Knowledge

Guernsey's well-regarded trust legislation has, since the late 1980s, helped the jurisdiction to maintain its standing as a recognised centre for international wealth management and fiduciary services.

To ensure the jurisdiction's laws continue meeting contemporary demands, the Committee of Economic Development, in consultation with local practitioners, and after considering various legislative developments in other offshore jurisdictions, proposed various amendments to the current trust law (The Trusts (Guernsey) Law, 2007 (the "Trusts Law")). The amendments were debated by Guernsey's legislature, the States of Deliberation, on 20 May 2026 and were passed. The next step is for the legislation to be drafted implementing these amendments.

The amendments do not radically overhaul the existing law. Instead, they are more of a pragmatic tuning, designed to clarify existing statutory provisions, resolve ambiguities highlighted by recent case law, and align Guernsey with modern commercial realities. Below is a short summary of some of the key changes.

Shifting the presumption on reserved powers

Currently, under section 15 of the Trusts Law, when a settlor or a third party (such as a protector) holds reserved powers, the law presumes that they do not owe fiduciary duties unless explicitly stated otherwise. The amendments will flip this presumption. Reserved powers will now be presumed fiduciary by nature, unless the trust deed expressly stipulates the contrary.

Streamlining administration and mental incapacity

It is proposed that section 17 of the Trusts Law will be modified to permit a single trustee to manage a trust by default, provided the terms of the trust instrument do not mandate a higher number.

An amendment to section 20 of the Trusts Law is also proposed, which will introduce a mechanism for the automatic removal of a trustee who becomes mentally incapacitated. By bypassing the traditional requirement for a formal court application in this situation, the law will reduce administrative delays and costs for families and fiduciaries.

Statutory right to remuneration for professionals

The Law currently provides that a trustee cannot be remunerated unless the trust instrument allows for this. It is proposed that, in the situation where a professional trustee is in office, it will be entitled to reasonable remuneration, subject to the terms of the trust, any agreement with the beneficiaries, or an order of the court.

Enhancing safeguards: trustee liability, liens, and limitation periods

Several proposed amendments will address trustee liability:

• Security for liabilities: there will be clarification about a trustee’s right to demand reasonable security to cover outstanding or potential liabilities before transferring trust assets to a successor.
• Statutory lien: section 44 of the Trusts Law will be amended to ensure that a statutory lien will not inadvertently override prior security arrangements or the rights of secured lenders.
• Prescription periods: under Guernsey law, claims for breach of trust are prescribed after three years from the date of breach. It is proposed that this time will run from the earlier of two benchmarks: the delivery of complete and accurate trust accounts, or the point at which an aggrieved beneficiary discovers the alleged breach.

Overcoming the "Two-Party Rule"

It is common for a trustee to act as a trustee of several trusts, or indeed as a custodian of underlying structures. It is also common for a trustee, wearing these numerous hats, to transfer or lend assets between the structures that it administers. Problems arise, however, in contract law and in equity. When a trustee deals with itself, albeit in a different capacity i.e. as a trustee of another trust, the transaction can potentially be impugned on the basis it breaches one of the following rules: (i) the two-party rule, which states that a party cannot contract with itself; (ii) the self-dealing rule; (iii) the genuine transaction rule; and (iv) the no-conflict rule. The latter three are rules of equity and can be overcome. However, the two-party rule is more difficult to resolve and can be particularly annoying for trustees wearing two or more hats.

Jersey addressed this situation in legislation in 2012. It is proposed that Guernsey now does the same, with an amendment to section 41 of the Trusts Law that will allow a trustee of a trust to transact with itself as trustee of another trust.

Flexibility with powers of attorney

The existing three-year statutory limit on powers of attorney granted by trustees will be eliminated. Various safeguards will be preserved to prevent fiduciaries from entirely abdicating or delegating their core duties, but this amendment allows trustees long-term operational flexibility.

Restoring Saunders v Vautier

Section 53(3) of the Trusts Law, which replicated a provision in earlier legislation to the same effect, was intended to effectively codify the rule in Saunders v Vautier [1841] 41 E.R. 482. The rule, in summary, states that if all the beneficiaries of a trust are ascertained, adults and under no disability, they may require the trustee to transfer the legal estate to them and terminate the trust. This position became unsettled by the Guernsey case of Rusnano Capital AG v Molard International (PTC) Limited [2019] GRC011, which took a 'snapshot' approach and found that, even though there was a power in the trust instrument to add beneficiaries, at the time the sole beneficiary in this case called for the termination of the trust, the 'power to add' had not been exercised and therefore, the beneficiary was entitled to terminate the trust.

It has been proposed that section 53(3) of the Trusts Law be amended to effectively restore the rule in Saunders v Vautier and ensure that there is no expansion upon the scope of this rule, such as what was seen in the Rusnano case.

Broader court powers for variations

It has been proposed that the court be given broader powers to approve variations of trusts.

• Varying beneficial interests: the court will have wider latitude to approve variations to beneficial interests or authorise transactions even when unanimous beneficiary consent is absent, particularly when a single beneficiary is unreasonably blocking a proposal or where gathering universal consent is logistically disproportionate.
• Restoring Hastings-Bass: the more flexible version of the Hastings-Bass rule will be restored. This will mean that a breach of fiduciary duty will not be required for the court to set aside a flawed decision, and the court can declare such decisions void, voidable, of effective, but on different terms.

Privacy, arbitration, and alternate dispute resolution (ADR)

Currently, administrative proceedings, i.e. matters relating to the interpretation and administration of a trust, are often heard in private, and the decision anonymised. To save time and costs, the Trusts Law will be amended to expressly permit the court to make provision in respect of private hearings.

The Trusts Law will also be amended to include the following in relation to alternative dispute resolution ("ADR"):

• expanding the use of ADR to include internal trust disputes and the types of ADR processes available.  
• recognition of arbitration clauses in trust instruments.

These reforms enhance clarity and flexibility in Guernsey’s trust framework, which keeps the jurisdiction commercially competitive while preserving core principles that have long underpinned its success.  If you require advice in relation to the matters set out in this briefing, please get in touch with the following BC contacts.