Establishing a Trust in Jersey is relativity simple, but one of the most commonly asked questions Fiduchi receives is 'how do I establish a Trust in Jersey?'
The below eight steps provide a brief outline of the various stages an individual should consider, as well as the different types of trusts and their uses.
It is important to ensure that Fiduchi are involved early on in the decision-making process to ensure that we understand the client’s objectives and to suggest the most appropriate truststructure to be established. It is also important that appropriate tax and legal advice is taken in the home jurisdiction of the client, to ensure no tax, legal or regulatory breaches occur as a consequence of establishing an offshore structure.
An explanation of the purpose of the offshore structure will be required including information such as the proposed activities and transactions, the purpose of those activities and thevarious parties involved.
If there is a tax or legal rationale for establishing the offshore structure, then an understanding of this rationale will also be needed (this is often most easily achieved by providing a copy of the tax or legal advice obtained by the client). Information regarding the significant assets and liabilities that are likely to be held in the structure will also be required.
Jersey Law requires that the identity and residential address of the various parties involved in the offshore structure be appropriately verified. For individuals, this usually involves providing an appropriate photographic document, such as a certified copy of their passport, ID card, driving licence or similar, to verify their identity.
To verify the individual’s address, it is usual for a certified copy of a recent utility bill to be provided that clearly records the residential address. In situations where the address is recorded as a post office box number, alternative evidence may need to be provided.
International regulations require that Fiduchi obtains a full understanding of the client’s wealth and their path to wealth. This is often best obtained by the provision of a curriculum vitae.
In addition, Fiduchi must have a documented understanding of the source of any fundstransferred into trust.
Appropriate evidence to verify the source of funding and wealth will need to be provided, such as a reference from suitable referee or a copy of audited accounts or a transactioncontract.
Independent references should be provided on the settlor. Two independent references should be provided from suitable referees such as a bank with which the settlor has maintained a long-standing relationship, a legal advisor or accountant.
There are a number of different types of trust that could be used - determining the choice will depend on the needs of the beneficiaries and any tax or legal considerations.
The most commonly used trusts are as follows:
This is the most commonly used trust, providing the trustees with complete discretion to manage the assets and income in accordance with the beneficiaries’best interests.
This type of trust may be used in circumstances where there is a desire by the settlor to preserve the capital of a fund for certain beneficiaries, but to permit other beneficiaries to receive the income arising from the assets. The trustees must distribute the income earned in the trust to those beneficiaries with a specified right to receive it, but retain discretion over the capital.
A typical example when this type of trust is used is when a settlor wants his spouse to take benefit from the use of the family house for the remainder of her life and for the children to take benefit after she dies.
A reserved powers trust allows a third party to the trust (usually but not necessarily the settlor) to retain certain powers in respect of the trust. These powers may allowthe power holder to give binding instructions to the trustee over particular aspectsof the trust, such as how the trust’s assets are invested or who may benefit from the trust and in what circumstances.
Trusts of this type offer flexibility and can be attractive to settlors from jurisdictions unfamiliar with the trust concept, but care must be taken to ensure that the reservation of any particular power does not give rise to any adverse tax or legal consequences.
These are trusts that are set up for a defined purpose as opposed to being set up to benefit specific beneficiaries or charities. These trusts can be used in any number of ways and can be applied to private family trusts as well as to international finance transactions or trusts used for social benefit projects.
These trusts require the appointment of an ‘enforcer’, whose duty it is to enforce the trust in relation to the stated purpose but otherwise, they have essentially the same characteristics as all other Jersey trusts.
Once the trust is established it is common for the settlor to provide guidance to the trustees on the administration of the trust fund by way of a letter of wishes. A letter of wishes is not a legally binding document and the trustees do not have to follow the guidance of the settlor.
However, in practice it proves to be a useful tool that the trustees use to facilitate their decision making and to determine how best to manage the trust assets in the best interests of the beneficiaries and in accordance with the original purpose of the trust. For example, a letter of wishes may give guidance on how to allocate between the beneficiaries the benefit taken from the trust assets following the death of the settlor.
A letter of wishes is usually provided to the trustees when the trust is created and may be amended from time to time. Subsequent letters of wishes can be provided at a later date.
Most trust structures can be established within a week. However, the timeframe is usually determined by the speed with which the various information required above can be gathered and how many amendments (if any) are needed to the standard trust instrument that we can provide.
Clients are often advised to set up trusts as part of their wealth planning arrangements but for some, an offshore trust may hold a certain mystique. The purpose of this article is to explain some of the basics in establishing a trust together with the potential benefits that may be available.
Many people still seem to associate the use of offshore trusts solely with tax planning. However, the reality is that offshore trusts now offer much more than that.
Based on research conducted in November of last year by Hubbis, in conjunction with Jersey Finance, there is an estimated USD 1 trillion due to be passed down in the next decade from older Middle Eastern patriarchs and matriarchs to the younger generation.
Fiduchi is a regulated provider of trust and company services, and therefore its experts are able to assist you in all aspects of ensuring continued compliance in the constant changing landscape. At Fiduchi we take a pragmatic approach to ensure your interests, whether personal or business, are safeguarded. Because of this, we don’t apply a ‘one size fits all’ methodology, rather the contrary. Our director led teams will assess your needs to ensure we take into consideration all your requirements and provide the bespoke service you require.