Following our coverage in the September 2016 newsletter, a Consultation Response and Policy Paper has been released following a three month consultation on the Trusts (Jersey) Law Act 1984. A summary of the conclusions made in this paper are set out below:
Changes to be made
- An amendment to Article 29 dealing with the provision of information to beneficiaries. This will include that disclosure to beneficiaries can be restricted or enlarged by the terms of the trust with the trustee having discretion to refuse disclosure if such refusal is considered in the best interests of the beneficiaries as a whole. However, the principles of disclosure or what exactly should be disclosed will not be specified.
- The clarification of provisions in relation to the reservation of powers by a settlor. The key clarifications to be made include the addition of wording to reflect the multi-layered structuring of many trusts, a new provision confirming that the holding of a reserved power or interest does not of itself constitute the holder a trustee and the insertion of a presumptive provision that reserved powers cease to have effect on death, incapacity or bankruptcy of a powerholder.
- An extension of the indemnity provisions to cover lifetime distributions and to enable individual officers and employees to benefit from the indemnities and to permit them to directly enforce them in certain circumstances.
- Widening the options relating to accumulation and distribution of trust income. The default position will be retaining income in its character of income.
- The addition of wording confirming a presumption that unless specified otherwise, a trust will take effect upon the trust property vesting in the trustee.
- Increasing (to a limited extent) the court’s power to vary a trust where it is not possible to locate or consult all adult beneficiaries.
Issues still to be considered
- The need for a beneficiary at all times during the existence of a trust.
- The legitimé (or forced heirship) provisions and whether changes to them are required.
- The confirmation of the appointment of a corporate trustee post-merger.
Issues not requiring changes to the Act
- Insolvent trusts.
- Arbitration provisions.
- Trustees self-contracting in different capacities.
- The court’s further ability to vary trust or trust provisions.
In our view the most interesting change is the extension of the indemnity provisions to expressly include employees and directors. This is likely to be welcomed by trustees and insurers in particular in giving clarity to this position which in practice (due to indemnities given to directors and the directors and officers insurance coverage) had always assumed to be the case. Other changes are more of welcome clarification or in the case of information, codifying the existing case law.
It is notable that the two most radical changes, namely the arbitration possibility and insolvent trusts have not been incorporated although these were also perhaps the most contentious. In relation to insolvent trusts, Jersey is considering a separate statutory regime to govern the insolvency of trust structures. Emma Jordan, Head of Contentious Trusts at Taylor Wessing, has been appointed a member of the working group consulting on the possible statutory regime in relation to insolvent trusts.