There are a number of attractive and flexible structuring options for trusts, including:
- Accumulation and maintenance trusts: Requires the trustee to accumulate the income of the trust for the future, but gives power for the income to be used in order to benefit (or maintain) any of the beneficiaries should the need arise (for example, to pay school or medical fees).
- Fixed interest trusts/life interest trusts: Where the interests created are readily identifiable from the terms of the trust and will give rise to a particular beneficiary having a fixed entitlement to the income and/or capital of the trust property. The interests are usually fixed by time and by amount.
- Discretionary trusts: A discretionary trust is most common and unlike a fixed trust, the trustee has discretion to decide the share of capital and income which each beneficiary will receive. It can provide more flexibility than a fixed trust; the trustees can respond to future circumstances as and when they arise and also take into account guidance through letters of wishes from the settlor.
- Reserved powers trusts: Allows a third party to the trust (usually but not necessarily the settlor or other instigator of the trust) to retain certain powers in respect of the trust. These powers may deal with any aspect of the trust, ranging from how the trust’s assets are invested through to who may benefit from the trust and in what circumstances.
- Purpose trusts: Trusts which are neither charitable nor for named/ascertainable beneficiaries, but for a purpose. The possibilities are virtually limitless, ranging from private family trusts at one end of the scale to those used in international financial transactions at the other. An enforcer is required to be appointed to enforce the terms of a trust in relation to its non-charitable purposes.
- Charitable trusts: A Jersey trust is a vehicle frequently used for charities or to hold ‘orphan’ entities, both as discretionary trusts (see above) with a class of beneficiaries and as trusts having charitable purposes instead of beneficiaries.
- Protective trusts: A trust where the interest of a beneficiary will be reduced or terminated if the beneficiary attempts to assign his rights as a beneficiary or becomes subject to some form of compulsory assignment (such as a bankruptcy order).
Flexible regulatory and legal environment
While all ‘professional’ trustees (i.e. generally those offering services to the public) must be regulated and licensed by the Jersey Financial Services Commission (“JFSC”), ‘private’ trust companies can avail themselves of regulatory flexibility such that they need not be regulated or licensed if they meet certain criteria. Any person having full capacity to hold and dispose of property may be a settlor or a trustee although typically SPV corporate trustees are popular.
A trust is a Jersey trust where the trust deed states that the trust is to be governed by Jersey law. It is not necessary for the trustee of a Jersey trust to be resident in Jersey (although if the trustee is resident elsewhere this may result in trust taxation in another jurisdiction).
Trustees are also protected under the Trusts Law in that their liability to a third party arising out of any transaction affecting the trust (save for breach) is limited to the trust property (provided the third party was aware the trustee was acting in that capacity).
- Employee benefit trusts/schemes
- Pension funds
- Investment funds and real estate holding vehicles (e.g. a unit trust)
- To hold security over a borrower’s assets for the benefit of lenders under syndicated loans
- As an ‘orphaning’ mechanism to hold assets ‘off balance sheet’, and in the creation of ‘bankruptcy remote’ structures