The Eighth Amendment to the Trusts (Jersey) Law 1984 came into force today and represents a targeted but significant development in Jersey trust law. It reshapes the circumstances in which beneficiaries may bring a trust to an end and clarifies the priority of trustee liens in secured financing structures.
Members of our Private Capital & Trusts team were closely involved in the industry consultation process on the Eighth Amendment, including through participation in the Trusts Law Working Group and the review of successive drafts of the amendment legislation.
What is the background to this amendment?
Jersey's trusts practitioners have had to wait over a year between a consultation on proposed amendments to the Trusts (Jersey) Law 1984 (
Law) and the passing of the resulting legislation.
Since its enactment in 1984, the Law has positioned Jersey as a leading international trust jurisdiction, offering a flexible statutory platform underpinned by a sophisticated court and professional fiduciary sector. The legislation provides for robust recognition of reserved powers, purpose trusts, practical variation and rectification mechanisms, and strong firewall provisions insulating Jersey trusts from the impact of foreign laws.
This eighth amendment to the Law (
Eighth Amendment) builds on that foundation by addressing two areas where traditional trust principles can sit uncomfortably alongside contemporary trust drafting and commercial reality: the ability of adult beneficiaries to terminate a trust contrary to its terms and the status of a trustee’s lien against third‑party secured creditors.
How does the Eighth Amendment affect the rights of adult beneficiaries to end a trust?
At English common law, the principle in
Saunders v Vautier permits beneficiaries who are all of full age and capacity to bring the trust to an end and call for the legal title to be transferred to them, notwithstanding any contrary intention in the trust instrument. In Jersey, Article 43 of the Law provides a statutory power broadly analogous to the English position.
It was generally accepted that the existence of a power to add beneficiaries is sufficient to prevent termination of a trust, however the Guernsey court ruled otherwise in the recent case of
Rusnano (both at first instance and on appeal). Whilst not binding in Jersey, that decision caused uncertainty as it is possible that a Jersey court would give weight to the conclusions reached.
To alleviate this uncertainty, the Eighth Amendment prohibits the application of Article 43 of the Law if there are other persons who could become beneficiaries in accordance with the terms of, or pursuant to the exercise of any power under the trust, or if the terms of the trust currently provide for the disposition of trust property for a charitable or non-charitable purpose.
This statutory change seeks to ensure that the wishes and intention of the settlor and the trust’s stated purposes are the decisive reference point for administration and distribution, enhancing the reliability of dynastic structures, particularly where inter‑generational stewardship, asset protection and family governance are core objectives.
However, beneficiaries are not left without options. A trustee may, where appropriate, use the full range of dispositive and administrative powers typically conferred under a standard Jersey discretionary trust to bring the trust to an end if that is in beneficiaries’ interests. Additionally, the Royal Court’s supervisory jurisdiction remains available.
How does the Eighth Amendment affect Trustee liens, secured financing and 'reasonable security'?
In 2022, the Privy Council in the Z Trust litigation confirmed the existence of the trustee’s lien in Jersey law. A trustee’s equitable lien is the default mechanism by which a trustee secures reimbursement and indemnity from the trust fund for liabilities properly incurred in the execution of the trust.
However, the Privy Council’s confirmation that trustees are secured creditors, and that former trustees’ liens rank
pari passu, created uncertainty for external secured creditors, particularly as to priority. The amendments to Article 43A address this uncertainty by subordinating the trustee’s lien to secured obligations, unless the secured party agrees otherwise. There were concerns that this would leave trustees without adequate protection, however Article 43A has also been amended to provide that no account is to be taken of the trustee's lien in considering a trustee's right to require to be provided with 'reasonable security' when transferring trust property. This enables a trustee who is parting with trust assets to negotiate a contractual indemnity on terms which provide sufficient security in the particular circumstances of the trust.
Secured lenders to trust‑connected structures will welcome this clarity on lien subordination but trustees may take a different position. We anticipate there will be stronger indemnity drafting to protect outgoing trustees where there is, or may be, secured lending over trust assets.
Does the Eighth Amendment make any other changes?
In addition to amendments to Article 43 and Article 43A, the Eighth Amendment introduces a series of consequential and clarificatory updates across the Law. These are principally designed to improve coherence and administration rather than to effect substantive change.
In broad terms, the updates:
- simplify the definitions and drafting relating to corporations in the Law;
- confirm that the resignation of a sole trustee, leaving no trustee in place, is invalid; and
- adjust the protections for a bona fide purchaser for value by providing that ‘notice’ (rather than ‘actual notice’) of a breach of trust will defeat those protections when dealing with a trustee.
While those working in or with the trusts industry should review the Eighth Amendment in full, these further changes are not expected to alter day to day fiduciary practice in a material way. Their principal effect is to codify market practice and tidy the statutory framework.
In practice, what does the Eighth Amendment mean for Jersey trusts?
The power to terminate a Jersey trust under Article 43 of the Law has been clarified so that it cannot be exercised if there are other persons who could become beneficiaries under the trust, or if the terms of the trust currently provide for the disposition of trust property for a charitable or non-charitable purposes. However, in practice, the breadth of powers in modern Jersey discretionary trusts, together with the Royal Court’s supervisory jurisdiction, should ensure appropriate flexibility without destabilising long‑term structures.
The introduction of Article 43A brings welcome clarity for secured creditors by subordinating the trustee's lien to third‑party security. However, it also bolsters the trustee's ability to negotiate stronger contractual indemnities, by confirming that the lien should not be taken into account when considering a trustee's right to ‘reasonable security’.
Taken together, these reforms reinforce Jersey’s standing as a jurisdiction that marries principled trust law with the needs of modern private wealth and financing practice.
What practical steps should be taken now?
For trustees, beneficiaries and lenders, the practical steps to be taken now are straightforward: review precedents, update financing and intercreditor templates to address lien subordination expressly and ensure that ‘reasonable security’ is provided on a transaction‑specific basis rather than assumed through the equitable lien.
Advisers should also consider whether existing trust documentation continues to reflect the intended balance between flexibility and control in light of the amended Article 43.
How we can help
Our Private Capital & Trusts group advises trustees, beneficiaries, family offices and lenders on the full spectrum of Jersey trust law matters, including the structuring, administration and termination of discretionary trusts and the interaction between trust assets and secured financing.
We have been closely involved in advising clients on the practical implications of the Eighth Amendment to the Trusts (Jersey) Law 1984, including the revised operation of Article 43, the treatment of trustee liens under amended Article 43A and the resulting considerations for trust drafting, trustee indemnities and secured lending structures.
Working alongside our Banking & Finance, Regulatory and Insolvency & Dispute Resolution colleagues, we can assist with trust restructurings, court applications, financing documentation and the updating of precedent trust and security documentation to reflect the new statutory position.
