If a Trust has the standard settlor exclusion.clause, but
There is an overiding power that allows transfer of trust property to other settlements,
released from the terms of the current Trust and property held according to the new trusts terms.
Does the original trust settlor exclusion mean the settlor has be excluded from the new trust?
Otherwise this power to transfer could be used to allow the settlor to benefit, even if it does have negative tax consequences.
All well drawn trusts that contain this common power should, if wished, exclude the settlor and spouse from benefit under any transferee trust or make certain that the general exclusion cause covers it as well as the head trust. The tax consequences that follow such persons being able to benefit are about mere possibilities, and with a few too remote exceptions such as only benefiting under the intestacy of another beneficiary. Without this wide exclusion the settlor or spouse qualifying in the future as a solicitor and benefiting from the professional charging clause would be caught and this must be borne in mind if unusually any trustee is allowed to charge.
Mr Kessler KC’s clause should cover any eventuality:
" Exclusion of Settlor and Spouse
Notwithstanding anything else in this Trust, no power conferred by this Trust shall be exercisable, and no provision shall operate so as to allow Trust Property or its income to become payable to or applicable for the benefit of the Settlor or the Spouse of the Settlor in any circumstances whatsoever."
And he certainly thinks that it covers his own clause allowing transfer to another trust. Some drafters may prefer still to repeat the exclusion in that specific clause.
Your actual clause measured against this may allow such a transfer from which the settlor or spouse can benefit with, as you say, negative tax consequences. This happened in the case of IRC v Botnar  STC 205 where the settlor was excluded under the settlement itself but could be added as a beneficiary of a transferee trust, which appeared from extraneous material to have been quite intentional. Query if it had not been intended, but safer to assume that it does not matter.
It used to be possible to ask HMRC to consider a trust deed from this point of view but the practice has been long discontinued
Thank you for the feedback, it is a Kessler Trust Deed
and has exactlty the same worded Exclusion clause you have quoted
and confirming the exclusion clause does need exclude the settlor from benfiting from any Transfers to be tax efficient and that he certainly thinks that it covers his own clause allowing transfer to another trust.
Now I know that I can add that Mr Kessler, in his book which accompanies his precedents, makes clear that his exclusion clause covers the exercise of the transfer to another trust power, among his Overriding Powers: Ch 13 paras 13.8 and 13.11.