We act for husband and wife clients who in 2018 created a joint US living trust in Virginia, CA. At the time they were US resident and US domiciled. They are planning to move permanently to the UK in 23/24. She will acquire an English domicile of choice; he will be a Formerly Domiciled Resident. The US trust holds three US properties which are likely to be sold. The two settlors are the only two trustees.
I am conscious of the discussion on this Forum from May 2016 at US Living Trust - is it a bare trust for UK tax purposes? - #5 by USattorneyinUK (and indeed Ian Watson’s article in STEP at https://www.step.org/step-journal/step-journal-june-2014/unsettling-questions#footnote11_oqmmelu).).
I understand that, where s.603 of the UTC applies to a trust (i.e. it is revocable and the trustee has capacity to revoke the trust), that would indicate that the rights of the beneficiaries are subject to, and the duties of the trustees owed exclusively to, the settlors of that trust and so there is no substantive trust in that case. I believe Virginia has adopted s.603.
This trust is revocable and moreover states that if the settlors have in fact appointed attorneys then the attorneys have all the powers of the trustees, including the power to revoke the trust. However, I have recommended the clients take local advice on whether or not the authority of any such attorneys would continue if either of the settlors lost mental capacity.
My query here is: does the fact that they were joint settlors, albeit currently the only two trustees, make a difference to the analysis of bare trust or substantive trust (including both for UK IHT and for UK CGT purposes)?