A Guernsey Trust refers to the transfer of a trust fund from the settlor to the trustee. It also separates the ownership from the beneficiary parties who could also have a right to the property.
To establish a Guernsey Trust is a simple procedure involving carrying out the trust deed by the participants and taking over the given property, usually a money amount for running the fund. Still, this is the end phase; now let us reflect back on the pre-establishment conditions.
The conditions for the Guernsey Trust fund can be defined during the settlor’s life or posthumously by following the wishes from the settlor’s will. Usually, the settlor dictates the conditions and the requirements.
What are a Trust Fund, Settlor, Trustee, and Letter of Wishes?
The trust fund represents the trustee’s assets. In general terms, third parties also have the right to invest in the fund anytime, even if they are not one of the initial settlors.
We already said that the settlor is the party which establishes the fund by passing on the trust to the trustee. After the settlor transfers the trust obligations and rights, he/she has no right anymore to interfere in the trust activities, unless specified in the terms. All rights and obligations are passed on to the trustee and beneficiaries, whereby the settlor can be a beneficiary.
As we said, the settlor can reserve some rights specifically listed in the terms. These could usually encompass powers to appoint and remove both, trustees and beneficiaries, and participating in investment decisions regarding the trust.
A company or a natural person can be the Trustee. According to Guernsey Trust conditions, a corporate trustee is not necessary, but it is necessary that the settlor makes a wise choice when selecting the trustee. The trustee should be reliable and able to carry out the terms of the trust. The Guernsey trusts require two trustees unless one trustee was just selected. Two or more trustees have to vote unanimously unless otherwise specified in the terms.
Letter of wishes is the letter which the settlor sends to the trustees to express how they would like the trustees to carry out the allocation from a discretionary trust. This letter is not legally binding, but in most cases, it is respected.
Guernsey Trust Types
There are numerous trust types, and all of them have their own rules under which they operate. Here’s a quick breakdown of the most common types.
A discretionary trust is also known as the offshore trust. Trustees have to be discrete when deciding on the fund allocation. Trustees select the beneficiaries who will be granted a part of the fund. They also determine the amount which is being awarded or allocated. The trustees have the obligation to act in the interest of the beneficiaries. As we said above, the settlor may submit a Letter of Wish to give a proposal, but it is up to the trustees if they want to accept it.
There are also charitable and non-charitable trusts. The first one is obviously set up for charity, and they are tax-exempt. Non-charitable trusts are aimed at particular purposes (e.g. company ownership). The rules for this trust fund are a bit tighter by being only valid in written form and if under the supervision an enforcer who will make sure that the trustees do their job.
Employee benefit and pension trusts are aimed as an incentive to reward employees. To stimulate employees, the fund covers certain employee benefits, either by the employer or the house of pension funds.
As we can see, Guernsey Trusts are convenient for different purposes as long as they are handled properly and under the supervision of trustees which are not supposed to be biased. As long as the trustees are fair and objective, beneficiaries have a real shot of profiting from the trust allocations.