Kellyann Ozouf (pictured), Partner and trusts specialist at Collas Crill, takes a look at the proposed amendments to the Trusts (Jersey) Law 1984
Despite being more than 30 years old, the Trusts (Jersey) Law 1984 continues to provide a framework, whilst allowing Jersey’s courts to apply and develop general trust law principles.
To ensure that Jersey’s position as a leading trusts jurisdiction is maintained, the law has been amended six times since 1984 and, after a consultation last year, we’re awaiting the seventh amendment.
In producing the proposed amendments, the States of Jersey and Jersey Finance's Trusts Law Working Group considered the island’s competitor jurisdictions to ensure that we’re not at a competitive disadvantage on the international stage.
The proposed amendments aren’t ground-breaking or revolutionary, but they do clarify certain areas of the existing law and introduce new provisions, all with the aim of preserving the integrity and flexibility of Jersey trusts; developing existing jurisprudence; and evolving industry practice in order to build upon the strong foundations already in place.
The seventh amendment is rather technical, but we set out below a summary of some of the amendments that we're expecting to be made.
Rights of beneficiaries to information
The provision in the current law regarding the information to which a beneficiary is entitled is confusingly drafted. The amendment will clear this up while also proposing to:
• Allow the terms of a trust to restrict or enlarge a beneficiary’s right to information
• Provide the trustee with discretion to refuse disclosure if it considers that it’s in the interest of the beneficiaries to do so – noting that a beneficiary should have the right to apply to the court where insufficient information is forthcoming.
Unlike Guernsey, however, the law won’t be amended to allow a prohibition on the disclosure of any information whatsoever, because it’s considered that to do so would hinder a beneficiary’s ability to hold a trustee to account for its actions.
Reservation of settlor powers
The law permits a settlor to retain certain powers in relation to a trust. The powers that may be reserved by a settlor are listed in the law. The amendment proposes to:
• Allow a settlor to retain all the powers listed in the relevant provision of the law
• Confirm that if a settlor reserves one or more or all of those powers, such reservation shall not constitute that settlor a trustee
• State that any powers reserved shall cease upon death, incapacity or bankruptcy, unless stated otherwise in the trust instrument.
Trustee indemnities
It’s common practice for a retiring trustee to require the incoming trustee to indemnify its officers and employees against particular liabilities that might ensue following the change of trustee.
The law will be amended to reflect this practice so that officers and employees will be able to benefit directly from indemnities from a new trustee (including where an indemnity has been extended or renewed by subsequent trustees).
It’s also common practice for indemnities to be sought from a recipient beneficiary upon distributions being made during the trust period and on its termination. The law will also be extended to expressly provide for that.
Variation
The Royal Court of Jersey has limited statutory powers to vary a trust under the law. It can currently vary a trust on behalf of minors, interdicts, unascertained or unborn beneficiaries, provided that it’s of the view that it’s for their benefit.
The amendment seeks to allow the court to provide consent to a variation on behalf of beneficiaries who the court is satisfied cannot be found, despite proper attempts to locate them, or who, due to their number, it’s practically unfeasible to contact, and then only if the court determines that such variation is in their best interests.
Statutory lien
The amendment will also introduce a statutory lien for trustees, which will bring Jersey in line with Guernsey on this particular point. It’s proposed that a trustee should have:
• A statutory non-possessory lien to secure its proper expenses and liabilities even after having retired and having transferred the trust property to a new trustee
• A statutory lien to secure the payment of authorised remuneration to the trustee and reimbursement of all expenses and liabilities reasonably incurred by the trustee.
We anticipate the amendment being lodged with the States of Jersey shortly, and hope it will be in force by the end of 2017. It will bring some much-needed clarity for trust practitioners and help retain our competitive advantage.