이 에피소드에 관해
In In the Matter of the Affinity Trust and the V Trust, the Jersey Royal Court approved the variation of a discretionary trust to reverse the irrevocable exclusion of its settlor as a beneficiary and blessed the trustee's decisions to re-admit the settlor and distribute approximately £4.8 million to him.
The decision addresses the application of Articles 47 and 51 of the Trusts (Jersey) Law 1984 in the context of trust restructurings prompted by the abolition of the UK Non-Dom regime.
The V Trust was a Jersey discretionary trust established in 2001. In 2017, the Settlor was irrevocably excluded as a beneficiary on English tax advice, the objective being to prevent the Trust from being treated as "settlor interested" by HMRC. However, the exclusion proved ineffective as the Settlor's wife had not been simultaneously excluded, and her potential addition as a beneficiary was sufficient to attribute Trust income to the Settlor for UK tax purposes.
Following the abolition of the Non-Dom regime from 6 April 2025, annual UK tax liabilities were projected to reach "tens or hundreds of thousands of pounds", with substantial inheritance tax charges arising every ten years. The Settlor therefore asked the trustee to apply to the Royal Court to reverse his exclusion, re-admit him as a beneficiary, and distribute approximately £4.8 million to him, which he would then gift to his four adult children. The proposed distribution was structured to take advantage of the UK's Temporary Repatriation Facility (TRF), which permits distributions at a 12% rate if made by 5 April 2027.
The Court was asked to approve the variation of the Trust under Article 47 of the Trusts (Jersey) Law 1984 on behalf of the minor and unborn beneficiaries, so as to reverse the Settlor's irrevocable exclusion.
Article 47 empowers the court to approve, on behalf of persons unable to consent, any arrangement varying or revoking the terms of a trust or enlarging the trustee's powers of management and administration. The Court followed previous decisions, confirming that its understanding of the word "arrangement" has a wide construction, so long as it benefits to some extent those persons who cannot consent, citing Mubarik v Mubarik [2008]. The Court noted that this approach had already been taken to revoke a settlor's irrevocable exclusion from the class of beneficiaries, most recently in IQEQ (Jersey) Limited Re B Trust [2024].
On the question of "benefit", the Court also applied the broad principles of construction endorsed in Re Weston's Settlements [1969], in which Lord Denning MR observed that "nearly every variation" before the court has tax avoidance as its principal object and "no one has ever suggested that this is undesirable or contrary to public policy." The Court acknowledged previous warnings against "overt tax avoidance" and noted that, where a variation affects the irrevocable exercise of a power, it will give "particularly close examination" to the underlying motivation. It held that legitimate tax planning would usually benefit those who cannot look to their own interests, and that this threshold was therefore met on the facts.
The Court ordered the variation so as to render the Settlor's exclusion revocable.
In reaching its decision, the Court assessed the balance of risk by reference to the points raised by the Court in The B Trust [2024]: why would a settlor not be expected to provide for their family if the assets are appointed back to them; and what would the Court say to the minor and unborn beneficiaries if it refused the variation?
The Court in the present case adopted the same reasoning as in The B Trust. Without the proposed arrangement, annual tax charges would steadily drain the Trust's assets, and the Settlor's additional US tax position further constrained the trustee's ability to make tax-efficient appointments. The Settlor could reasonably be expected to pass the wealth to the next generation, an expectation supported by the Trustee, th...
The decision addresses the application of Articles 47 and 51 of the Trusts (Jersey) Law 1984 in the context of trust restructurings prompted by the abolition of the UK Non-Dom regime.
The V Trust was a Jersey discretionary trust established in 2001. In 2017, the Settlor was irrevocably excluded as a beneficiary on English tax advice, the objective being to prevent the Trust from being treated as "settlor interested" by HMRC. However, the exclusion proved ineffective as the Settlor's wife had not been simultaneously excluded, and her potential addition as a beneficiary was sufficient to attribute Trust income to the Settlor for UK tax purposes.
Following the abolition of the Non-Dom regime from 6 April 2025, annual UK tax liabilities were projected to reach "tens or hundreds of thousands of pounds", with substantial inheritance tax charges arising every ten years. The Settlor therefore asked the trustee to apply to the Royal Court to reverse his exclusion, re-admit him as a beneficiary, and distribute approximately £4.8 million to him, which he would then gift to his four adult children. The proposed distribution was structured to take advantage of the UK's Temporary Repatriation Facility (TRF), which permits distributions at a 12% rate if made by 5 April 2027.
The Court was asked to approve the variation of the Trust under Article 47 of the Trusts (Jersey) Law 1984 on behalf of the minor and unborn beneficiaries, so as to reverse the Settlor's irrevocable exclusion.
Article 47 empowers the court to approve, on behalf of persons unable to consent, any arrangement varying or revoking the terms of a trust or enlarging the trustee's powers of management and administration. The Court followed previous decisions, confirming that its understanding of the word "arrangement" has a wide construction, so long as it benefits to some extent those persons who cannot consent, citing Mubarik v Mubarik [2008]. The Court noted that this approach had already been taken to revoke a settlor's irrevocable exclusion from the class of beneficiaries, most recently in IQEQ (Jersey) Limited Re B Trust [2024].
On the question of "benefit", the Court also applied the broad principles of construction endorsed in Re Weston's Settlements [1969], in which Lord Denning MR observed that "nearly every variation" before the court has tax avoidance as its principal object and "no one has ever suggested that this is undesirable or contrary to public policy." The Court acknowledged previous warnings against "overt tax avoidance" and noted that, where a variation affects the irrevocable exercise of a power, it will give "particularly close examination" to the underlying motivation. It held that legitimate tax planning would usually benefit those who cannot look to their own interests, and that this threshold was therefore met on the facts.
The Court ordered the variation so as to render the Settlor's exclusion revocable.
In reaching its decision, the Court assessed the balance of risk by reference to the points raised by the Court in The B Trust [2024]: why would a settlor not be expected to provide for their family if the assets are appointed back to them; and what would the Court say to the minor and unborn beneficiaries if it refused the variation?
The Court in the present case adopted the same reasoning as in The B Trust. Without the proposed arrangement, annual tax charges would steadily drain the Trust's assets, and the Settlor's additional US tax position further constrained the trustee's ability to make tax-efficient appointments. The Settlor could reasonably be expected to pass the wealth to the next generation, an expectation supported by the Trustee, th...
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