Operation of a trust
A Trust becomes effective once the documents have been signed by the Settlor and the Trustees and the initial property to be settled has been conveyed to the Trustees. In making the transfer of assets to the Trustees, the Settlor is effectively making a gift of those assets, and as a consequence, ceases to have any beneficial interest in them. Accordingly, they no longer form part of the Settlor's estate. On the death of the Settlor, they continue to be subject to the Trusts.
Whilst the Trust Instrument will name the Beneficiaries who are capable of benefiting from the Trust Funds, it must be appreciated that for the duration of the Trust Period those beneficiaries have no absolute right to benefit from or participate in the Trust property unless or until the Trustees exercise their discretion in favour of one or more of them. However, the Trustees take from the Settlor at the outset a letter reflecting the current wishes of the Settlor with regard to the administration of the Trust Fund. Such a Letter of Wishes is an informal, private, document which neither forms part of the Trust Instrument nor in any way fetters the discretionary powers vested in the Trustee. In practice, the Trustees are guided accordingly.
When the Trust is established, it is customary for a nominal sum of money to be settled on the Trustees. There are, however, provisions in the Trust Instrument for further property to be added to the Trust Funds during the Trust Period and it is usual for the greater part of the Trust assets to be transferred shortly after the Trust has been established. During the Trust Period the Trustees will hold the Trust Property at their discretion for any one or more of the discretionary Beneficiaries of the Settlement.
Trust Instruments are drafted to give the Trustees the greatest degree of flexibility and powers in the administration of the Trusts.
Whilst the Trust may exist until long after the Settlor's death, it can be terminated at any time by the Trustees. The duration of a Jersey Trust is no longer limited in law and specific Trust legislation has been enacted which provides that a Trustee must exercise diligence and integrity.
In the above context, Jersey Trusts are completely free of Jersey taxation. However, there is no requirement to register or record Jersey Trust Instruments with any Authority and therefore anonymity and confidentiality apply.
We normally arrange for the drafting of Trust documentation in conjunction with our lawyers and are happy to liaise with clients' lawyers regarding the proposed documentation.
Trust Instruments and related paperwork can be tailored to the specific requirements of each client and that this has been essentially an illustration of the characteristics of a typical Offshore Discretionary Settlement.