The Trusts (Guernsey) Law 2007, came into effect during March 2008.
The jurisdiction of Guernsey has been a centre for the provision of trust services for over 50 years and enjoys a high reputation. The revised legislation provides a modern statutory basis for trust management and introduces greater flexibility in a number of areas.
Non-Charitable Purpose Trusts
One of the most significant changes is the introduction of non-charitable purpose trusts. Previously, under Guernsey Trust Law, to be valid a trust had to have one or more beneficiaries, or be created for charitable purposes. If a trust had no identifiable beneficiary, unless it was created for a charitable purpose, it was invalid.
The new law provides for the validity of non-charitable purpose trusts through enforceability. This is provided by the appointment of a person who can enforce the terms of the trust, an “enforcer”.
A trust formed for the purpose of property ownership is valid. In addition non-charitable purpose trusts can be formed for both commercial and non-commercial reasons, including the holding of special purpose vehicles.
Duration of a Trust
Trusts can be formed that have no perpetuity period, previously the time limit for a Guernsey trust was 100 years. Subject to the terms of the trust, existing trusts may also be made perpetual.
Where a high net worth family wishes to ensure that the benefits of a trust are preserved for many generations of descendants, advisers should carefully consider the use of a perpetual Guernsey trust.
The new law confirms that no Guernsey trust can be rendered void due to the fact that it defeats a claim under foreign matrimonial, civil partnership or heirship laws. The new law also enhances the defence of a Guernsey trust against other types of attack based on foreign law or from foreign courts. It is recommended that as far as possible, assets are held in Guernsey to guard against a foreign court seizing property or assets from within its jurisdiction.
The period during which claims could be brought against a trustee were not previously very clear and could potentially be very long.
The limitation period for bringing actions for breach of trust is clarified as 3 years from the date that the claimant first became aware of the breach. Exceptions to this are in the case of minor and unborn beneficiaries.
A maximum 18 year limitation period has been introduced from the date of the breach, for all matters other than trustee fraud.
Additional Security for Trustees
- Previously directors of corporate trustees were personally liable for losses due to breach of trust and had to act as guarantors. A solution has been found with the new obligation for corporate trustees to be covered by professional indemnity insurance.
- All trustees and former trustees are automatically provided with a non-possessory lien over trust property as security against liability. Notably the lien continues after the trustee retires, regardless of whether the assets are held by a successor trustee or a beneficiary.
Additional Key Features of the New Guernsey Trust Law
- The circumstances are clarified whereby information may be disclosed to an enforcer, any beneficiaries, the settlor or any trust officer.
- A settlor is permitted to reserve certain powers to himself, or grant certain powers to another to retain a degree of control over the trust. This can also absolve trustees from any liability resulting from the valid exercise of such powers.
The new Trust Law provides greater clarity on several Guernsey trust matters, introduces a number of innovative features and provides greater flexibility. It also adds a series of additional safeguards for trustees.
For further information on this topic please contact John Nelson at the Dixcart office in Guernsey, or contact us.