The law of trusts in Jersey (part of the Channel Islands) underwent massive changes in September 2006 that may prove to be a boon to intellectual property (IP) commercialisation ventures using Jersey trusts.

It is common to use Jersey trusts with a corporate trustee, which can be an "exempt company" under Jersey laws.

The most crucial feature of trusts in Jersey is that trustees are not subject to Jersey tax provided the beneficiaries are not resident in Jersey and the trust does not derive income from sources within Jersey. Importantly, Jersey does not impose capital gains tax on disposals in Jersey.

A discretionary trust may be not only an ideal vehicle for  holding and disposal of  IP, but also for efficient distribution of income and capital to its beneficiaries.

Until now, a  major problem faced by settlors of a trust  (owners of IP) in Jersey was that they lost control over the trust assets  (IP) to the trustees, who were able to ignore the wishes of the  owner of the IP in dealing with the assets of the trust and also in decisions about their disposal. The amendments to the law have decisively changed this position.

The three relevant amendments relate to:

• reservation of powers of trust settlors, who would be the owners of IP assets;
• disregard of foreign law claims in respect of trust disputes; and
• removal of the rule that a trust cannot continue beyond a specific period.

The amendments allow the owner-settlor to reserve almost all powers of the trustee to himself or herself so that, unlike in the past, he/she is not compelled to rely on the trustee for decisions on distribution of income and disposal of trust assets, especially the IP.

Any disputes arising in respect of trusts according to any foreign law will not have any effect on Jersey trusts. Therefore claims against the settler-owner under Australian law will not be taken into consideration by the courts in Jersey.

Unlike in other jurisdictions, the trust will not be limited to a specified period after which the trust assets must vest absolutely in the beneficiaries. This amendment will allow the trust assets to be transferred to another trust without regard to the rule that the assets must vest within a specified period.

This short article overviews a limited area of taxation of trusts in Jersey. The article is of a general nature. Before using trusts in Jersey you should seek professional advice and review your specific circumstances. 

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