Changes to Jersey’s trusts law are good news for the industry.

Jersey has made changes to its trust law which will come into force later in 2012. The changes will further enhance Jersey’s reputation amongst wealthy families and their advisors and for trust professionals, it also provides practical solutions to some challenges the industry has faced in recent years.

The most significant changes are

• designed to ensure that any issues relating to a Jersey trust are decided in accordance with Jersey law, rather than the law of a country which may not even recognise the concept of trusts.
• Foreign courts, in particular the English divorce courts, have shown a willingness to use their own laws to try to modify the terms of Jersey law trusts in favour of people who may not even be beneficiaries of the trust (e.g. one of the divorcing spouses).

The changes make it clear that foreign courts will not be able to tamper with a Jersey trust – all issues must be determined in accordance with Jersey law and any judgments of a foreign court not based on Jersey law will not be successful.

Foreign laws are not wholly excluded though, and will have a continuing role, for example, in determining issues over assets situated within the foreign court’s jurisdiction.

The amendments also

• enhance and clarify the provisions allowing the person who creates the trust (the settlor) to enjoy a continuing say in the administration of the trust without impeaching its validity.
• Settlors are often hesitant to hand over their assets to a trustee and lose complete say over how the assets are managed; the reservation of some powers can qualm their hesitation.

Jersey previously introduced non-charitable purpose trusts (i.e. trusts which do not have individuals as beneficiaries but can carry out business transactions or philanthropic works).

• An amendment is made to redefine “purpose” to clarify that the simple ownership of assets is a sufficient purpose.
• The holding of assets, whether as part of a commercial transaction or otherwise, has become one of the more popular uses of such purpose trusts but onshore advisors questioned whether it was a proper purpose; this amendment puts the issue beyond doubt.

Other amendments

• will allow trustees to charge reasonable fees where no charging clause is included in the trust document, and will allow trustees to contract with themselves.
• It is a longstanding principle that a person cannot contract with himself but this hampers trustees where they act for several trusts for the same family by preventing them from carrying out transactions between such trusts (such as a sale and purchase of shares in a family company).

These changes provide certainty in areas which were previously questioned and introduce practical solutions.