Guernsey is a well-established trust jurisdiction and an international finance centre.  It has a modern trust legislation and an effective judicial system.  Guernsey law is derived from English common law, as supplemented by the Trusts (Guernsey) Law 2007 (the “Trust Law”).  Guernsey is a leading jurisdiction for the establishment and management of trusts.  Guernsey has a well-qualified professional trust sector, modern trusts legislation and an effective judicial system.

Given that all Beneficiaries and the Settlor are residents outside Guernsey and there is no Guernsey sourced income, the Trust will not be subject to taxation in Guernsey.  There are no capital gains, inheritance, stamp duty or value added tax payable by a trust in Guernsey.

Professional corporate trustees in Guernsey are regulated by the Guernsey Financial Services Commission.

A Guernsey Trust may be created by a Trust Instrument setting out the terms of the trust in which the settlor transfers the assets to the trustee on trust for the benefit of the beneficiaries.

The Settlor of the trust is the owner of the assets who settled the assets into a trust.  The professional corporate Trustee is the company which is the legal owner of the trust assets.  The Trustee has the power to hold, administer and distribute the trust assets in accordance with the terms of the trust.  The Trustee holds the trust assets for the benefit of the beneficiaries of the trust.  The Settlor can be one of the beneficiaries but he cannot be the sole beneficiary of the trust.

The trust assets constitute a separate fund and do not form any part of the property of a trustee.  The Trust Law also imposes fiduciary duties on trustees, regulates the administration of trusts and provides rights of beneficiaries.

1. Benefits of Guernsey Trust
   
   

   (1)	Succession planning The Trustee can hold the trust assets and distribute the trust assets to the beneficiaries in accordance with the terms of the Trust Deed.  The Settlor may give a letter of wishes as a guidance regarding the timing, amount and manner of distribution to the Trustee. The Trustee can hold the shares of a family business for concentration of shareholding of family business and to ensure that the family business can pass to future generations.
   (2)	Asset protection By transferring the assets to the trust, the Settlor segregating the trust assets with his own assets, protect the trust assets from creditor’s claims provided that the intention of setting up a trust is not to defraud creditors and the Settlor does not reserve to himself unrestricted powers to revoke the trust, a trust can serve as an important asset protection functions.  In addition, the trustee can appoint the spouses of the descendants as excluded persons of the trust who cannot benefit from the trust.  The Trustee may cease to make distribution to the beneficiaries who have the risk of divorce.
   (3)	Avoidance of probate Assets owned by an individual usually pass on death in accordance with the terms of a will.  If the assets are held in a wide variety of countries, it may be necessary to obtain a grant of probate with respect to the will in each country where assets are located.  This can be an onerous, lengthy and costly process which can last between six months to two years.  Moreover, there may be estate duties and taxes payable before the estate can be settled and the assets distributed to the heirs of the deceased.  If such assets are settled on trust, the trust can enable the trust assets to be passed on future generations smoothly and according to the wishes of the settlor.
   (4)	Tax planning During the existence of the trust, under the current tax regulations of Hong Kong, Singapore, Cayman Islands, British Virgin Islands, and Jersey, there is no tax reporting obligation for the income generated by the trust assets. However, when a beneficiary receives a trust distribution, there may be tax reporting obligations depending on the tax residency status of that beneficiary. Trust can be used to protect or exclude property settlements for UK inheritance tax purposes and foreign grantor trusts for US tax purposes.
   (5)	Avoidance of forced heirship rules To guarantee that the trust assets can be distributed to the beneficiaries according to the wishes of the Settlor.  An individual from a country with rigid legal or religious inheritance laws may implement a scheme of distribution of assets among his heirs that differs from that prescribed by his domiciliary law.  By establishing a trust in common law jurisdictions such as Hong Kong, Cayman Islands, British Virgin Islands, Jersey and Guernsey, the desired distribution plan can often be implemented.
   (6)	Confidentiality A trust does not need to be registered and it is a private legal arrangement between the Settlor and the Trustee. The information relating to the trust is not accessible by the general public.
   (7)	Philanthropy A trust can be set up for charitable purpose in which the beneficiary of a trust can includes charitable organizations or for charitable purposes.
   (8)	Commercial uses Such as Employee Benefits Trust, Pension Funds, Investment Funds, etc.

   
   
2. Different kinds of Guernsey Trusts
   
   

   (1)	Discretionary Trust A discretionary trust is the most common type of trusts which gives the trustees wide powers to administer the assets and to distribute the assets to the discretionary beneficiaries at their discretion. The trustees will usually be guided by a non-legally binding letter of wishes from the settlor setting out wishes of the settlor regarding the manner in which the trust fund is to be administered and distributed. The letter of wishes can be updated from time to time.  A Guernsey Trust may exist for an unlimited period of time.
   (2)	Reserved Powers Trust The Settlor of Guernsey Trust may reserve certain powers as shown below to himself or confer the powers on the Protector, without invalidating the trust: (a) Power of investment; (b) Power to appoint and remove Trustee; (c) Power to vary or amend the terms of the Trust Instrument; (d) Power to change the proper law of the trust.
   (3)	Purpose Trust Guernsey law trusts can be established partly or wholly for noncharitable purposes.  Purpose trusts may be used in corporate transactions to create structures to hold assets which are otherwise difficult or undesirable for a company to hold.  More commonly the purpose trust can be used to hold shares in a family trading company. An enforcer is legally required to be appointed to enforce the terms of a trust in relation to its non-charitable purposes, but the settlor may name the enforcer.

See also：Trusts (Guernsey) Law 2007