When a trust has beneficiaries in different jurisdictions, trustees can be confronted with the situation where equal distributions can have unequal tax consequences. Leading to the question, is this a relevant consideration in the context of quantum?

This is considered in the context of a restructure by the Royal Court of Jersey in Representation of SG Kleinwort Hambros Trust Company (CI) Limited and Others re P Trusts as follows at 6 (vii):

“Any restructuring should not result in there being a material adverse tax consequence for current or future beneficiaries; at the same time, where an individual beneficiary chose to live was a personal matter for them, and individual beneficiaries would have to accept the tax consequences of their considered decisions and choices which are ultimately made by them.”

And at [9]:

“The discussion about the relevant principles does in our judgment lead to some clarification of the tax principle referred to by the SG Trustees in November 2021.  That principle reflected what J had in mind in his letters of wishes; but one has to recall that J also had in mind that the existing trusts would continue, although that is not likely to be the position.  The fact is that with any restructuring there are likely to be some tax consequences.  Our preliminary view of the relevant tax principles is that in a restructuring the Trustees should try to avoid any unnecessary incidence of taxation.  It may not be possible to do so – not least because all four of J’s children are now living in Country B, albeit K may not be living there permanently at the moment, and that is bound to have tax consequences.  It may be that some tax consequences are inevitable for the purposes of a restructuring.  In our judgment, the important consideration is that, while the instance of taxation should be avoided if possible, it would be wrong to be tax driven in taking dispositive decisions if the result of doing so were to be to breach the core principles.  In the words of the old saying, one cannot make an omelette without breaking eggs.”

References:

• Representation of SG Kleinwort Hambros Trust Company (CI) Limited and Others re P Trusts [2023] JRC 143