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01 October 2015
In Representation of X Trustees Limited(1) the Royal Court was asked to approve variations to a settlement on behalf of the settlement's minor, unborn and unascertained beneficiaries in accordance with the Trusts (Jersey) Law 1984.
Article 47 of the law provides that the court may approve certain actions – including variations – on behalf of minor, unborn and unascertained beneficiaries where it believes that the action will benefit the relevant beneficiaries.
The trustee wished to vary the settlement in order to:
Both variations had the support of the settlement's adult beneficiaries.
The court had to decide whether these variations were in the interests of the minor, unborn and unascertained beneficiaries of the settlement in accordance with Article 47(2).
In relation to the first variation, the court considered that, were the settlement to expire in 2016, a capital gains tax charge would be triggered and the assets would fall within the scope of UK inheritance tax, as the beneficiaries were resident in the United Kingdom.
Having considered In the matter of the DDD Settlements(2) – where the court found tax planning to be a benefit – the court held that it was for the benefit of the minor, unborn and unascertained beneficiaries to allow the settlement to continue to grow outside the United Kingdom, and that this could be achieved by extending the trust period.
In relation to the second variation, the court noted that the assets of the settlement consisted of shares in an underlying company, meaning that there was no income accumulation. While allowing income accumulation might not result in any immediate benefit to the relevant beneficiaries, the court considered that such a change would allow the trustee to manage the settlement more efficiently for the future.
Therefore, the court held that by removing the existing inflexibility on income accumulation, the trustee could control the flow of income in a planned way to the benefit of the minor, unborn and unascertained beneficiaries.
Finding that both variations were for the benefit of the relevant beneficiaries, the court gave its approval in accordance with Article 47.
Previous case law has found that, for the purposes of Article 47, 'benefit' must be construed widely and is not limited to financial interests. This case demonstrates that tax planning and the management of trust funds may also be considered benefits when asking the court to approve variations to settlements under Article 47.
For further information on this topic please contact Steve Meiklejohn at Ogier by telephone (+44 1534 504 000) or email (firstname.lastname@example.org). The Ogier website can be accessed at www.ogier.com.
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