifies the position by introducing a definition of purpose. The definition of purpose is non-exhaustive and confirms that a purpose may involve the conferral of any benefit on any person, it need not consume nor be capable of consuming the income or capital of the trust and includes "without limitation, the acquisition, holding, ownership, management or disposal of property and the exercise of functions".
Trustees transacting with themselves on behalf of different trusts
It is a generally accepted legal principle that it is not possible for a person to make a valid contract with him/herself. In the world of trusts, it is sometimes the case that assets are transferred between two trusts, for example by way of a sale, where both trusts have the same corporate trustee. An addition to Article 31 of the 1984 Law makes it clear that a person in the capacity as a trustee of one trust may enter into a contract or other arrangement with himself or herself in his/her capacity as a trustee of one or more other trusts.
Indemnities
Another issue which has vexed practitioners for a number of years has been the development of 'chains' of indemnities, when the management of a trust has moved from one trustee to another and this process is repeated a number of times and each retiring trustee seeks indemnities from its successor. An amendment to Article 34 of the 1984 Law now makes it clear that earlier trustees in the chain can enforce indemnities in their favour from successor trustees notwithstanding the fact that they may not have been a party to a subsequent indemnity given in their favour.
Limitations of activities
Article 57 of the 1984 Law has been amended to clarify the period within which an action founded on breach of trust may be brought against a trustee by a beneficiary. In most cases the action must now be brought within three years of the earlier of the date of delivery of the final accounts of the trust to the beneficiary, or the date on which a beneficiary first has knowledge of a breach of trust. Save in the case of fraud, no action founded on breach of trust can now be brought against a trustee by any person (not just beneficiaries) once a period of 21 years has expired after the date of the breach.
Remuneration of professional trustees
Currently a trustee of a Jersey law trust is not entitled to remuneration unless specifically authorised by the trust's terms, unless all of the beneficiaries of the trust have consented in writing or unless the Court has granted an order permitting such remuneration. Amendment No 5 introduces a statutory right for professional trustees to be remunerated.
It is reassuring to see the 1984 Law evolve further. The clear statutory framework serves to underpin Jersey's position as a leading jurisdiction for the management and administration of trust structures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.