Trust Power of Appointment

A trust deed contains a power of appointment whereby the Trustees may ‘_provide for the transfer of any assets to the trustees of any other settlement, wherever established, from which a Beneficiary may benefit, whether or not persons other than Beneficiaries may also benefit.’

The Settlor and Settlors Spouse have been excluded as beneficiaries.

Can the Trustees appoint assets to another settlement if the Settlor and his spouse may benefit from that other trust?

My own view is that the ability to transfer trust assets to another settlement where other people may benefit is a ‘discreet’ exemption provision for the trustees when transferring assets to another settlement but that the trustees may be in breach of trust to appoint assets to another settlement where the Settlor and his Spouse may also benefit directly.

Is my view too strict? I welcome readers’ comments.

Kurt Lee
Lester Aldridge LLP

I will leave it to someone else with more experience in legal matters to
answer your question but I wonder whether anyone has given consideration to
the taxation consequences of what appear to possibly be contradicting

Presumably the settlor and spouse were excluded specifically in order that
the adverse settlor assessable taxation.consequences should not arise

However, unless there is something very specific in the settlor/spouse
exclusion wording [ which incidentally is likely to mean that the transfer
possibly being envisaged transfer would be ultra vires ] it appears to me
that HMRC’s view is likely to be that the trust is and always has been
settlor assessable.

Andrew M Mortimer

It is not possible to answer this question as it stands. It depends on the wording of the relevant clauses, in the context of the trust deed as a whole. Starting with a blank sheet, one could draft the settlement to achieve either one result or the other.

Having said that, the usual form would provide that the exclusion of the settlor and spouse overrides any power in the trust deed, so that the Trustees could not transfer the fund to another settlement under which they may benefit.

James Kessler QC
15 Old Square
Lincoln’s Inn

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