New Guernsey Trust Law by Michael Betley
The Trusts (Guernsey) Law, 2007, becomes effective and commences operation from Monday 17 March 2008. Some of the most significant changes to the legislation include:
The introduction of (non-charitable) Purpose Trusts
Removal of limits of the length of a trust’s duration – allowing perpetual trusts
Clarification of the position of retiring trustees and making the transfer process more streamlined
Clarification of the circumstances under which information has to be given to beneficiaries
Abolishment of the liability of directors of corporate trustees based in Guernsey or acting as trustees of Guernsey law trusts, particularly as a way to encourage greater use of Private Trust Companies
Revision of arrangements regarding limitation periods and Alternative Dispute Resolution
By way of a brief comparative with the old Trusts (Guernsey) Law, 1989, the principal changes are:
(s6) – No prohibition on creating a trust of Guernsey realty so long as trust is in writing.
(s12) – Purpose trusts for non-charitable purposes are permitted so long as trust is in writing.
There must be a provision for the appointment of an enforcer who will oversee compliance with the non-charitable purpose. Non charitable purpose trusts will not be restricted to commercial uses and will not have beneficiaries. Unlike Jersey law purpose trusts will be permitted as a rule rather than the exception to the rule.
(s14) – Judgments from other jurisdictions will be unenforceable in Guernsey if inconsistent with the new Guernsey law. Judgment may be enforceable by an order from the Royal Court which protects the interests of the beneficiaries or the proper administration of the trust.
(s15) – The Settlor is permitted to reserve certain powers without invalidating the trust. A trustee complying with a valid exercise of such a power will not be in breach of trust.
(s16) – Perpetual trusts are now permitted rather than being restricted to 100 years, as was the case.
(s26) – A trust instrument may restrict the right of information to the beneficiaries subject to the right to apply to Court who may grant disclosure of information if such disclosure is in the interests of a beneficiary or for the proper administration or enforcement of the trust.
(s34) – Trustees may grant a power of attorney for up to three years or an unlimited period if providing security over trust property.
(s35) – Professional indemnity insurance is to become a legitimate expense of the trust but not to the extent to protect a trustee against fraud, wilful misconduct or gross negligence.
(s38) – Trustees are not obliged to reveal deliberations, reasons for decisions or contents of a letter of wishes unless so ordered by the Court.
(s43) – An indemnity for a retiring trustee out of trust property must not be greater than that which could have been provided had the trustee remained a trustee without the Court order or consent of all beneficiaries. An indemnity to a retiring trustee who is not party to the indemnity is enforceable.
(s44) – A trustee has a non possessory lien over trust property for all expenses and liabilities properly incurred. This lien continues after retirement unless expressly waived, the property is no longer identifiable or is in the hands of a bona fide purchaser for value.
(s62) – A judgment in action against a trustee for breach of trust is binding on all beneficiaries so long as they were represented in the action or had notice of the action and a reasonable opportunity to be heard.
(s63) – If permitted by the trust deed or authorised by the Court any dispute between a trustee and a beneficiary may be referred to an arbitrator or mediator and will bind all beneficiaries so long as they had notice of the action and a reasonable opportunity to be heard. Minors and unascertained beneficiaries must be independently represented.
(s71) – Actions against a trustee have a three year limitation commencing from the beneficiary?s knowledge of the breach of trust unless for fraud or conversion for own use. In case of a minor the limitation will commence from the earlier of either the beneficiary attaining eighteen years or the beneficiary?s guardian obtaining knowledge. In all cases there is a maximum limitation period of eighteen years.
(s83) – No director of a corporate trustee will be under any liability as a guarantor of the trustee where there has been a breach of trust by the trustee unless proceedings commenced prior to the new law coming into force.