Guernsey Trusts
Guernsey Trust Law
The legal system in Guernsey developed from ancient Norman French law and the Island has never had a comprehensive legal framework of trust law in the same way as England and the other English speaking offshore financial centres. This omission was rectified by the enactment of the Trusts (Guernsey) Law 1989, which codifies Guernsey trust law for the first time. Where the Courts need extra guidance they turn to English law. The Trusts (Guernsey) law 1989 imposes fiduciary duties on trustees, regulates the administration of trusts and safeguards the rights of beneficiaries. A Guernsey trust can have duration of up to 100 years and Guernsey is a party to the International Hague Convention of the Law applicable to Trusts and on their recognition.
A trust offers complete confidentiality in Guernsey. There are no reporting requirements for trusts, which do not have a Guernsey settlor and/or beneficiaries, either on establishment or on an on-going basis. The powers of the trustees to distribute income and capital may be written in any way, providing complete flexibility ranging from fixed interest trusts, where income and capital is payable to specific individuals at specific times, to trusts where the discretion rests entirely with the trustees.
Typical Uses- Private family wealth planning – preserving family wealth from, for example, spendthrift children, or perhaps protecting the interests of minors
- Inheritance planning – increasingly individuals have global assets and family members may be resident outside the home country at various stages during their lives. A trust may provide some protection from taxes during these periods or an opportunity to distribute income and/or capital during such periods
- Conservation and continuity of family businesses and assets
- Corporate planning - trust structures are often used in employee share ownership plans, pension schemes and unit trusts (special purpose vehicles)
Forced Heirship
Guernsey law has statutory provisions to protect the trustees of Guernsey trusts against foreign laws of fixed inheritance, commonly called forced heirship. Where a person domiciled outside Guernsey transfers property to a Guernsey trust during his lifetime, he is deemed to have had the capacity to do so if, at the time of the transfer, he was under the law of his domicile of full age and sound mind. In general, rules relating to inheritance or succession in the law of the transferor's domicile cannot affect the validity of the transfer to the Guernsey trust.
Taxation in Guernsey
Guernsey trusts are exempt from Guernsey income taxation provided that:
- Income arising to the trust has a non-Guernsey source
- All the beneficiaries of the trust are non-residents of Guernsey
- By concession, Guernsey bank interest paid to Guernsey trustees is also exempt from Guernsey taxation, where all the beneficiaries of the trust are non-residents of Guernsey
Guernsey has no gift tax, capital gains tax or estate tax.
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