Is the holder of a power to revoke a trust, who is not also a beneficiary of the trust, entitled to exercise the right of a beneficiary under Article 10A of the Trusts (Jersey) 1984 (TJL) to disclaim his/her interest under the trust so as to release his/her power to revoke the trust? This issue was considered by the Royal Court (MacRae, Bailiff, presiding) in the recent case of Representation of Novatrust Limited re the Helford Trust [2026] JRC 010.

Facts/background

The background, in brief summary, was as follows.

The settlor of the Trust, now in his nineties, was (and is) Swiss resident. The assets of the Trust are substantial. When the Trust was established (in 2022), the settlor’s son, a member of the beneficial class, was US resident (he no longer is). The US tax advice taken by the settlor at that time the Trust was created was to the effect that it was important that that it qualified as a Foreign Grantor Trust (FGT). In order for the Trust to be classified as a FGT, it had to be (and must be) revocable by the settlor (who is still alive).

Accordingly, the Trust Instrument included a power held by the settlor to revoke the Trust (Clause 22). The wording of the clause also allowed the settlor to release his power of revocation. Given the importance of ensuring that the Trust remained an FGT, a restriction was included in the Trust Instrument (Clause 9) which prevented the exercise of powerswhich would otherwise stop the Trust from qualifying as an FGT.

Tax considerations

The hearing took place in October 2025. This was ahead of a referendum due to take place in Switzerland on 30November 2025 on an initiative to introduce a federal inheritance tax on gifts and inheritances exceeding 50 million Swiss Francs at a rate of 50% which would apply to gifts and inheritances after the referendum date.

If the proposal was adopted, upon the settlor’s death, this would result in a 50% charge on assets in the settlor’s estate in excess of 50 million Swiss Francs. As the Trust did not then qualify as an irrevocable fixed interest trust from a Swiss perspective, it would be treated as transparent for Swiss tax purposes and the assets within the Trust would be assumed to be within the settlor’s estate for the purposes of the consequent tax charge. If the Trust was instead tobe treated, as a matter of Swiss law, as an irrevocable fixed interest trust, then the tax charge on the assets within the Trust would not arise in the event that the proposal was adopted (as things transpired, the proposal was not adopted).

For the Trust to be classified as an irrevocable fixed trust in Switzerland, it was necessary, amongst other things, for the settlor to release his power of revocation.

US tax considerations were also relevant. However, the US tax advice that was before the Court was to the effect that, If the settlor was to release his power of revocation, this would not have a material impact on the US tax arising in the future as this was merely an acceleration of what would occur upon the death of the settlor who, although in good health, is elderly.

The application

Given the significance of the potential Swiss taxation issue, the settlor and Trustee wished to take steps to ensure that the Trust remained outside of the settlor’s estate in the event of a Swiss Federal inheritance tax issue arising, whichwould inevitably mean that the Trust would cease to be an FGT for US tax purposes.

The application was made by the Trustee. It advanced three possible solutions (in the alternative) to the situation it faced, as follows:

1. A declaration from the Court that, on the proper construction of Clause 9, that clause did not prevent the settlor from releasing his power to revoke the Trust.

2. A declaration from the Court that the settlor was able to disclaim or release his power to revoke the Trust, pursuant to Article 10A of the TJL.

3. Approval by the Court, on behalf of the minor and unborn beneficiaries of the Trust (MAUs), of a variation to the Trust, being the deletion of Clause 9 (in its entirety).

Construction of Clause 9

Having regard to the terms/wording of Clause 9 and its understanding of the factual matrix at the time the Trust wascreated (i.e., the critical need, from a US tax perspective, for the Trust to have FGT status), the Court was ultimatelynot persuaded by the construction (the “narrow construction”) of the clause contended for by the Trustee (so as to allowthe settlor to release his power to revoke the Trust).

The Article 10A application

The point of interest arose in relation to this limb of the alternative relief sought by the Trustee in its Representation.

The Trustee contended that the settlor had the power (or right) to disclaim his power to revoke the Trust (under Clause22). It was argued that the settlor had an entitlement to benefit under the Trust which gave him the status of “beneficiary” under Article 10A of the TJL. A “beneficiary” is defined in Article 1 of the TJL as “a person entitled to benefit under a trust or in his favour a discretion to distribute property held on trust may be exercised”.

The settlor was not a member of the beneficial class. However, the Trustee argued (relying on the decision of the PrivyCouncil in TMSF v Merill Lynch and Trust Co (Cayman) Limited [2012] 1 WLR 1721 and on a passage in Lewin) that the power of revocation is a beneficial power that is tantamount to ownership.

It was argued by the Trustee that the object of a discretionary power has an interest under a trust and that the trusteeowes that beneficiary or object “the relevant duties of consideration”, even though they may never receive a distribution and, by analogy, a settlor’s right of revocation constitutes an interest under a trust, although the settlor may neverexercise it. The Trustee argued that the settlor’s interest in the Trust assets under the power to revoke was so significant that it is “tantamount to ownership”, as the exercise of the power to revoke has the effect that, after itsexercise, the Trustee holds the Trust assets on bare trust for the settlor. Accordingly, the Trustee sought an orderor declaration, pursuant to Article 10A, to the effect that the settlor may disclaim or release his right to revoke the Trust(which should have effect from the date of that disclaim or release).

Although the Court fount the argument to be attractive, it ultimately was unable to accept it. The Court commented as follows:

“Our understanding is that a beneficiary for the purpose of the definition in the Law is a beneficiary in theordinary course, i.e., a person entitled to benefit under the trust as it is, not the person who might at their election set the trust aside so that the trustee holds the trust on bare trust for them. One can well understand why a power of revocation is described as a beneficial power and why the holder has a power which is tantamount to ownership. That does not mean that such a power holder is a beneficiary as ordinarily understood and as defined for the purposes of Article 1.”

Citing the Royal Court’s decision the Exeter Settlement [2010] JLR 169, which it said has come in for some academic criticism, it held:

“Ultimately, we do not accept that the holder of a power of revocation who is not a beneficiary is entitled toexercise the right of a beneficiary to disclaim an interest under the trust, so as to permit the Settlor in this case torelease his power to revoke the Trust under Clause 22 of the Trust Instrument.”

Variation application

That left the third and final alternative limb of relief sought by the Trustee, namely the Court’s approval (under Article47(1) of the TJL), on behalf of the MAUs, for approval of a variation of the Trust so that Clause 9 (being the restriction on the settlor releasing his power to revoke the Trust) could be deleted in its entirety. That variation, if granted, would allow the settlor to exercise his power under Clause 22 to release his power to revoke the Trust (following which the Trust would cease to be an FGT).

The proposed variation was supported by the settlor, the adult beneficiaries and the guardian for the MAUs.

The Court commented follows:

“This is ostensibly a proposed variation which is in the interests of the beneficial class, in that the variation would mean that the Trust assets could no longer be returned to the Settlor. Such a return would of course prejudice the beneficiaries. The proposed variation would mitigate the risk of the Trust assets being severely impacted by the prospective Swiss charge to tax, and the removal of Clause 9 would provide the Trustee with the flexibility toexercise its powers without being subject to the restrictions set out therein.”

The Court was satisfied, on the balance of probabilities, that the proposed variation was for the benefit of thebeneficiaries of the Trust, including the MAUs. It commented that even if the Swiss tax change did not take effect (and itdid not, in the event), it had to be to their advantage that the settlor’s power to revoke the Trust was removed in anyevent. The removal of Clause 9 would provide the Trustee with future planning flexibility in any event.

It granted the relief so as to permit the Trustee to implement the proposed variation and to take the necessary consequential steps to ensure that the Trust would qualify as an irrevocable fixed trust for Swiss law purposes prior to the referendum.

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*Note the real name of the Trust has not been used in this artivle