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Proper law of a trust

The Jersey Trusts Law defines the proper law of a trust through the terms and connections of the trust.

Meaning in the Jersey Law

The Jersey Trusts Law defines the proper law of a trust as the jurisdiction's law expressed in the trust terms, implied from those terms, or, if neither applies, most closely connected to the trust when created.[3]

The statute says the closest connection applies when no law is expressed or implied, and also when the expressed or implied law does not provide for trusts or the relevant category. To assess connection, it lists the designated place of administration, location of trust assets, trustee's residence or business, and the trust's objects and their places of fulfillment.[3]

In the Jersey statute, the labels Jersey trust and foreign trust follow this term. A Jersey trust has Jersey law as its proper law; a foreign trust has the law of another jurisdiction as its proper law.[3]

The Hague Convention uses the phrase law applicable to a trust and says the settlor's choice governs when expressed or implied in the instrument or written evidence, interpreted if necessary with the circumstances. If the chosen law does not provide for trusts or the category involved, the choice is ineffective and the Convention's closest-connection rule applies.[1]

The Convention's closest-connection factors parallel the Jersey list: designated administration place, asset location, trustee residence or business, and trust objects and their fulfillment places. It also states that the selected law generally governs validity, construction, effects, and administration. A severable aspect, especially administration, may have a different governing law.[1]

Bermuda's statute likewise starts with the settlor's express or implied choice and uses closest connection if no applicable law was chosen. Cayman law instead directs attention first to the trust terms and evidence of party intention, considering other circumstances only if the terms do not supply that evidence.[5]

What the selected law governs

The Hague Convention assigns the applicable law questions about trustee appointment and duties, asset administration, investments, beneficiary relations, variation, termination, distributions, and trustee accounting. It allows replacement of the law governing a severable aspect only as determined by the law applicable to trust validity.[1]

Questions and answers

What determines a trust's proper law under the Jersey statute?

It is the law expressed in the trust terms, then the law implied from them. If neither applies, or that law does not provide for the trust category, the law most closely connected at creation is used.[3]

Which connections matter when no choice applies?

The Jersey statute lists the designated place of administration, location of trust assets, trustee residence or business, and the trust's objects and places of fulfillment.[3]

Can one part of a trust have a different governing law?

Under the Hague Convention, a severable aspect, particularly administration, may be governed by another law. The law applicable to validity determines whether the law for the trust or that aspect may be replaced.[1]

Which laws address proper law and governing law?

The Jersey Trusts Law, the Bermuda and Cayman statutes and the Hague Convention each address it. They start from the law the settlor chose or the trust terms imply, and use the closest connection when neither supplies a law.[3]

  • Trust: The Hague Convention describes a trust as a relationship in which a settlor places assets under a trustee's control for beneficiaries or a specified purpose.
  • Recognition of a trust: The Hague Convention describes recognition of a trust, its minimum legal effects, and limits tied to applicable law. Jersey law also addresses recognition.
  • Trust duration: Trust duration is the period a trust may continue. The Hague Convention says applicable law governs duration limits and other trust terms for a trust.
  • Settlor: A settlor is associated with creating a trust or placing property into it.
Sources and data notes
  1. HCCH, 1985 Hague Trusts Convention. https://www.hcch.net/en/instruments/conventions/full-text/?cid=59. Retrieved .
  2. Internal Revenue Service, 26 CFR 301.7701-4. https://www.ecfr.gov/current/title-26/section-301.7701-4. Retrieved .
  3. Jersey Legal Information Board, Trusts (Jersey) Law 1984. https://jerseylaw.je/laws/current/l_11_1984. Retrieved .
  4. Cayman Islands Legislature, Trusts Act (2021 Revision). https://legislation.gov.ky/cms/images/LEGISLATION/PRINCIPAL/1967/1967-0006/1967-0006_2021%20Revision.pdf. Retrieved .
  5. Legislature of Bermuda, Trusts (Special Provisions) Act 1989. https://bermuda.fm/legislation/1591. Retrieved .

Dates in this block record when each source was read for this page.