Jersey Private Foundations
The island of Jersey is officially known as the Bailiwick of Jersey, and is a self-governing Crown Dependency. Located off the northwestern coast of France, it is the largest of the Channel Islands at around 120km². The surrounding (uninhabited) islands such as Les Dirouilles, Les Minquiers, Les Pierres de Lecq, and Les Écréhous form part of Jersey too, reports Oliver Taylor.
Jersey was once part of the Duchy of Normandy, and Norman dukes became kings of England circa 1066. After Normandy was lost to France by the English kings during the 13th century, the ducal title was surrendered to France. Jersey, however, today a country of just over 100,000 people, maintained its loyalty to the English Crown, although it was never incorporated into the Kingdom of England and today still remains officially outside of the UK.
A self-governing parliamentary democracy under a constitutional monarchy, Jersey has borrowed much from Britain, yet retained its own financial and judicial identity. The power of self-determination held by Jersey differs from that of other Crown Dependencies. The Lieutenant Governor in Jersey represents the King, for one thing, and Jersey has always had the reputation of being a loud voice with the ear of the king.
Jersey has maintained both its British loyalties and its international identity as something distinct from the UK. The UK is still constitutionally obligated to be the defender of Jersey in the event that the island is threatened by war, but otherwise it is very much self-regulating.
The island has always had a reputation for astute financial planning, and today its large financial services industry is responsible for around 40% of its Gross Value Added (GVA). Of course, the British loyalty and influence is apparent on the island, where English predominates and pound sterling remains the primary currency. The island also displays a strong Norman-French culture, and it sports a dialect of the Norman language called Jèrriais as a kind of local first/second tongue. French is also widely employed in legal documents and Jersey courts. Alongside Guernsey, Jersey recognises either English or French when it comes to documentation.
As potent as Jersey’s British loyalty is, there are definitely equally strong cultural ties to mainland Normandy. The country also shares close cultural links with neighbour Guernsey, and the two islands enjoy a good-natured rivalry, especially when it comes to money management.
TAKING A CLOSER LOOK AT JERSEY PRIVATE FOUNDATIONS
A private foundation is defined as a tax-exempt organisation that doesn’t rely on marketplace sales or broad public support, and foundations typically serve humanitarian purposes. Private foundations are a well established and popular route to managing family affairs. In the US, for example, private foundations manage over $630 billion in assets- far more than many countries’ GDP.
Right at the outset, it’s worth mentioning that Jersey private foundations, as do all jurisdictional foundations, trusts, and International Business Corporations, come with advantages and disadvantages. Jersey, however, is a “full service” offshore destination. This means that it has a long history of facilitating individual’s money management. Jersey is the smartest way to fly above board, so to speak. Other destinations vary in their legislated commitment to privacy, but Jersey is both as transparent as required by law, as well as shrewd in its interpretation of international law, against the backdrop of its own legislative reality.
It was 13 years ago that Jersey embellished its toolkit of wealth planning and financial vehicles by introducing the Jersey Foundations Law (2009). Circa 2020, some 400 foundations were on the books of the Jersey Financial Services Commission (JFSC). Foundations that are genuinely philanthropic in nature account for around a third of that total, with private equity, charitable, or private wealth holding structures making up the remainder.
At its core, a foundation is a legal person that acts in its own name, through its Council. It’s very similar to how a company acts through a board of directors. While foundations are often described as “a trust that works like a company”, there is no separation of legal and beneficial title with a foundation, unlike there is in a trust.
A DEEPER DIVE INTO JERSEY FOUNDATIONS
The foundations toolkit was then further strengthened with the addition of merger, conversion, and continuance regulations. In a nutshell, by recognising a long list of entities that are allowed to merge with a Jersey foundation, the minister made the island instantly more attractive for many families and HNWIs invested elsewhere.
Liechtenstein recently had its back to the wall as pressure from the EU culminated in the threat of being labelled an “uncooperative jurisdiction”. At the beginning of 2022, Lichtenstein started implementing the pressured changes, which immediately made the destination subpar for a large percentage of those who have been managing their money matters there.
Oops. Great news for places like Jersey, of course, and their legislation was in place in time to scoop up the alpine fallout.
A foundation charter is compulsory in Jersey (as it typically is elsewhere too), but unless there are compelling reasons for publicity (a charitable drive perhaps), this document omits names and beneficiaries. A Jersey foundation is viewed as a corporate taxpayer for purposes of income tax, which is zero percent. In fact, the standard Jersey rate is 0%, although some financial sectors pay 10%, and some utilities and retailers a maximum of 20%. In Jersey, capital gains are exempt as well.
Comparing a foundation to trusts and even companies becomes convoluted- it’s much easier to grasp when one simply looks directly at the things a foundation enables. Foundations are successful vehicles for philanthropy, holding assets more securely than a trust (civil law jurisdictions that lack an articulated approach towards trusts can confound things), and of course gratifyingly DIY (rather than giving assets to a traditional private trust company).
Estate planning for many is simplest with a foundation, and a Jersey foundation also acts as a corporate protector in instances where a number of family members come together to force a say in the management of trusts of which they are beneficiaries.
JERSEY AND GUERNSEY FOUNDATIONS
There are certain differences between a Jersey foundation and Guernsey foundations, although both are run by a council. Jersey law mandates at least a single member, Guernsey says two. Here, the founder and provider of its assets can remain an active participant by becoming one of the council members.
A founder can also make sure that only trusted family members, advisors and friends are council members in order to ensure long term control. Foundation council members have no fiduciary duty to beneficiaries, although their duty is mandated as being towards the foundation itself. One council member or two? The Jersey legislation also mandates that again a minimum of one of the council members is registered under relevant financial services laws. If no one is eligible, a local agent duly recognised will be needed to act as the “Qualified Member” as stipulated in Jersey law.
Indeed, it’s the requirement for a guardian that identifies Jersey and Guernsey foundations amongst many other locales. The requirement was established as a mechanism to capably ensure a foundation’s smooth administration, while also motivated by the all important consideration of protecting beneficiaries’ interests.
Jersey is smart. Picking through the architectural options of a Jersey foundation, there’s always a good reason behind every point. Taken as a whole, Jersey is a clean and compliant destination, yet still extremely client-centric, and so not above rubbing their smarts in global regulators’ faces.
A final takeaway image can be gleaned when it’s remembered that Jersey foundation councils are there to steer the foundation as per the will of its founder, as outlined in the founding documents. There is no decision-making required of council members. A foundation does not have to have beneficiaries, and any beneficiaries may have their rights and interests restricted by the founding documents.
Jersey, like only a handful of other destinations, has done what so many failed to do- sail through global regulatory pressure and come out still attractive to clients on the other side. Of course, there are destinations that are knowingly outlaw to such global initiatives and they intend to milk absolute secrecy until it dies. Good on them, but Jersey isn’t one of them. Jersey has gone another route, applied its mind, absorbed legislation as it came down the line, and made a very attractive proposition of it too.
With a solid history in the arena, centuries of cunning in the bag, and a great array of vehicles on offer right now, Jersey’s future looks bright. Foundations are, after all, usually about giving and family. Flying below the radar with trusts and foundations is stressful, but Jersey is the crafty alternative. EG