Jersey Will and Life Interest Trust?

Trusts Discussion
1

My client is UK resident. Her mother and brothers are resident in Jersey as was her late father when he died in 2014. Father was domiciled in Jersey when he died; Mother is Long-Term non-UK resident.

The family consider that the Movable Estate was left under a Life Interest Trust. However, the Trust as defined in the Will states that: the trustees shall hold the residue upon trust:

(a) during the lifetime of my Wife to pay or apply so much of the income and/or capital of the Residue to my Wife or for her benefit as my Trustees shall in their absolute discretion think fit;

(b) subject to the above, to accumulate the income of the Residue and add the same to the capital of the Residue;

(c) subject to the above, and upon the death of my Wife, to pay the income and the capital of the Residue to such of my children as shall survive me and if more than one then in equal shares for themselves absolutely…..

It seems to me that rather than create a Life Interest Settlement, clause (a) above has created a Discretionary Trust with the wife (my client’s mother) as the sole beneficiary during her lifetime.

On their mother’s death, my client and her brothers will become absolutely entitled (clause (c) above) to the assets, but will these be treated for UK tax purposes as coming from the mother or as a distribution from the trust?

Any thoughts on this would be greatly appreciated.

2

Yes, you’re not going crazy; it is absolutely a discretionary trust. Mother has no right to income.

3

Really appreciate your prompt answer - thank you.

If the trustees undertake some death-bed planning and distribute all of the assets to the mother, such that they then pass to the children under her Will, rather than as a distribution from the trust, would that be caught by the Onward Gift rules?

4

@Hugh

Is the will a Jersey will of movables?

If it was and Jersey law governs the interest created, it is in itself a movable right governing the income arising. That is what the Trust Law actually states. It may therefore be in possession during the lady’s lifetime, irrespective of the Trustee’s “discretion” to accumulate which you invoke and was doubtless exercised.

Perhaps confirmation, from a Jersey advocate might be needed as, if it were an interest in possession as a result of Jersey law, then subject to recent Royal Court rulings, perhaps your IHT issue might be resolved by a simple difference in the law applicable

5

Peter, thank you for your message. The Will is, indeed specifically of the father’s Movable Estate. It is written under Jersey law.

I will consult with my client and be in touch directly.

Kind regards, Hugh

6

Subject to implementation by the OECD jurisdictions concerned, the UK Government has announced its intention to implement information exchange on immovable property ownership and, as a separate category, income produced by immovable property in its jurisdiction. Gibraltar is also a party. The objective of the OECD and the statement is that the proposal is to be implemented in 2029-2030.

The parties to the joint Statement of 4 December 2025 are: Belgium, Brazil, Chile, Costa Rica, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Korea, Lithuania, Malta, New Zealand, Norway, Peru, Portugal, Romania, Slovenia, South Africa, Spain, Sweden and the United Kingdom; and the United Kingdom’s Overseas Territory of Gibraltar.

The British Crown Peculiars (if you wish - ‘Dependencies’) are not on the list. Noting that in Jersey there is no central land register yet, simply a register recording individual transaction before the Royal Court. Note that the USA is not on the list of parties – FIRPTA remains a separate fiscal phenomenon.

Once the mechanisms are in place, it is clear that the existence of trusts as an integral part of English immovable property law, when coupled with the HMRC Register of trusts, will enable other jurisdictions to acquire information on the beneficial ownership of immovables within the jurisdiction and what is more the rental income produced as a separate category of available information.

Coupled with the OECD’s political incursions into successions and inheritance taxation, it is clear that tax administrations are coupling the generational transfer bonanza with the legal outcome.

French commentators have noted that there is no definition of what constitutes an SPI yet which could lead to the effective transformation of an immovable to a movable irrespective of whether it is held by trustees or through a company.

HMRC have issued the following announcement on 4th December, 2025:

https://www.gov.uk/government/publications/joint-statement-for-the-automatic-exchange-of-information-on-immovable-property/collective-engagement-to-exchange-readily-available-information-on-immovable-property

Season’s Greetings from the Château de la Muet ….

Peter Harris