Who is the Settlor?

Trusts Discussion
1

X = Deceased
Y = X’s disabled adult daughter
Z = Y’s mother

On X’s death, £250,000 was settled into a Discretionary Trust (“Trust 1”) managed by a life insurance company.

Y is a potential beneficiary of Trust 1.

Z would prefer the funds in Trust 1 to be held in a dedicated Disabled Person’s Trust (“Trust 2”), for the benefit of Y. Z would like the Trustees of Trust 1 to resettle the funds to the Trustees of Trust 2.

Who would be the Settlor of Trust 2? Would it be X, Z or the Trustees of Trust 1?

I appreciate there may be different answers depending on the different taxes but I’m asking more from a drafting perspective.

2

X for all purposes: X is the settlor of Trust 1 and I presume that assets pass directly from Trust 1 to Trust 2 by means of a power of advancement or express power to transfer to another settlement for Y’s benefit.

(I assume Trust 1 was established under X’s will, although you do not state that expressly)

Andrew Goodman
Osborne Clarke LLP

3

Thank you, Andrew. Trust 1 is actually a life policy wrapped in a Trust, with the funds now being payable at the life company’s discretion (as Trustee). But I take the point about X being the Settlor.

4

Why does Z want. to move the trust property?

Is it for tax treasons and/or non-tax issues?

Was the possibility of setting up a disabled person’s trust initially considered?

Trust 1 now holds £250k cash which arose from the maturity of a single premium bond on X’s life?

Who are currently the other possible;e beneficiaries under Trust 1?

Agree with AG’s comments re settlor for tax.

Malcolm Finney

5

Many thanks, Malcolm.

  • The reasons for moving the Trust property are a mixture of tax and non-tax reasons.
  • I haven’t seen any indication that a Disabled Person’s Trust was initially considered.
  • The £250K arose from an insurance payment rather than a Premium Bond.
  • The Trust Deed is on its way to me so I can’t yet identify the other potential beneficiaries of Trust 1 (if any).