Jersey trusts for U.S. citizens

Jersey trust legislation and its organization

The Trusts (Jersey) Law 1984 sets statutory rules for trusts but expressly says it does not codify the entire law on trusts. That law also covers trustees and people with interests under trusts. A trust is a Jersey trust when Jersey law governs it.^[1]

The legislation separates provisions applying only to Jersey trusts from provisions applying only to foreign trusts. Its provisions of general application extend to Jersey trusts and, where the context permits, foreign trusts. Supplemental provisions address application of the legislation and qualifications to its operation.^[1]

Article 4 identifies governing law from the trust's express terms or their implication. If neither settles the question, governing law is the law with the closest connection when the trust was created. Relevant factors include the designated administration location and property location, along with trustee residence or business and the trust's objects.^[1]

Jersey's legislative framework distinguishes among Laws, Regulations and Orders. Regulations generally supplement a parent Law under authority granted by that Law. A Minister can make an Order only when authorized by a Law or Regulations.^[6]

Trust arrangements and duration; who does what

The legislation describes trusts for beneficiaries and trusts for purposes. It also covers arrangements combining both. Under Article 2, a trustee holds property in a capacity distinct from owning it in the trustee's own right. A beneficiary may be someone whose identity is not yet established or who does not yet exist.^[1]

Article 7 permits a trust to arise through an oral declaration or conduct. It may also arise through a written instrument, including a will or codicil. A unit trust requires a written instrument. Its definition concerns beneficiaries participating in profits or income from property held or managed through the arrangement.^[1]

The Law also addresses trusts for non-charitable purposes through a separate office called an enforcer. Article 12 requires terms providing for that appointment and a replacement whenever the office is vacant. Article 13 prevents the same person from holding that office and serving as trustee.^[1]

A Jersey trust can have an unlimited duration unless its terms provide otherwise. Article 15 also removes rules against perpetuities and excessive accumulations. The trust's own terms therefore remain relevant to whether it has a specified endpoint.^[1]

Beneficiaries can be identified by name or determined through a class or relationship. Trust terms may permit additions to or exclusions from the beneficiary group, and may attach an obligation as a condition of benefit. A settlor or trustee may also hold a beneficiary interest.^[1]

At least one trustee is required, subject to the trust terms. Trustee duties include administering the trust according to its terms and maintaining accurate accounts and records. Trustees must also keep trust property separate and identifiable. Multiple trustees generally act together, although the terms may authorize majority decisions.^[1]

Regulation and public registration categories

The Jersey Financial Services Commission registers professional trustees for trust company business under the Financial Services (Jersey) Law 1998. The Trusts Law's definition of professional trustee expressly connects that status to registration under Article 9 of the financial services legislation.^[1]

The Commission's regulated-entity register identifies trust company business activities through class descriptions. Class M covers acting as, fulfilling the role of, or arranging for another person to act as a nominee shareholder or unitholder for someone else.^[3]

The Commission's application process also addresses principal and key persons through its personal questionnaire portal. The Commission does not accept paper applications and provides an online route for submitting and updating that information.^[2]

Jersey tax treatment of trust distributions

Revenue Jersey describes income distributions from trusts or settlements as subject to Jersey tax. Its personal tax guidance states that 20% is deducted from income from a Jersey trust before payment. Recipients must still report that income on their personal tax returns.^[4]

Revenue Jersey explains that disclosure of total income is needed to calculate some tax reliefs. The same guidance defines an overseas trust or settlement by reference to trustees residing outside Jersey.

CRS and FATCA information exchange

Jersey's CRS rules govern automatic exchange of financial account information through domestic regulations. Revenue Jersey says those regulations set responsibilities for Jersey financial institutions. They also cover reporting arrangements involving the Comptroller.^[5]

Revenue Jersey accepts consolidated CRS reports containing information for multiple jurisdictions, as well as separate jurisdiction reports. The reporting institution remains responsible for identifying the jurisdiction to which each client's information is transmitted.^[5]

Jersey has a Model 1 FATCA intergovernmental agreement with the United States that is in force. Treasury describes FATCA reporting as covering financial accounts held by U.S. taxpayers and certain foreign entities in which U.S. taxpayers have a substantial ownership interest.^[8]

FATCA and CRS reports are separate submissions under Revenue Jersey's guidance. A client resident in both the United States and a CRS jurisdiction is included in both the FATCA report and the CRS report.^[5]

U.S. tax and foreign trust reporting

U.S. citizenship falls within the IRS definition of a U.S. person. The IRS describes information reporting and income tax consequences for U.S. persons who create foreign trusts, transact with them, own them under grantor trust rules, or receive distributions.^[10]

A U.S. person treated as an owner under the grantor trust rules generally reports the trust's income. For a U.S. beneficiary receiving a distribution from a foreign nongrantor trust, the IRS generally describes reporting the beneficiary's share of distributable net income.^[10]

Form 3520 generally reports specified foreign trust transactions and ownership. The IRS lists creation, transfers, loans and distributions among relevant events. It also includes uncompensated use of trust property. The instructions require an owner to complete Part II even without transactions during the tax year.^[10][11]

Form 3520-A addresses annual information for a foreign trust with a U.S. owner. The IRS places responsibility on the U.S. owner to ensure that the trust files a complete return and supplies required statements. If the trust does not file, the owner files a substitute with Form 3520.^[10]

Form 8938 may apply when the combined value of specified foreign financial assets exceeds the applicable reporting thresholds. FBAR may apply to a financial interest in, or signature authority over, a foreign financial account. The IRS identifies both as possible requirements alongside foreign trust returns.^[10]

The IRS describes conditional exceptions to Forms 3520 and 3520-A for certain retirement and benefit trusts. Eligibility depends on the individual and trust meeting the stated requirements. Those exceptions do not remove any applicable Form 8938 or FBAR reporting obligation.^[10]

Court and legal system structure

The Judicial Greffe provides administrative support and legal services for Jersey's courts. The Government's institutional description groups the courts with the Judicial Greffe and the Probation Service. It also includes the Tribunal Service and Viscount's Department within the administration of justice.^[7]

For the Trusts Law, the defined court is the Inferior Number of the Royal Court. Jersey's legislative framework also assigns the Royal Court a registration role for Laws, subject to the special procedure described for taxation legislation.^[1][6]

Primary sources

The Jersey Legal Information Board publishes Jersey legislation, while the Government's Legislative Drafting Office explains legislative forms. The Jersey Financial Services Commission supplies registration information. Revenue Jersey publishes distribution and CRS guidance.

The U.S. Department of the Treasury supplies the FATCA jurisdiction table.

More on Jersey

Questions and answers

Related resources

Related glossary terms

• Corporate trustee: A corporate trustee is a corporation under Jersey law. The law explains how it acts for a trust and relates to an individual trustee or trust corporation.
• Charitable trust: A charitable trust holds property for charitable purposes, and trust laws relate it to purpose trusts and to the other categories of trust used in planning.
• Recognition of a trust: The Hague Convention describes recognition of a trust, its minimum legal effects, and limits tied to applicable law. Jersey law also addresses recognition.

Related articles and guides

• Cook Islands Trust Legislation: Cook Islands requirements for international trusts and the supervision of trustee companies under the Trustee Companies Act 2014, for U.S. citizen readers.