The following appeared in the letters page of the Jersey Evening Post on 24 October 2006 (except that I've corrected it's typographical errors, a sin of which I do know I am not innocent by the way):
Jersey trusts should be recognised as bare trusts
From Richard Murphy, director, Tax Research.
I NOTE the article (JEP, 13 October) in which Advocate Hanson says that non-Jersey lawyers should be seeking more advice from Jersey advocates regarding the future of Jersey trusts.
He is right, UK and other lawyers should be talking to Jersey lawyers about Jersey trusts, but not for the reason he says. The actual reason is simple. Under Jersey's new trust laws the simple fact is that all Jersey discretionary trusts (and that's the vast majority of them) are now revocable. That means that the settlor can ask for the trust assets, income and gains to be paid back to them at any time, even if they might have to apply on occasion to the Royal Court to do so. This does, according to senior Jersey civil servants, recognise the reality of what is, in any event, happening in Jersey.
The change is important though. By cutting away the charade that Jersey trusts have been properly administered to date and by recognising the reality that Jersey trusts no longer ever require the settlor to give up their interests in the assets they claim to have gifted the new law means that in English law all Jersey trusts should now be recognised as bare trusts, or mere nominee arrangements. The result is that the UK Courts will be under no obligation to recognise the validity of any Jersey trust and that Jersey trusts will now have almost no use in UK tax planning.
Jersey passed its new laws to reinforce the power of its own courts, and to legitimise the defects in trust administration which are known to be commonplace in the Island. But in the process it has shot itself in the foot. Its trusts will now be of no use for tax, matrimonial, or other planning in the UK and many other jurisdictions in the world.
Jersey would be wise on occasion to remember that it might be an Island, but its clients live elsewhere and it's the laws of the lands in which they live, and not Jersey's which matter. And some places still believe that when a person says they've given something away they have to mean it, even if Jersey does not require such honesty.
The Old Orchard, Bexwell Road, Downham Market, Norfolk.