There are occasions when the planned benefit of a trust is not
personal or charitable in nature. In addition, the benefit of a
trust may be intended to go to an institution. In these
circumstances, The Purpose Trust can achieve these purposes.
The traditional concept of a Trust involves a three way
relationship where the Settlor, as the original owner of an asset,
settles the asset into a Trust managed by the Trustee, who holds
the asset for the use and enjoyment of the Beneficiaries of the
Trust. Under Jersey Law there is the possibility of a trust being
created for a pure purpose.
Under Jersey Trust Law it is possible to establish a Purpose
Trust without ascertainable beneficiaries and instead a particular
purpose is stated in the Trust Instrument. This purpose does not
need to be charitable. All the existing law for Jersey Trusts will
apply, such as perpetuity periods and no requirements in Jersey for
a Trust to be registered or in any way open to public
Advantages of a Purpose Trust
The main advantage of a purpose trust is that it has no
beneficiaries. The Trustees have the legal ownership, but there is
no one who can be regarded as having beneficial ownership. The
Trust can therefore become a kind of 'non-owned' vehicle
which proves useful in different kinds of transactions.
An important aspect of the non-charitable Purpose Trust under
the Jersey Legislation is the requirement to appoint a person whose
duty it is to enforce that the Trustees undertake 'the
purpose'. This person is called the 'Enforcer'. The
Enforcer must be a different person to the Trustees.
An Enforcer may be an individual or a company. The Enforcer is
not allowed to profit from his office unless he is expressly
authorised to do so in the Trust Instrument. A Trustee cannot also
be an Enforcer.
Use of Purpose Trusts
Purpose Trusts are regularly used for holding shares in an
underlying entity such as a Private Trust Company.
Purpose Trusts are used in this regard, because they offer
privacy to the underlying client and are orphan vehicles (i.e.
Purpose Trusts have no shares which need to be held or owned).
Other uses for Purpose Trusts include asset financing and also
for joint ventures where neither party wants to be in control of
the voting power or do not want a formal association with each
Purpose Trusts can also act an impartial custodian or where the
Settlor would like the benefit to be for a purpose which is neither
personal or falls within the definition of a charity, and the
Purpose Trust can achieve this purpose.
Of particular interest is the use of a Purpose Trust as a
special purpose vehicle in the connection with financing
arrangements such as off-balance sheet asset-backed securitisation.
The use of the purpose trust to own the special purpose vehicle in
this type of arrangement can be of benefit to all parties.
A purpose trust can also be used to collect funds from various
sources and redistribute them according to an organised programme,
without seeking to achieve any profit for itself.
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.
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