Reserved Powers Flashcards
Q1. Why is “donner et retenir ne vaut” less of a concern now for Jersey trusts?
A1. Because Jersey law (Articles 9(5) and 9(7)) overrides that rule for trusts. Instead, the modern fear is that excessive settlor powers may lead a trust to be deemed a sham or a testamentary instrument in foreign courts.
Q2. Under Article 9A(1), what two points does it clarify about a trust when a settlor reserves powers or a beneficial interest?
A2.
The trust remains valid (not invalidated),
The trust takes immediate effect, avoiding classification as a will unless expressly stated otherwise.
Q3. Name some of the powers a settlor can reserve under Article 9A(2) without invalidating the trust.
A3.
Power to revoke, vary, amend the trust,
Power to advance or apply trust income/capital,
Power to appoint or remove trustees/protectors/beneficiaries,
Power to direct investment decisions,
Power to change the trust’s proper law, etc.
Q4. If a trustee follows a validly reserved power exercised by the settlor, are they in breach of trust?
A4. No. Article 9A(3) confirms that a trustee is not in breach for respecting powers the settlor can legitimately exercise.
Q5. Does a settlor who reserves powers automatically become a trustee?
A5. No. Article 9A(3A) states that merely reserving beneficial interests or powers doesn’t make the person a trustee.
Q6. Could a foreign court refuse to recognize Article 9A and deem a heavily reserved-power trust as testamentary?
A6. Possibly. Foreign courts might apply their own public policy or formalities rules. Article 9A is valid in Jersey, but not necessarily binding on other jurisdictions.
Q7. How can two or more people be co-settlors of the same trust?
A7. They can each transfer property (on separate days or times) to the same trustee under the same trust terms, making them all “settlors” within the meaning of the Law.
Q8. Why is it common to have a nominal initial settlor, followed by the “real” settlor’s substantial contribution later?
A8. Often the trustee (or a third party) seeds the trust with a small sum and executes the deed, then the true settlor adds major assets afterward, effectively becoming a co-settlor.
Q9. What if a trust ends and undistributed assets remain?
A9. By default, those assets revert to the settlor (or their estate) under a “resulting trust,” unless the trust deed or a court order specifies differently (Article 42).
Q10. If there are multiple settlors, how is it decided which settlor gets the undistributed property back?
A10. It goes back to the particular settlor who contributed that property (Article 42(3)).
Q11. What does Article 9A ultimately confirm about settlor-reserved powers and the validity of Jersey trusts?
A11. It ensures broad settlor powers do not invalidate the trust or make it testamentary. The trust is presumed to take effect immediately, so long as it’s not expressly a will.
