Guide to Trusts in Guernsey - Appleby

A typical trust structure may look something like the following:SETTLORManage Trust forthe benefit ofbeneficiarySettles/transfersassets into TrustPROTECTOR(Optional)Protects the Trust fund andwatches over the TrusteesTRUSTEES“TRUST”Receivedistributionsfrom TrustBENEFICIARIESLegal “ownership”Economic/Beneficial“ownership”TRUSTFUNDTrust is a useful and practical concept that has been around for centuries. Both the Romans and earlyIslamic societies developed similar structures, but it is England and its affiliated Crown Dependenciesand former commonwealth countries that have been at the forefront of the development of trusts and itis now a concept particularly associated with common law jurisdictions.A trust can be established during your lifetime (inter vivos trust) or upon your death under the termsof your will (testamentary trust). Nowadays, although a trust can still be established orally or byconduct, most trusts are formally established in a written instrument and are additionally stated to begoverned by local law (such as The Trusts (Guernsey) Law, 2007).3. REGULATION OF GUERNSEY TRUSTEESGuernsey is renowned for its robust yet pragmatic regulation of professional trustees, trust companiesand company administrators, having been actively and effectively regulated by the local regulator (theGuernsey Financial Services Commission) since April 2001.4. TYPES OF TRUSTS COMMONLY USED IN GUERNSEY4.1 Discretionary TrustProbably the most widely used type of offshore trust. The trustees are under a duty to use theirdiscretion to apply the income and capital of the trust assets for the benefit of a class of beneficiaries.The trustees decide which beneficiaries benefit, and what proportion of the trust fund they receive.Whilst the trustees have discretion, they are subject to obligations as to how they exercise it and mustdo so only for the benefit of the beneficiaries. The beneficiaries have no right to either income or capitalof the trust, but merely a hope that the trustees will exercise their discretion for their benefit. Thesettlor can give guidance (usually through a letter of wishes) to the trustees as to how they would likethe trustees to exercise their discretion, but ultimately cannot control them.applebyglobal.com 3