Jersey focus | In good hands

For many people, philanthropy is becoming increasingly significant. It covers a wide range of initiatives, some of which fall within the technical definition of ‘charitable’, whereas others, even though they may
be benevolent and for the common good, may not.

Although philanthropic donation is not the sole preserve of the wealthy, it is an important financial and legal issue for those individuals and families. Many consider creating and maintaining philanthropic structures as part of engaging the next generations in
wealth management responsibilities.

Religion and culture may prompt donations but social entrepreneurship and venture philanthropy are on the increase – and they are not limited to older generations and the ultra-wealthy. Young entrepreneurs want to make a social impact, and social investment may now itself be seen as a growth area.

There is also significant philanthropic growth within the funds sector in which sustainable investments are developing into a separate asset class.

Increasingly, philanthropists are looking to the financial services sector in Jersey and elsewhere for greater engagement in the provision of
relevant services.

Major charitable benefactors who
are resident onshore may not be inclined to set up offshore philanthropic structures if there are difficulties in securing cross-border tax deductions. However, there can be opportunities for tax-efficient structuring and there is a huge market where that is not an issue.

Jersey, as well as its experience in setting up and administering trusts and foundations, offers an immediate opportunity to assist in philanthropy and to develop as a lead jurisdiction, through the wealth already held and administered offshore.

Flexible friend

The agglomeration of wealth by substantial families and corporates in tax-neutral jurisdictions such as Jersey provides great opening to families, individuals and companies for creating entities that can serve charitable or philanthropic objectives either directly
or as ‘feeders’ to other institutions. They can structure vehicles for these purposes in a significantly more flexible manner
in Jersey than is usually possible in
other jurisdictions.

Jersey has the services to provide flexible vehicles for charitable and philanthropic purposes. It is already a pre-eminent trusts jurisdiction, enjoys modern companies’ legislation, has a wide set of partnership structures and
an innovative foundations law, the use
of which is growing in popularity.

Perhaps, above all, the relevant legislation emphasises the importance of flexibility and allows structures to be created that meet the needs of an individual client.

Jersey’s trust legislation covers both charitable and non-charitable purpose trusts. And there’s the option for partly personal and/or partly charitable and partly philanthropic.

Non-charitable purpose trusts are often used for altruistic good causes and Jersey trusts allow for a range of structures that can be adapted to suit specific philanthropic objectives. The charitable trust is an attractive option,
but it is not the only solution.

Firm foundations

Since their launch in 2009, Jersey foundations are increasingly used by philanthropists as an alternative to trusts. As true orphan structures, they are ideal for these purposes and can be used for structures that are either charitable or non-charitable or that are philanthropic but with the capacity to provide
personal benefits.

About a third of foundations set up in Jersey are used for philanthropic purposes. Among their attractions are the clarity of registration with the Jersey Financial Services Commission and the availability (but only if required) of publicity as to the identity of the economic founder and the nature of
the purposes. They are also capable of infinite duration.

Through the system of having a council of members and a guardian to ensure the council pursues the foundation’s objects, both flexibility
and safeguards are provided, along
with the ability for the economic founder to have a continuing role.

However, it’s surprising that Jersey is not yet seen as an international hub for charity and philanthropy. Two potential gaps in the island’s profile are perhaps the absence of a Jersey statute specifically governing charities, equivalent to the Charities Act 2011 in England and Wales, or a regulatory body like the Charity Commission to maintain a register of charities and to supervise their activities; and the possible need to clarify the expression ‘charitable purposes’ (see box below).

Perhaps the negotiation of tax information exchange agreements and Foreign Account Tax Compliance Act arrangements will come to include the securing of automatic tax recognition for Jersey’s charitable structures.

Jersey has the people with the necessary skills and experience to act as trustees or as council members. Its financial structures are well regulated, and the individuals and companies involved are already highly skilled in fiduciary duties and in the due diligence that is inherent in considering possible philanthropic activities.

When the pros and cons of establishing philanthropic structures ‘onshore’ or ‘offshore’ are weighed, Jersey has several key strategic advantages that can be applied for the benefit of those wishing to set up long-term arrangements for charity or for philanthropy in the wider sense. 

Julian Hayden is director at Hawksford in Jersey

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