Estate planning in Jersey
Jersey, officially the Bailiwick of Jersey, is a British Crown Dependency located between the northern coast of France and the southern coast of England. Jersey is a self-governing parliamentary democracy under a constitutional monarchy. Jersey has its own financial, legal and judicial systems and is a financial centre which attracts foreign investors who want to reduce their tax burden.
Jersey is an ideal location to establish a trust which holds multiple international assets. Jersey is politically and economically stable and has a well-developed legal system. Jersey recognises trusts and provides one of the highest standards worldwide in terms of protection for beneficiaries. For example, all professional trustees must be regulated and licensed by the Jersey Financial Services Commission.
A Jersey trust is a trust of which the trust deed states that the trust is to be governed by Jersey law. The trustee of a Jersey trust does not have to be resident in Jersey and there are no government fees and no duties to be paid when creating the trust or while the trust is in existence.
Jersey law contains specific provisions which do not comply with forced heirship laws (laws of certain countries which require specific portions of a person’s estate to be left to specified persons). In other words, a settlor can transfer his assets to a Jersey trust during his lifetime and Jersey law will not give effect to any rule of another country relating to inheritance or succession which says that such a transfer is not allowed. This means that a Jersey trust allows the settlor the absolute freedom to decide who will inherit his assets.
A settlor of a Jersey trust may reserve certain powers for himself:
- The settlor may restrict the exercise of any powers or discretions of a trustee by requiring that they shall only be exercisable with the consent of the settlor or any other person specified in the terms of the trust;
- The settlor may revoke, vary or amend the terms of a trust;
- The settlor may advance, appoint, pay or apply income or capital of the trust property or may give directions to do the same;
- The settlor may appoint or remove any trustee, enforcer, protector, beneficiary, investment manager or adviser.
Jersey has no capital taxes, inheritance taxes, gift taxes or wealth taxes. Jersey does impose income tax but the trustees of a Jersey trust will not be liable to income tax on the income from trust assets where none of the beneficiaries is Jersey resident. In other words, assets and funds transferred to a Jersey trust can grow and accumulate completely tax-free within the trust.
Jersey, a common law jurisdiction, enacted the Foundations (Jersey) Law in 2009. This legislation specifies how Jersey foundations are to be created and managed.
A Jersey foundation needs to have a charter, which is open to public inspection, and regulations, which are private. The Jersey foundation is a separate legal entity which is managed by a council of persons (these persons can be both natural or corporate persons). The 2009 Law requires one of the council members to be a Jersey regulated entity, known as the qualified member.
A Jersey foundation has beneficiaries and the law provides that no fiduciary duties are owed to them by the council. The beneficiaries are not entitled to information about the foundation’s assets, unless they have a vested interest.
Council members of a Jersey foundation are always accountable to a guardian who is appointed under the foundation’s regulations. The guardian of a Jersey foundation cannot be a member of the council unless the guardian is the qualified member. The guardian of a Jersey foundation needs to ensure that the council carries out its functions.
The Jersey foundation is an entity in its own right, can sue and be sued and its property is available to its creditors. Jersey foundations have characteristics of both a company and a trust which makes them interesting entities for taxation purposes. A Jersey foundation can be drafted in various ways which affects the tax treatment in different jurisdictions.
Jersey has no capital taxes, inheritance taxes, gift taxes or wealth taxes and Jersey foundations are not subject to income tax in Jersey.
Do not hesitate to contact us if you would like to know if a Jersey trust or foundation could be the perfect solution for you to protect your family and to save taxes.