Sequence of Events
Anyone who is legally competent and not an undischarged bankrupt may create a Trust, subject to any restrictions that may be imposed by a country of residence or domicile. The tax implications of establishing a Trust vary with individual circumstances and it is important for each individual to seek professional advice in order to clarify their own tax and legal position before proceeding.
After discussion or correspondence, a Trust Deed will be prepared which may contain the following information:
(a) The name of the Settlor and Beneficiaries.
(b) A description of the initial assets settled by the Settlor.
(c) A statement of the Trusts upon which the assets settled are held.
It is preferable for a Trust Deed to be drafted to give the Trustees the greatest degree of flexibility and powers in the administration of the Trust Fund. The duration of a Guernsey Trust may be unlimited and specific Trust legislation has been enacted which provides, amongst other provisions, that a Trustee must exercise diligence and integrity and act in the best interests of the Beneficiaries.
Non Resident Guernsey Trusts are generally free of local taxation and there is no requirement to register or record the relevant Trust Deeds with any authority. will arrange for the drafting of Trust documentation.
A Trust becomes effective once the documents have been signed by the Trustee (and the Settlor where he is a named party to the document) and the initial property to be settled has been conveyed to the Trustees. In making the transfer of assets to the Trustees, the Settlor is effectively making a gift of those assets and, as a consequence, ceases to have any proprietary interest in them (subject to the laws to which the Settlor is subject). Accordingly, they no longer form part of the Settlor’s estate. On the death of the Settlor, they continue to be held in the Trust. As an alternative, it is possible to loan funds to a trust.
When a Settlor creates a Trust, he relies to a very high degree on the integrity of the Trustee. In some cases the Settlor may wish to have the additional comfort of appointing a Protector who has the Settlor’s confidence and invariably has knowledge of the Beneficiaries.
In a Discretionary Trust, it is possible to appoint such a Protector. This in effect means that the Trustees refer to the Protector before they exercise particular discretionary powers. The Protector can be a family member, friend or lawyer, for instance.