This article was originally published by Bloomsbury Professional
Fixed rights of inheritance
Statement of succession laws and rights of inheritance
The Bailiwick of Guernsey comprises a number of islands including Guernsey, Alderney and Sark. Succession laws in each of these three islands differ. This chapter is limited only to the laws of succession and rights of inheritance presently in force in the island of Guernsey.
Guernsey law distinguishes between realty (immovable assets) and personalty (movable assets). Under Guernsey law, the devolution of realty is governed by the law of the jurisdiction in which it is situate. The inheritance laws of Guernsey apply to all realty situate in Guernsey, notwithstanding where the deceased may have been resident or domiciled and no matter what his nationality may have been.
Personalty is governed by the law of the jurisdiction where the deceased was domiciled at the date of his death. Guernsey laws of inheritance relating to personalty do not apply to the estate of a individual who is not domiciled in Guernsey, or to a Guernsey resident who may be domiciled elsewhere than in Guernsey.
The Law Reform (Inheritance and Miscellaneous Provisions) (Guernsey) Law 2006 (‘the 2006 Law’), came into force in Guernsey on 7 May 2008 implementing a number of key changes to Guernsey's inheritance laws, some of which are discussed below.
The States of Guernsey also agreed in 2010 to abolish Guernsey's laws of ‘Forced Heirship’, whereby the law dictates that a certain part of the deceased's estate must be left to a spouse or descendant. Its abolition, by the introduction of the Inheritance (Guernsey) Law, 2011 (the '2011 Law') which came into force on 2 April 2012, was a major change and current law now sees provision for family and dependents incorporated into Guernsey law, akin to the United Kingdom's Inheritance (Provision for Family and Dependents) Act 1975 for those Wills made subject to the 2011 Law or the estates of individuals who are intestate are died post 2 April 2012.
Under the 2011 Law a testator is able to leave both their realty and personalty by will to whomever they wish however this freedom is subject to potential challenge from those able to apply for financial provision from an estate.
An applicant who can show that the deceased's estate, either by will or intestacy, did not make reasonable financial provision for them can make a claim against the estate.
Only certain classes of applicants are able to apply, such as the spouse or civil partner of the deceased, a child of the deceased, someone who was treated as a child of the deceased, someone with whom the deceased lived for a period of two years immediately prior to their death or someone who was being maintained by the deceased immediately prior to their death. Claims can only be made against the estate of a person who signed a will after the introduction of the 2011 Law, made a will post 29 June 2010 and stated in it that the 2011 Law was to apply to it or, in the case of an intestate estate, a person who died after the introduction of the 2011 Law. There have been no such claims brought before the Royal Court of Guernsey to date and as such the full effect of the introduction of the ability to make such a claim is not yet known.
Realty and personalty can be disposed of either by separate wills or by a single will dealing with the entire estate.
A will disposing of personalty appoints executors and will specify the intended bequests and other dispositions. It may also create a trust for the benefit of minors or vulnerable persons. Although often called a ‘will of personalty’, it might also concern the devolution of realty outside the Island.
A separate will of realty covers realty situate within the Island. It does not appoint executors (and has no need to as an executor has no responsibility in relation to Guernsey realty). Upon the death of the testator, the will of realty is registered and title to the realty passes to the heirs or legatees named in the will.
Under Guernsey law, all property of the deceased is deemed to be either realty or personalty. This applies not only to tangible objects but also to non-tangible assets such as legal rights of action.
The distinction between real and personal property is roughly equivalent to the distinction between immovable and movable assets, i.e. between land and chattels. There are, however, exceptional cases where some movable assets are deemed to be realty.
An Ordinance passed by the Royal Court of Guernsey in January 1852 defined what constituted ‘meubles’ and ‘immeubles’ by the laws of the Island. Movable things are personalty (meubles), and land together with the buildings constructed on the land are realty (immeubles). This includes things incorporated in the land or attached to it as permanent fixtures. Certain crops are realty during specified periods of time, and there are things connected with realty which are deemed to be realty, e.g. a life interest (usufruct) in realty, servitudes imposed on land, legal actions in pursuit of a claim to recover realty, and anything lying outside the Bailiwick of Guernsey which is deemed by Guernsey law to be realty.
Under the 2011 Law, a person can leave their realty in their will to whomever they wish. The previous rules of forced heirship have been abolished. All testators are now able to leave their real property upon trust in their will, should they so wish.
Further, the order of succession on an intestacy has been modified. Under the 2011 Law, where the deceased leaves a spouse or civil partner but no issue, their spouse or civil partner will inherit the whole of their realty. However, where the deceased also has issue, their spouse or civil partner will inherit half their realty and will also have a right of enjoyment over the remaining half of the matrimonial home. Their issue will inherit the remaining half of the estate, subject to the right of enjoyment of the spouse or civil partner. Where the deceased is not survived by a spouse or civil partner or any issue, then in the first instance their siblings and their respective descendants will inherit the deceased's realty, then it will pass to ascendants, then remoter relatives and finally if there are no remoter relatives the realty will pass to the Crown.
The inclusion of civil partners upon intestacy should be noted. The Same Sex Marriage (Guernsey) Law, 2016 came into force on 2 May 2017 and the 2011 Law defines a civil partner as one who has registered as a civil partner of the deceased under the Civil Partnership Act 2004 or who is treated as having done so by registering an overseas relationship within the meaning in that Act.
A person is able to waive his rights as a spouse by entering into a pre-nuptial contract.
Where realty is purchased in joint names ‘for themselves and the survivor of them’ the realty in question will, on the death of the first to die, vest automatically in the survivor(s). Where, however, the realty has been purchased by co-owners in ‘undivided shares’, then an undivided share forms a part of the real estate of the deceased and will devolve according to his will or, if there is no will, then as on an intestacy.
An adopted child is treated as if he had been born in lawful wedlock provided that Guernsey law recognises an adoption in the jurisdiction in which the child is adopted.
Step-children have no automatic rights to inherit from their step-parent unless specifically included within a Will.
The rules of inheritance set out below apply only when the deceased was domiciled in Guernsey at the date of his death.
It should be noted that the rules of inheritance:
- do not apply to assets held jointly by spouses which, in the absence of contrary intention, will vest in the survivor by virtue of the Husband and Wife (Joint Accounts) (Guernsey) Law 1966;
- apply only to the net estate. Debts and testamentary expenses are paid out of the gross estate. Any forced heirship entitlements under Guernsey law which benefit the surviving spouse and children (see below) would apply only to the net estate of the movable assets;
- may have been modified by marriage contract or judicial separation, the marriage contract having been entered into before the marriage and the judicial separation having been declared either in Guernsey or elsewhere.
Under the 2011 Law, a testator can leave his entire personal estate to whomever he wishes, subject only to the risk of a claim for financial provision. Again, due to this complete freedom, testators are able to leave their estate in whatever manner they so wish and as such are now able to place their personal estate upon a variety of different types of trusts in their will.
The 2011 Law has also made certain changes to the order of succession in the event of an intestate personal estate. Where the deceased leaves a spouse or civil partner but no issue their spouse or civil partner will inherit the whole of their personal estate. However, where the deceased also has issue their spouse or civil partner will inherit half their personal estate and their issue will inherit the remaining half of the estate. Where the deceased is not survived by a spouse or civil partner or any issue, then in the first instance their siblings and their respective descendants will inherit the deceased's realty, then it will pass to ascendants, then remoter relatives and finally if there are no remoter relatives the estate will pass to the Crown.
How to claim statutory rights of inheritance
On an intestacy, the heirs of the deceased will automatically inherit his realty. Title to the Guernsey realty will vest in the heirs without any action on their part.
If the deceased made a will dealing with realty, the heirs named in the will inherit the relevant propertyAn application must be made to the Royal Court for permission to register the will. Any beneficiary named in the will can apply. An application must be signed by an advocate who must confirm that all formalities have been properly concluded and that there is no reason in law why the application should not be granted.
Following the grant of the application, the Greffe (Land Registry) will issue a sealed and certified copy of the Act of Court. The Act forms part of the title of the property.
In Guernsey, grants of probate and letters of administration are issued by the Bailiwick of Guernsey Probate Registry (the former Ecclesiastical Court of the Bailiwick of Guernsey). Only an executor or administrator holding a grant or letters issued by the Guernsey Probate Registry can lawfully administer and wind up a Guernsey estate.
Grants are made by application to the Guernsey Probate Registry, which sits every Friday. Persons taking out a grant are required to swear on oath that they will administer the estate according to law and provide a true inventory of the estate when they have completed their duties.
In the first instance, grants are issued to executors named in the last will of the deceased. In the absence of any will, the nearest next of kin is entitled to take out a grant. Executors or next of kin can, of course, renounce their right to a grant should they not wish to undertake the administration of the estate.
A person claiming to be entitled to the whole or part of the personal estate of the deceased person should apply to the executor or administrator for his entitlement. A copy of the grant or letters of administration can be obtained from the Guernsey Probate Registry.
Where a grant has first been issued in a foreign jurisdiction, probate can be issued in Guernsey to enable the foreign executor or administrator to administer the Guernsey estate.
How to challenge succession
Where the succession to movables is in dispute, a person can enter a caveat with the Guernsey Probate Registry. A caveat will prevent the issue of a grant of letters to an applicant. Once lodged, a caveat subsists for a period of six months. At the end of the six-month period, it can be renewed. A fee of approximately £50 is payable upon the caveat being lodged.
The Guernsey Probate Registry will, with the permission of the caveator, issue a limited grant to enable an estate to be administered and the debts to be paid. Such limited grant will not allow the executors or administrators to distribute the estate.
Any proceedings challenging the succession or the right to the issue of a grant of probate or letters of administration must be brought before the Royal Court of Guernsey by virtue of the Ecclesiastical Court (Jurisdiction) (Bailiwick of Guernsey) Law 1994. The Guernsey Probate Registry does not have jurisdiction to settle disputes.
Proceedings will be brought by the aggrieved party either against the putative executors or administrators, or otherwise against those who are claiming to have an entitlement in the estate.
Similarly, proceedings relating to a disputed claim to immovable property must be brought in the Royal Court of Guernsey. Such proceedings should be brought against those who are claiming to be entitled to the real property.
Following the introduction of the 2011 Law, certain categories of individuals are able to apply for financial provision, subject to evidencing that the deceased's estate has not made reasonable financial provision for them.
The class of claimants is limited to a spouse or civil partner; a former spouse or former civil partner who has not formed a subsequent marriage or civil partnership; a cohabitee living with the deceased for in excess of two years in the same household and as spouse or civil partner; a child; any person treated by the deceased as a child of the family; or any person who was immediately before the death of the deceased was being maintained by the deceased.
Claims must be brought within six months of the date of death of the deceased, unless the court's permission is obtained to allow claims after this date.
When considering claims, the court will consider the financial resources and needs, both at the present time and in the future, of the applicant and of the beneficiaries of the estate. The court will also take into consideration the obligations and responsibilities of the deceased towards any applicant or beneficiary of the estate, the size and nature of the deceased's net estate, any physical and mental disabilities of the applicant or any beneficiary, and any other matter which the court might consider relevant, including the conduct of any party. The court has wide powers to make a variety of orders, including the transfer of property and payment of lump sums of money, having taken in to account a wide range of matters which are described in the Law.
Ability to benefit charities
Subject to any entitlements of a surviving spouse and children as set out at G8.2 and G8.3 above relating to Guernsey's rules of forced heirship, which may still apply where Wills were made prior to 2 April 2012, a person is able to benefit a charity by will. The charity can be a local or overseas entity.
There is no definition of charity under Guernsey law. In deciding whether or not an entity is ‘charitable’ in nature, reference is generally made to the Statute of Elizabeth and the relevant decisions of the courts.
It is usual to provide in any will that the receipt of the treasurer or other proper officer of the relevant charity shall be sufficient to discharge the executors.
Treatment of lifetime gifts in calculating inheritance rights
Whilst individuals now have complete freedom to leave their estate to whomever they wish, a testator who has concerns over the possibility of a claim being made against his estate for financial provision may wish to attempt to circumvent this by making a lifetime gift to individuals.
It is, however, important to note that, under the 2011 Law, the court has the ability to undo any gifts made six years prior to the testator's death which were intended to defeat a claim for financial provision. However, as no claims have yet been brought in front of the Guernsey courts for financial provision, the full extent to which such gifts will be challenged is not yet clear.
Ability to create trusts under local law
By virtue of the provisions of the Trusts (Guernsey) Law 2007 (‘the Trusts Law’), any person can establish a trust under Guernsey law.
A trust exists if a person (a ‘trustee’) holds or has vested in him, or is deemed to hold or have vested in him, property which does not form, or which has ceased to form, part of his own estate:
- for the benefit of another person (a ‘beneficiary’), whether or not yet ascertained or in existence;
- for any purpose which is not for the benefit only of the trustee.
A Guernsey trust can be established by residents and non-residents alike. There are no limitations on the ability to create a Guernsey trust. The Trusts Law also applies to trusts created by will.
Section 14(3) of the Trusts Law provides that no Guernsey trust is void or voidable or invalid if that trust avoids or defeats any rights, claims, interests, obligations or liabilities conferred or imposed by the law of any other jurisdiction on any person by way of foreign heirship rights.
Recognition of foreign trusts
Guernsey law recognises the validity of foreign trusts. Part IV, sections 66–77 of the Trusts Law, contain provisions as to both Guernsey and foreign trusts. The provisions include the powers of the court, upon application, to make orders as to the execution, administration or enforcement of a trust, or concerning a trustee, beneficiary or the trust property.
The sections of the Law also cover such matters as the bankruptcy of trustees, following trust property, limitation periods and prescription.
Use of companies
A Guernsey trust can own shares in companies registered in Guernsey or elsewhere. Trustees commonly use a corporate vehicle to own realty or to hold investment portfolios and other assets. Corporate ownership can often make the administration, management and ownership of assets easier than if the assets were owned in the name of trustees.
The use of companies can also aid the disposal of assets by transferring the shares in the companies.
Choice of law to govern succession
As outlined at G8.1 above, Guernsey laws of succession relating to movables do not apply to the estate of an individual who is domiciled in Guernsey, or to a Guernsey resident who may be domiciled elsewhere than in Guernsey.
Guernsey, in common with other jurisdictions, does not have a statutory definition of ‘domicile’. The Island’s courts would be expected to give it the meaning attributed to it by the principles of private international law.
A person seeking to avoid the provisions as to the succession of real or personal property under Guernsey law might choose to place assets in trust in the names of trustees. There is no statutory restriction on so doing, however, if done within six years of the testator's death such disposition may be undone if a claim for financial provision is made. Alternatively, assets may be put into the name of a company and the shares in the company disposed of. Shares in a company constitute personal property (movable assets) under Guernsey Law. In this way, real property in Guernsey can be disposed of as if it were personalty.
Local recognition of foreign court orders
The only statutory provision for the recognition of foreign court orders under Guernsey law is the Judgments (Reciprocal Enforcement) (Guernsey) Law 1957. Pursuant to this legislation, a foreign judgment can be registered in and sued upon in Guernsey. The defences available to the judgment debtor are limited to certain procedural and technical issues as set out in the 1957 Law. These are, for example, that the judgment debtor did not receive notice of the proceedings being taken in the foreign jurisdiction before judgment was given against him.
In other cases, the Guernsey court will recognise foreign court orders to the extent acknowledged by the principles of private international law. In insolvency cases, a person appointed as a liquidator or receiver in England can apply to the Guernsey court for aid pursuant to the Insolvency Act 1986 (Guernsey) Order of 1989. The court will recognise the appointment under the insolvency legislation in the United Kingdom.
As stated in G8.5 above, a person who is sworn as an executor or administrator in a foreign jurisdiction must have a grant of representation issued by the Guernsey Probate Registry in order to lawfully administer an estate in Guernsey.
In the case of small balances (of, say, less than £5,000) held by banks in Guernsey, or smaller holdings of stocks, shares or units in unit trusts, the bank or the investment manager may be prepared to accept an indemnity from the foreign executor or administrator, or indeed from the spouse of the deceased, upon production of the original will without requiring the issue of a grant in Guernsey. The acceptance of such indemnities is wholly a matter for the institution that holds the asset. It cannot be forced to accept an indemnity and can insist upon a grant being obtained.
Information publicly available after death
By application to the Guernsey Probate Registry, a person can obtain a copy of the grant of probate or letters of administration which, in the case of probate, will normally have a copy of the will of the deceased attached.
In order to be effective, wills disposing of realty must be registered at the Greffe (Land Registry) in Guernsey — see G8.4 above. Until registered they are of no effect. The Greffe is a public registry and the wills and other documentation registered there are available for public inspection during normal business hours.
Formalities required for a valid, local will
A person signing wills in Guernsey may either make separate wills for real property (immovables) and personal property (movables) or a combined will dealing with both. Wills must be in writing.
Under the 2006 Law, all wills must be signed in the presence of two witnesses (aged 14 years and over), both present at the same time, who must also sign the will. The will would be considered invalid if witnessed by a husband, wife, descendant or beneficiary named in the will. Previously, wills dealing with realty had to be signed before two Jurats of the Royal Court and a testator may still choose to have a will of realty witnessed in this way with a fee being paid to the Court for doing so.
An exception to the above rules for wills of personalty is a holographic will. Such a will does not need to be witnessed. It must be in the handwriting of the deceased, dated and signed at its foot.
These formalities are set out in the Loi sur les Successions of 1840, the law on the Testaments de Meubles of 1847 and the 2006 Law.
At the current time, if signed outside the Island of Guernsey a will can dispose of both real and personal property, provided the formalities in respect of attestation are observed.
Recognition of foreign wills
Wills which have been made outside the jurisdiction but which are submitted for probate in Guernsey will be recognised if they have been executed in accordance with the formalities required for a valid will as set out in G8.15 above.
In addition, by virtue of the Execution of Wills (Bailiwick of Guernsey) Law 1994, a will, whether disposing of real or personal property or both, shall be regarded as properly executed if its execution conforms to the internal law in force:
- in the territory where it was executed;
- in the territory where, at the time of its execution or of the testator’s death, the testator was domiciled or had his habitual residence;
- in a state of which, at either of those times, the testator was a national; or
- in so far as the will disposes of real property, in the territory where the property is situated.
There are additional provisions in respect of wills executed on board a vessel or aircraft, and wills that exercise a power of appointment.
It has become increasingly common to make a separate will in respect of Guernsey assets where the testator is resident in another jurisdiction. A separate Guernsey will may make provision forthe payment of testamentary expenses and debts arising in Guernsey;
- the payment of testamentary expenses and debts arising in Guernsey;
- the appointment of local (as opposed to foreign) executors to administer the Guernsey estate;
- the devolution of the Guernsey estate in a particular way which might differ from the way in which the remainder of the testator’s assets may be bequeathed.
The making of a separate Guernsey will does not, of course, override any restrictions on the testator’s testamentary capacity under the law of his domicile at the date of his death. It would be open to a member of the testator’s family, or other person entitled under the law of his domicile to any part of his estate, to challenge the entitlements under the Guernsey will.
A Guernsey will can be revoked by a subsequent will that contains an appropriate revocation clause. Any document which purports to revoke an earlier will must fulfil the requirements for the valid execution of wills as set out in G8.15 and G8.16 above.
A Guernsey will can also be revoked by the physical destruction of the will by the testator whose intention is to revoke it.
A will can also be revoked by the making of a new will outside Guernsey, if the new will contains general revocation provisions in respect of any previous testamentary disposition which the testator may have made. In this regard it is important to take care when making a foreign will to ensure that the Guernsey will is not inadvertently revoked.
The probate jurisdiction in Guernsey is administered by the Guernsey Probate Registry. The court sits at 9.30 am each Friday. The business of the court is administered by the Registrar of the Guernsey Probate Registry. The court is presided over by the Dean of Guernsey or, in his absence, by one of the two Vice-Deans.
Executors are sworn before the Registry. An executor will ordinarily attend in person, but if absent from the Island can swear the oath by post. The executor is asked to identify the will as being the last will of the deceased as far as the executor knows and believes. If there is no will, the Dean will ask the administrator to confirm that as far as he is aware the deceased died without leaving a will. The executor/administrator is asked to read out an oath whereby he swears to administer the estate according to law and to exhibit a true inventory of the estate whenever required by law so to do. Once this oath has been taken, the executor/administrator departs from the court and the grant of probate/letters of administration is subsequently issued by the Registrar.
The grant of probate or letters of administration is usually available on the Monday or Tuesday following the Friday on which the oath is taken by the executor/administrator. The grant is accompanied by a note of court fees. The original will is retained in the Registry's records.
The fee payable upon the issue of the grant is approximately 0.36 per cent of the value of the estate. If the first grant of probate/letters of administration is issued in Guernsey, the fee is calculated on the value of the personal estate worldwide. If the grant issued in Guernsey is subsequent to a foreign grant, then the fee is calculated on the value of the Guernsey estate only.
The duties of an executor or administrator are set out in the Loi relative aux Executeurs Testamentaires et aux Administrateurs des Successions de Personnes Decedées of 1930.
An executor/administrator must pay all liabilities of which he has notice. If the estate is insufficient to pay all liabilities, then the executor/administrator will not be liable for the shortfall.
An executor/administrator can place a notice in the local Island newspaper requiring that he be notified within a specified period of time, being not less than three months, of any claims against a deceased or his estate. At the expiration of that period the executor/administrator can distribute the estate without liability for claims which have not been notified. A creditor can still follow property into the hands of the recipient. This limitation on the liability of an executor or administrator is contained in the Prescription (Amendment) (Guernsey) Law 1997.
When he has concluded the administration, it is not necessary for the executor to lodge a copy of his accounts with the Guernsey Probate Registry. An executor will, of course, send copies of the estate accounts to the residuary beneficiaries. If, however, there is any suggestion of impropriety on the part of the executor/administrator, then the Guernsey Probate Registry can call upon him to produce a copy of the accounts. The Registrar can do so if he has cause to believe that an estate has been incorrectly administered or there has been undue delay in administering it.
Should there be any dispute between an executor or a beneficiary, or if the executor should wish to receive judicial direction as to the way in which he should perform his duties, then application must be made to the Royal Court of Guernsey and not to the Guernsey Probate Registry. This is by virtue of the provisions of the Ecclesiastical Court Law of 1994 (see G8.6 above). If the matter requiring interpretation or directions from the court concerns the administration of trusts arising under a will, then the executor can apply to the court pursuant to the relevant provisions of the Trusts (Guernsey) Law 2007, as amended, in particular section 69.
An executor cannot charge for his services unless he is expressly permitted to do so by the terms of the will.
If an executor named in the will is not able to take office, perhaps because he has predeceased the testator or is incapacitated, then an administrator will be sworn to administer the estate with the will annexed. The administrator is the nearest in next of kin to the deceased (see G8.5 above). The Guernsey Probate Registry will give guidance as to the person who should be sworn as the administrator in such circumstances.
As wills of personalty are a matter of public record once they have been admitted to probate, a beneficiary is at liberty to apply to the Guernsey Probate Registry for a copy of the will in order to establish his entitlement.
If the deceased was domiciled in Guernsey at the date of his death, a spouse, child or remoter descendant of a deceased may have a statutory entitlement in the estate that is not identified by the will (see G8.2 and G8.3 above).
If the deceased made a will of realty, then it must be registered at the Greffe (Land Registry) in the Island (see G8.4 above). That register is a matter of public record and therefore any person can examine the register of wills. Individuals can thereby establish whether or not they have become entitled to any part of the deceased’s real property.
In reference to wills dealing with both realty and personalty, as a will disposing of realty must be registered at the Greffe, the will becomes a public document once registered. Individuals may continue to make two separate wills as they may not want details such as specific monetary gifts or burial requirements to be openly available for inspection on public record.
If the deceased died intestate without making a will of realty, then his property will be inherited by his next of kin or remoter descendants or ancestors as set out in G8.2 above. In such circumstances, an heir will only be able to identify whether or not he has any entitlement by tracing his relationship to the deceased through a family tree. Collateral succession under Guernsey law is particularly complex. In some instances ancestors have moved abroad and it has proved impossible to identify the full extent of the heirs entitled or to trace them. As a result some properties in Guernsey have become difficult to convey.
Under the 2006 Law some of the difficulties relating to identifying all of the heirs to realty have been resolved by introducing a system of 'administration orders'. An heir, Her Majesty's Procureur or a legal guardian of an heir will be able to apply to the Royal Court to have an administrator appointed who will (once appointed) have title to the property vested in him so he can sell the property, giving good title to the purchaser and then hold the proceeds of sale pending him tracing all of the heirs to the realty who will have a share in the proceeds of sale. In some circumstances, he will have to hold the proceeds of sale for up to six years (the prescription period for realty) and then seek the Court's permission to distribute the proceeds to those established as being entitled to them.
An heir or beneficiary who is aggrieved by the way in which an executor has conducted the administration of an estate can complain to the Guernsey Probate Registry. In the event of default on the part of the executor it may be necessary to bring proceedings against him before the Royal Court of Guernsey. Likewise, an heir or beneficiary who wishes to challenge the validity of a will must bring proceedings in the Royal Court.
The only tax levied in Guernsey is income tax. There are no capital taxes, inheritance taxes or estate duties. Income tax is charged at a flat rate of 20 per cent. Personal allowances below which tax is not payable are available although these are subject to abatement depending upon income. Tax capping, by statute is available in respect of foreign and Guernsey source income. A specific global tax cap of £50,000 is available to new residents of the Island in certain circumstances.
Relevance of residence, nationality, citizenship and domicile
Liability to income tax in Guernsey arises out of residence. Nationality, citizenship and domicile are irrelevant for tax purposes. Persons resident but not solely or principally resident are liable on worldwide income. They may elect to pay the standard charge of £40,000 that is considered to meet any tax liability in Guernsey upon non-Guernsey source income as well as being set against tax arising upon Guernsey source income of up to £200,000. Persons solely or principally resident are liable to pay income tax on their worldwide income, subject to election for specific tax caps that may be available.
No income tax is payable on the income of an estate unless the beneficiaries are resident in Guernsey for tax purposes and the income arises from Guernsey sources (excluding Guernsey bank interest as this is considered foreign income). Guernsey source bank interest is paid gross to both residents and non-residents alike.
Tax on lifetime gifts
There is no Guernsey tax payable on a lifetime gift made by a Guernsey resident. An individual resident in Guernsey should take care that they are not subject to such a tax in a jurisdiction in which they were previously resident or domiciled (deemed or otherwise).
Tax on death
As there are no capital taxes in Guernsey, there is no tax payable on death. The assets devolve to the beneficiaries free of tax. Again, care should be taken such that exposure does not arise in a jurisdiction of former tax residence or domicile (deemed or otherwise).
Jurisdiction of tax charge
Tax payable by non-Guernsey residents is generally only in respect of Guernsey source rental income as most other Guernsey source income, paid to a non-Guernsey resident may be made gross. A charity recognised as such by the Director of Revenue Services in Guernsey is not liable to pay tax on income arising in the Island or elsewhere, with the exception of Guernsey source rental income.
Recognition of foreign taxes
Guernsey has full double tax agreements and partial agreements in place that include the provision for sharing tax information with certain foreign jurisdictions. It also has entered into FACTA agreements and is a signatory to Common Reporting Standards.
Who is liable for the tax?
An executor is liable for the tax which would have been payable by the deceased.
On the death of an individual, all rights, duties and liabilities under the Income Tax (Guernsey) Law 1975, as amended, arising before his death which would have attached to him had he not died, and any liability to be charged with or to pay tax or a penalty or surcharge to which he would have been subject if he had not died, pass to his personal representative. The amount of tax or penalty or surcharge payable by the personal representative is a debt due from and payable out of the estate of the deceased.
An assessment or an additional assessment of any income arising before death cannot be made, and penalty proceedings cannot be instituted, later than the end of the third year of charge following that in which an individual died.
With regard to the income of the beneficiaries, an executor may be charged with income tax at the standard rate in respect of any income which he is entitled to receive on behalf of any person, or which is derived from property vested in him. This does not, however, affect the liability of the person beneficially entitled to such income to be charged in his own name.
It is normal practice that approximately six weeks after the date of death, the Guernsey Revenue Service will send a letter addressed to the personal representatives of the deceased asking for information in respect of the deceased’s income from 1 January in that year to the date of death and income accrued during the period of administration. They will also request the names and addresses of all the beneficiaries whether they be specific cash legatees or residuary beneficiaries.
If a beneficiary is resident for tax purposes in Guernsey, then any income arising from the part of the estate that he receives is subject to Guernsey income tax in his hands. The Guernsey resident beneficiary should declare such income on his tax return.