Trustee Responsibilities When Managing an Offshore Trust

A trust is only as effective as its trustees. Whether you are a professional trustee managing a Jersey or Cayman Islands structure, or a family member appointed to a Channel Islands trust, understanding your duties is not optional — it is a legal requirement, and failures can attract personal liability, tax penalties, and in some cases, legal challenge from beneficiaries.

This guide sets out the core trustee responsibilities when managing an offshore trust, covering the fundamental duties, investment powers and obligations, record-keeping requirements, UK tax administration, and the HMRC Trust Registration Service.

The Fundamental Trustee Duties

Trustee law in most common-law offshore jurisdictions (Jersey, Guernsey, Isle of Man, BVI, Cayman Islands) derives from English trust law principles, adapted by local legislation. The core duties are broadly consistent across these jurisdictions.

Act in the best interests of all beneficiaries. Trustees owe fiduciary duties to the beneficiaries of the trust — not to the settlor, and not to themselves. Where there is a conflict of interest, the trustee must either resolve it or stand aside. Trustees cannot profit from their position (unless the trust deed expressly allows trustee remuneration, which professional trustee deeds always do).

Exercise reasonable care and skill. A professional trustee is held to a higher standard than a lay trustee. A corporate trust company is expected to possess the knowledge and skills of an experienced professional. Lay trustees — family members or friends appointed informally — are held to the standard of an ordinary prudent person managing their own affairs.

Act impartially between beneficiaries. Most trusts have both income beneficiaries (who benefit from the trust's earnings) and capital beneficiaries (who benefit from the underlying assets). Trustees must not favour one class at the expense of the other — for example, by holding only income-generating assets and sacrificing capital growth for income beneficiaries, or vice versa.

Invest prudently. Trustees have a duty to invest the trust fund so as to preserve and, where possible, grow the real value of the assets. This does not mean adopting the most aggressive investment strategy — it means acting as a prudent investor would, taking into account the interests of all beneficiaries, the time horizon of the trust, and the specific circumstances.

Not delegate improperly. Trustees may appoint investment managers, accountants, and legal advisers, but they cannot simply hand over all decision-making and take no responsibility. Trustees must supervise their delegates and remain engaged with the trust's management. Rubber-stamping whatever an investment manager proposes is not good trusteeship.

Avoid conflicts of interest. Trustees should not benefit personally from the trust beyond any agreed trustee fee. They should not use trust assets as security for personal borrowing, should not transact with the trust as a counterparty without full disclosure and beneficiary consent, and should not accept secret commissions from third parties.

Investment Powers: Understanding the Trust Deed

The extent of a trustee's investment powers is defined primarily by the trust deed. Modern offshore trust deeds typically grant wide investment powers — the trustees may invest in equities, bonds, collective investment funds, property, alternative assets, private equity, and other instruments anywhere in the world. This flexibility is deliberately broad to allow the trust to be managed efficiently over its lifetime.

Some older trust deeds contain more restrictive investment clauses — requiring, for example, that investments be limited to certain asset classes or be of a certain credit quality. Before making any investment, trustees should check the deed to confirm their powers. Investing outside the scope of the trust deed is a breach of trust, even if the investment performs well.

Where the trust deed is silent or ambiguous, trustees may need to seek a court application to expand or clarify their powers. In Jersey, Guernsey, and other offshore jurisdictions, the courts have a statutory or inherent power to approve trustee applications for directions.

Regardless of the investment powers, trustees must obtain and consider appropriate investment advice unless the portfolio is so small that the cost of advice would be disproportionate. The receipt of that advice, and the trustees' response to it, should be documented.

The Annual Trustees' Meeting

Best practice for any well-administered offshore trust is an annual formal trustees' meeting. The meeting should be minuted and the minutes retained permanently in the trust file. Agenda items typically include:

• Review of investment portfolio performance against agreed benchmarks and objectives
• Review of the investment mandate and asset allocation — any changes required?
• Distribution decisions: are any beneficiaries in need of, or requesting, a distribution?
• Administration review: trust accounts up to date? Any new reporting or compliance requirements?
• Changes in beneficiaries' circumstances: births, deaths, marriages, divorces, changes in tax residency?
• Changes in applicable law: any legislative changes in the trustee jurisdiction or in the settlor's/beneficiaries' home countries that affect the trust?
• Trustee appointments and retirements: is the current trustee structure still appropriate?

Between annual meetings, trustees should convene (physically or via written resolution) whenever they exercise a discretionary power. Each distribution, investment instruction, or structural change should be formally approved by a trustee resolution and minuted.

Distributions to Beneficiaries

Trustees of a discretionary trust have wide powers to decide whether to make a distribution, to whom, and in what form. This discretion is genuine — it is not the settlor's right to direct distributions, and a trustee who simply does what the settlor instructs without independent consideration is at risk of the trust being treated as a sham.

In practice, settlors often provide a non-binding letter of wishes setting out how they would like the trust assets to be applied. Trustees must consider this letter seriously — ignoring it entirely would itself be questionable — but they must exercise their own independent judgement. They should document that they have considered all relevant factors: the interests of all beneficiaries, the financial needs of the requesting beneficiary, the impact on other beneficiaries, and tax consequences in relevant jurisdictions.

In offshore discretionary trusts used by UK-connected families, distributions can have complex UK tax consequences for beneficiaries who are UK resident. Trustees should take UK tax advice before making large distributions to UK-resident beneficiaries to ensure the distribution is structured efficiently.

UK IHT: The Relevant Property Regime

Offshore trusts settled by UK-domiciled settlors — and, since the 6 April 2025 reforms moved IHT onto a residence basis, trusts settled by "long-term resident" settlors (broadly, those UK resident for at least 10 of the last 20 tax years) — fall within the UK's "relevant property" regime for inheritance tax purposes. This has two key charges:

The 10-year anniversary charge. On every 10th anniversary of the trust's creation, a charge of up to 6% of the trust's value is payable to HMRC. The effective rate depends on the value of the trust, the nil-rate band available, and whether the trust received any distributions in the preceding decade.

Exit charges. When assets leave the trust — through distribution to a beneficiary or appointment of assets out of the trust — an exit charge applies, proportionate to the time elapsed since the last 10-year charge.

Trustees must keep track of these dates and obtain professional advice well in advance of each 10-year anniversary to ensure the charge is correctly calculated and paid on time. HMRC penalties apply for late payment. Trusts established by non-UK-domiciled settlors before April 2025 may fall outside the relevant property regime if they meet the conditions for excluded property status — though the post-April 2025 reforms have tightened this considerably.

Offshore trusts in Jersey, Guernsey, or the Isle of Man have their own local tax obligations, typically minimal (Jersey trusts managed by Jersey trustees and with no local-source income generally have no local tax liability), but trustees should confirm the position with local advisers in the trustee jurisdiction.

Appointment and Retirement of Trustees

Trustee continuity is important. Professional corporate trustees offer continuity that individual trustees — who may die, become incapacitated, or move — cannot guarantee. It is common practice, and strongly recommended, to appoint a professional trust company as at least one of the trustees to ensure the trust can always be properly administered.

When a trustee retires, a formal Deed of Retirement and Appointment of New Trustee should be executed. This document records the outgoing trustee's retirement, releases them from ongoing obligations (subject to any liability for past acts), and formally appoints the replacement. All trust documentation and assets should be formally transferred into the name of the new trustee.

Some trust deeds allow the settlor (or a "protector") to appoint and remove trustees. This power should be exercised carefully and documented — inappropriate or unexplained trustee changes can raise questions about the trust's legitimacy.

Trust Accounts and the HMRC Trust Registration Service

Trust accounts. Trustees must maintain proper financial accounts for the trust, recording all assets, liabilities, income, expenditure, and distributions. The standard of accounts required depends on the trust's complexity and the jurisdiction — some jurisdictions require annual accounts to be prepared by a qualified accountant; others merely require trustees to maintain adequate records. Beneficiaries generally have a right to request trust accounts (though the extent of this right varies by jurisdiction and trust deed). HMRC may request accounts in the context of a UK tax enquiry.

The Trust Registration Service (TRS). All UK express trusts, and certain offshore trusts with UK connections, must be registered with HMRC's TRS. An offshore trust must register where it has UK assets, has a UK tax liability, or has a UK-resident trustee. Registration requires details of the trust, the trustees, the settlor, the protector (if any), and the beneficial owners. Registration deadlines for trusts in existence before September 2022 have passed — unregistered trusts in scope face penalties. New trusts must register within 90 days of creation. Trustees should check their registration status urgently if this has not been done.

The TRS is part of the UK's implementation of the EU's 5th Anti-Money Laundering Directive, even post-Brexit, as the UK incorporated the requirement into domestic law. Comparable registers exist or are being introduced in Jersey, Guernsey, and the Isle of Man.

How Global Investments Can Help

Global Investments works with settlors, beneficiaries, and trustees of offshore trust structures across multiple jurisdictions. We can introduce you to specialist trust lawyers and tax advisers who can review your existing trust deed, advise on investment powers, ensure compliance with HMRC Trust Registration obligations, and calculate 10-year anniversary charges. If you are considering establishing a new offshore trust or reviewing an existing structure, contact us to discuss your objectives.