Knowledge

Background

In In the matter of the X Trusts [2026] GRC 034, the Royal Court of Guernsey (the "Court") was asked to bless a "momentous" decision by a corporate protector to remove Guernsey trustees and appoint a UK-resident trustee, thereby "onshoring" the trusts into the UK tax regime.

The trusts (the "Trusts") were established in 2024 and were worth approximately £192 million. Their beneficiaries were all UK-resident but were not financially dependent on the trust assets.

The proposal to onshore did not arise from tax efficiency; financial evidence showed the opposite. Based on the current distribution policy, if the Trusts were kept offshore, they could potentially grow substantially (cited as much as £82 billion by 2134), whereas onshoring would likely result in long-term erosion of the fund due to UK tax, inheritance tax and inflation.

The adult beneficiaries unanimously requested onshoring for "ethical, social and moral reasons". They expressed a strong desire that the family should pay tax in the UK, where they live.

The protector, after extensive advice and deliberation (including on conflicts and alternatives), made the decision in principle and applied for the Court's blessing under the Public Trustee v Cooper [2001] WTLR 901 jurisdiction.

The Court ultimately found at paragraph 96 of the judgment that "the Decision is one which a reasonable Protector in its position properly instructed could have arrived at. The Decision was reached by the Applicant taking into account only relevant considerations and the process overall was thorough, consultative and rational as was the outcome."

The Court's decision

The Court blessed the protector's decision, applying the established "Category 2" blessing framework under Public Trustee v Cooper. The Court was satisfied that the decision was:

• within the protector's powers;
• taken in good faith and for a proper purpose;
• one which a reasonable fiduciary could have reached; and
• not vitiated by any actual or potential conflict of interest.

Key takeaways

Public Trustee v Cooper applies to protectors

The Court confirmed that the classic blessing test applies not only to trustees, but also to protectors exercising fiduciary powers, including powers to appoint and remove trustees.

This reinforces that protectors must:

• act within scope of their powers;
• exercise independent judgement; and
• follow a robust decision-making process.

Benefit is not limited to financial gain

A central feature of this case is the Court's affirmation that a benefit to beneficiaries can include non-financial factors, such as:

• ethical beliefs;
• moral obligations;
• social considerations; and
• reputational or psychological comfort.

It is well established that when considering whether the exercise of a fiduciary power will benefit the beneficiaries of a trust, benefit is not confined to financial advantage but may also encompass moral and social benefit. As confirmed by Deputy Bailiff McMahon (as he then was) in In the Matter of the X Trust, the Y Trust and the Z Trust (Royal Court, 21 November 2014). A decision resulting in clear financial disadvantage may nevertheless constitute a proper exercise of fiduciary power where it delivers meaningful non-financial benefits aligned with the beneficiaries' values.

Paying tax can itself be a legitimate benefit

The Court recognised that exposure to taxation may form part of the benefit analysis, particularly where beneficiaries see tax payment as a moral and social obligation.

This follows a developing line of authority acknowledging that fiduciaries are not required to prioritise tax minimisation above all other considerations.

Process matters more than outcome

The judgment emphasises that the Court's focus is on whether the decision-making process was proper, informed and rational, not whether the Court would have made the same decision.

• In this case, the protector:
• took extensive legal and actuarial advice;
• considered alternatives;
• consulted widely (including representation for minors/unborn beneficiaries); and
• documented its reasoning in detail.
  This comprehensive process was decisive in securing the Court's approval.

Conflicts must be managed, not eliminated

The protector's board included family members who were also beneficiaries, giving rise to a potential conflict of interest.

The Court nevertheless approved the decision because:

• the conflict was identified and expressly acknowledged;
• independent directors were involved;
• legal advice was obtained; and
• the issue was transparently presented to the Court.

This case confirms that conflicts of interest are not fatal, provided they are properly managed and disclosed.

Long-term financial impact did not preclude approval

Despite evidence that onshoring could eventually deplete the funds of the Trusts, the Court accepted:

• the Trusts would continue to meet the needs of the beneficiaries for decades; and
• the beneficiaries' strongly held values justified the decision.

The Court was willing to balance present, tangible non-financial benefits against uncertain long-term financial detriment.

The developing role of the protector

The decision in this case highlights the increasingly active and central role of protectors in modern trust governance. The protector was not merely supervisory but the primary fiduciary decision-maker, taking a strategic decision of real significance. Notably, the role was held by a corporate protector rather than an individual, reflecting the increasing use of corporate fiduciary service providers in a role that was historically often filled by a trusted family friend, adviser or other individual connected with the family.

The Court's application of the Public Trustee v Cooper framework confirms that protectors are subject to the same standards of scrutiny as trustees, including requirements of good faith, rationality and proper process.

More broadly, this case reflects a trend towards protectors acting as key governance bodies, particularly in family structures, with responsibility for balancing financial and non-financial considerations and managing conflicts transparently.

Protectors must approach their fiduciary role with careful deliberation, advice and documentation, particularly where decisions are "momentous".

Practical implications

This decision will be of particular interest to trustees, protectors and advisers because it:

• reframes "best interests" as potentially extending well beyond financial outcomes;
• confirms that fiduciaries may properly take account of values and ethics;
• highlights the increasing importance of beneficiary views in trust decision-making; and
• demonstrates the importance of process, documentation and advice when taking unusual or value-driven decisions.