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Trust Law/Level VIII · Trusts of the world/8.1 Common-law systems/Lesson 6

The Channel Islands and the Crown dependencies

How Jersey, Guernsey and the Isle of Man govern trusts under their own laws, what Jersey’s ‘firewall’ says about foreign claims, how trust companies are regulated, and how the islands relate to the United Kingdom.

Education, not legal advice. Trust law changes from country to country and state to state, and the right structure depends on your situation. Anything you sign should be drafted or reviewed by a qualified lawyer where you live.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Jersey levies no capital gains or inheritance tax, and Guernsey and the Isle of Man no capital gains tax, so the island layer adds little tax. Catch: settlors and beneficiaries stay taxable where they live, and islands report under FATCA and the Common Reporting Standard.
  2. A family member acting as trustee, not by way of business, needs no Jersey trust company registration; the Financial Services (Jersey) Law 1998 covers business activity only. Catch: that trustee still owes full duties under the Trusts (Jersey) Law 1984.
  3. A Jersey trust can arise by oral declaration, written instrument or conduct, though a unit trust must be written (Article 7). Catch: an unwritten trust is hard to prove to banks, courts or tax authorities, so a short written deed is the practical, cheap evidence.
  4. Article 9’s firewall keeps a Jersey trust’s validity under Jersey law despite foreign heirship or marital claims, and Article 9(4) blocks inconsistent foreign judgments. Catch: it cannot validate transfers of property the settlor did not own, and foreign courts still act on local assets.
  5. An island trust that acquires UK land, or has a UK-resident trustee entering a UK business relationship, must register on HMRC’s Trust Registration Service. Catch: registration itself is compulsory, though HMRC releases the data only on legitimate-interest money-laundering requests, not to the public.

MaterialsThe Trusts (Jersey) Law 1984, free in its current revised form on jerseylaw.jeThe Trusts (Guernsey) Law, 2007, free on guernseylegalresources.gg, and the Isle of Man Trustee Act 2001, free on legislation.gov.imLesson 1.2.7, on the Hague Trusts Convention, and lesson 8.2.7, on recognising a foreign trust

Wonder

  1. Can a court in another country use its forced heirship rules to undo a Jersey trust?
  2. Why do three small islands, none of them part of the United Kingdom, each have their own trust law?
  3. Who supervises the companies that act as trustees in the islands?

Explore

  1. Jersey, the Bailiwick of Guernsey and the Isle of Man are Crown Dependencies. They are not part of the United Kingdom: each has its own legislature, courts, tax system and laws, while the UK Government is responsible for their defence and international representation. Jersey and the Bailiwick of Guernsey, which also includes Alderney, Sark and Herm, are the Channel Islands; the Isle of Man lies in the Irish Sea. The Channel Islands’ law has roots in Norman customary law, while the Isle of Man has its own common-law tradition. This lesson describes their trust laws and recommends none.
  2. Jersey’s trust statute is the Trusts (Jersey) Law 1984, which came into force on 23 March 1984 and has been amended many times since. It sets out how a trust may be created, what property may be held on trust, the duties and powers of trustees and the court’s powers over trusts. Under Article 7, a Jersey trust may come into existence in any manner, including by oral declaration, by a written instrument such as a will, or by conduct, although a unit trust must be created in writing. Jersey also allows non-charitable purpose trusts (lesson 9.2.6). Its current text is free on jerseylaw.je.
  3. Article 9 of the Jersey law is often called a firewall. It provides that the validity and interpretation of a Jersey trust, the validity of transfers into it, the settlor’s capacity, the trust’s administration and the beneficiaries’ interests are decided by Jersey law, and that no foreign law affects them, without regard to whether a foreign law does not recognise trusts, or whether the trust defeats rights given by foreign law because of a personal relationship, such as marriage, or by way of heirship rights, such as forced heirship. Under Article 9(4), a foreign judgment about a trust is not enforced to the extent it is inconsistent with the Article.
  4. Article 9 has its own limits. It does not validate a transfer of property the settlor did not own or have power to dispose of, a trust of land outside Jersey that is invalid where the land is, or a will invalid under the law of the testator’s domicile, and the terms of the trust can provide otherwise. It also cannot stop courts elsewhere from dealing with assets in their own territory. Guernsey’s current statute is the Trusts (Guernsey) Law, 2007, which has its own rules on questions to be decided by Guernsey law. Each statute’s exact wording is in its official source.
  5. The Isle of Man’s Trustee Act 2001 sets a statutory duty of care for trustees and rules on investment, acquiring land and appointing agents, nominees and custodians, following the same pattern as the Trustee Act 2000 of England and Wales (lesson 8.1.2). The Hague Trusts Convention (lesson 1.2.7) applies to all three islands through extensions by the United Kingdom: according to the HCCH status table, it has applied to the Isle of Man since 1 January 1992, to Jersey since 1 March 1992 and to the Bailiwick of Guernsey since 1 July 1993. Its rules on recognising foreign trusts, and their limits, are covered in lesson 8.2.7.
  6. Trust companies are licensed and supervised in each island: by the Jersey Financial Services Commission, by the Guernsey Financial Services Commission, whose licensing of fiduciaries began in 2001 and is now governed by a 2020 law, and by the Isle of Man Financial Services Authority, formed in 2015. Supervision covers matters such as who runs the business, anti-money-laundering controls and conduct. The islands set their own taxes but take part in international exchange of tax information, including under FATCA (2010) and the OECD Common Reporting Standard (2014), so how a trust is taxed also depends on the countries where its settlor and beneficiaries live.

Key facts

  • Jersey, Guernsey and the Isle of Man are Crown Dependencies with their own laws and courts; they are not part of the United Kingdom, which is responsible for their defence and international representation.
  • The Trusts (Jersey) Law 1984 came into force on 23 March 1984 and has been amended many times since.
  • Under Article 9 of the Jersey law, Jersey law decides questions such as a Jersey trust’s validity and administration, regardless of foreign heirship rights or rights arising from a personal relationship.
  • Under Article 9(4) of the Jersey law, a foreign judgment about a trust is not enforced to the extent it is inconsistent with Article 9.
  • Guernsey’s trust statute is the Trusts (Guernsey) Law, 2007, and the Isle of Man’s Trustee Act 2001 sets a statutory duty of care for trustees.
  • Through UK extensions, the Hague Trusts Convention has applied to the Isle of Man since 1 January 1992, Jersey since 1 March 1992 and the Bailiwick of Guernsey since 1 July 1993.

Exercise nine, six, three, one

9CollectList up to 9 features of the islands’ trust laws or regulation described in this lesson or a source you are reading (some sources give fewer), such as a statute, a firewall rule, a limit on that rule, a regulator or a treaty.
6ClusterSort them into 6 categories: constitutional status, Jersey trust law, Guernsey trust law, Isle of Man trust law, firewall rules and their limits, and regulation and international rules.
3DistillReduce the 6 categories to 3 groups: who makes the law, what the law says about trusts, and how outside rules and regulators reach trusts in the islands.
1CrystallizeWrite 1 sentence explaining, in your own words, what a firewall provision such as Jersey’s Article 9 does and one thing it does not do.

Fact check

Dates, figures and claims checked against the published sources listed below.

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PT ES ZH JA KO RU DE FR MS