A settlor, S, creates a pilot trust intended to receive further funds after his death. Because there was no intention to use the trust during S’s life, there is no exclusion of S, the spouse of S, or the minor children of S; all are potential beneficiaries of this widely drafted trust. It is clearly a settlor interested trust.
Following S’s divorce, his brother, B, decides to help S and his children, but he does not want to give S the money directly, because he is worried about the former spouse of S coming back for more money. B therefore gives the trustees of the pilot trust some funds so that they can use it to buy a house for S to live in that is suitable for S’s children when they visit.
Am I right in thinking that although expressed in terms of B giving money ‘to the trust’, this is in fact a separate settlement, on identical terms, with B as the settlor? If this is correct, does that in turn mean that the recently received funds are not ‘settlor interested’, either in terms of S (who, along with his minor children, are beneficiaries of the trust), or in terms of B (who is not a beneficiary of the trust)?
Or does the initial £10 of settlor interested funds permanently taint the entire trust?
Elliot, Bond & Banbury