Protecting your physical and financial assets is essential if you are a business owner or high-net-worth individual. Jersey Trusts make it easy to prepare for business succession, and manage important financial decisions for your family.
By establishing a Jersey Trust and placing funds or real estate in the trust, you can defend yourself against predatory creditors, financially irresponsible estate claimants, and asset forfeiture.
When deciding where to establish your trust, it helps to know the basics of how trusts work in Jersey and the advantages of offshore trusts in Jersey.
What Is a Jersey Trust?
Jersey is an island country located about 14 miles off the coast of France. It is an internationally recognized jurisdiction for the creation of legal trusts, and many investors choose to establish trusts here because of the favorable regulations and tax laws.
The Jersey Trusts Law 1984 codifies the creation and management of trusts in Jersey. The law helps involved parties establish the boundaries between legal ownership and beneficial ownership of their assets.
Jersey Trusts are primarily used for the following:
- Succession preparation for an estate or business
- Charitable fund management
- Tax and inheritance planning
- Asset protection
- Privacy and confidentiality
Here are four important definitions to know to better understand the function of a Jersey trust:
- Settlor: An individual or organization who legally cedes ownership of assets to a trustee. The deed of trust is an agreement of terms between the settlor and trustee outlining the pertinent assets and beneficiaries.
- Trustee: The trustee is an individual (or private trust company) who manages the trust according to the law and agreed-upon obligations. A PTC is an authorized entity that serves as the trustee for family trusts. These companies only act on behalf of the settlor and their family.
- Beneficiaries: A beneficiary is an individual who has the right to benefit from assets listed in the trust.
Types of Jersey Trusts
Jersey Trusts accommodate a wide range of complex asset transfers and can be used for a variety of purposes. Let’s go over the types of trusts you can establish in Jersey.
A discretionary trust is an irrevocable trust that gives trustees significant freedom over their fiduciary agreements. For example, trustees can establish a precise time to execute benefits for beneficiaries and determine the method by which they receive designated assets.
This type of Jersey Trust does not give beneficiaries a legal right to decide how to divide or distribute funds. Settlors can provide a letter of guidance outlining how the trustee should distribute assets to beneficiaries. Trustees will generally take these wishes into account. However, these documents are not legally binding.
Purpose trusts do not distribute assets or funds among beneficiaries. Rather, they allow you to hold assets for non-charitable causes. These circumstances may include:
- Holding shares for a private company
- Holding assets off balance sheets – assets such as equipment not typically listed on a company’s balance sheet
- Pursuing philanthropic ventures (which may deviate from traditional charitable giving)
- Protecting financial transactions
Your non-charitable purpose trust must assign an enforcer to ensure the proper distribution and management of listed assets. Enforcers have an obligation to honor and execute the agreements outlined by your purpose trust.
Consider establishing a charitable trust when you need to manage the transfer of large financial or asset donations to a charity. Like a purpose trust, you can use this method to transfer assets for a defined purpose rather than to individual beneficiaries.
However, your trust does not need to designate an enforcer to carry out an agreement. The Jersey Attorney General has default authority over the execution of these trusts based on the terms of the deed of trust.
Reserved Powers Trust
Suppose you are a settlor who wants to retain certain rights or powers over your trustee. In that case, it may be necessary to establish a reserved powers trust.
Under a reserved powers trust, the settlor becomes the “protector.” Some of the reserved powers this type of trust provides include:
- The ability to revoke or alter certain contents of the trust
- The power to bind directions to your trustee (purchasing, selling, distributing assets, etc.)
- The authority to require settlor consent before trustees can exercise their own powers
- The power to use or add funds from the trust whenever you please
The protector’s legal powers over a trustee depend primarily on their country of residence and the individual circumstances of the trust agreement.
Uses of Jersey Trusts
Individuals and corporations rely on Jersey Trusts for several reasons.
Per the Jersey Trusts Law 1984, you do not need to register Jersey Trusts with your local authorities or any other public office. This advantage makes them one of the most secure and confidential wealth management solutions available.
Wealth Preservation and Management
Managing the distribution of physical real estate or shareholdings can be risky without a legally binding agreement. In some cases, you may not want to distribute these assets among certain family members when you pass away.
A Jersey Trust gives you control over who receives assets and prevents malicious claimants from seizing property. Jersey makes pursuing litigation against the settlor incredibly challenging for those outside of the trust.
Offshore trusts can also help you avoid losses at home due to financial mismanagement or domestic trust confiscations.
Jersey Trusts act as a firewall to prevent asset losses from foreign marriage or heirship laws. All stipulations of your agreements are subject to Jersey law and no other court.
Family Business Succession
You can use a Jersey Trust to protect your family business succession if you live in a jurisdiction that enforces forced heirship.
Some forced heirship laws require you to transfer your properties to a predetermined member of your family after your death. However, these laws may not allow you to distribute ownership of your business and assets to someone you trust.
Jersey Trusts give your trustees the power to hold and transfer your business according to your wishes. They can move financial accounts, real estate, and other essential assets to an offshore safe haven — allowing your chosen successor to secure ownership at the appropriate time.
Philanthropy and Charitable Giving
Jersey Trusts are suitable if you want to establish a tax-efficient avenue for charitable donations. With a legally binding trust agreement, you can dictate that certain assets or funds go to your chosen charitable or philanthropic causes and ensure your beneficiaries do not simply choose not to abide by your charitable objectives.
Benefits of Jersey Trusts
You can create a trust in several jurisdictions, but Jersey’s regulatory reputation makes it an attractive choice for asset protection trusts. Examine the primary advantages of establishing a Jersey trust in more detail.
Asset Protection and Privacy
You have no obligation to report your assets or succession agreements held in a Jersey Trust to any public office in Jersey. Consequently, creditors and foreign claimants have no vehicle to pursue your trust funds without your consent. However, reporting may still be required by your home country.
The only two parties who have access to these private documents are the settlor and the trustees.
Still, exceptions may apply if your beneficiaries are entitled to financial information outlined in your trust.
Estate and Succession Planning
Discretionary trusts are highly flexible for estate and succession planning. Upon the death of the settlor, trustees do not need to go to probate court to receive ownership of estates and assets. Beneficiaries may also avoid inheritance taxes in Jersey, so you can seamlessly transfer assets to family members or ownership of a business to a chosen successor after your death.
How are Jersey Trusts regulated?
Jersey’s trusts law is an internationally recognized and respected statute that supports mutual agreements between involved parties. Trustees operating in Jersey must have licensing from the Island Financial Commission.
However, Jersey law does not regulate the activities of PTCs in Jersey. Under the Financial Services (Jersey) Law 1998, PTCs are exempt from licensing requirements.
Jersey Trust Tax Treatment
Jersey trust taxes are neutral, and the jurisdiction does not tax gifts, inheritance, wealth, or capital gains. Jersey PTCs also pay no taxes on assets if the settlor is not a resident of Jersey. However, you may still have to pay taxes in your home country on assets held within the Jersey Trust.
It is recommended you consult a professional tax advisor before establishing your trust to ensure you follow all regulations and minimize your tax burden.
Flexibility of Assets Held in a Jersey Trust
Asset flexibility is one reason so many individuals establish Jersey tTrusts. Unlike some domestic trusts — which have limitations on what you can include — Jersey trusts are more accommodating. You can hold these types of assets in a Jersey Trust:
- Precious metals
- Paper currency
- Airplanes, yachts, and real estate
- Commercial investments
- Bank accounts
- Money market accounts
There is no limit to how many assets you can hold in a Jersey Trust.
Jersey Trusts Compared to Other Offshore Jurisdictions
Jersey Trusts function similarly to trusts in other offshore jurisdictions, like the Cook Islands. Like the Jersey Trust, a Cook Island Trust provides formidable asset protection. Both jurisdictions also enjoy excellent reputations for their zero-dollar tax incentives on capital gains and inheritance. Of course, your home country may still apply these taxes.
Nevis Trusts established in the Federation of Saint Christopher and Nevis are another offshore alternative to Jersey Trusts. Both offshore solutions are excellent for protecting your wealth and allow you to open bank accounts and LLCs under the name of your trust. Both Jersey and Nevis Trusts offer electronic transfers for secure management of your assets year-round.
Business owners, medical professionals, and financial advisors can utilize any of these trusts for asset protection and estate planning purposes. Still, you may wonder which trust is right for you.
At Blake Harris Law, we can help you protect your domestic and offshore assets with comprehensive legal strategies and counseling. Our reputable attorneys have years of experience helping our clients nationwide set up offshore trusts for asset protection. We are ready to answer any questions you have about offshore Trusts in jurisdictions including Jersey and the Cook Islands, so contact Blake Harris Law today.