Settlor’s Involvement

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It is understandable that Settlors may wish to retain control over the Trust assets for as long as possible; after all, they have more often than not spent a lifetime accumulating the wealth they want to pass on. Some may even seek to appoint themselves as Trustee, however, too much involvement from the Settlor can lead to the Trust being deemed a sham, and therefore the Trust assets could form part of their estate for tax purposes. It is worth underlining the fact that there needs to be clear separation between the Settlor and the assets, ensuring that the Settlor cannot be deemed to have retained any unintended beneficial interest.

A Settlor may also wish to name themselves or their spouse as beneficiary, however, this requires lithuania mobile database very careful consideration. If the Settlor or his or her spouse can benefit in anyway, the Trust is deemed to be a Settlor Interested Trust, giving rise to adverse tax consequences.

Solution: The Settlor needs to be clear about what they want to achieve from outset. This way, the correct form of Trust and appropriate provisions can be included at planning stage. The client will need to work with the adviser to come to a decision. Referring to my note above, regarding professional Trustees, this can also provide comfort. The Settlor should be able to have confidence that their chosen service provider will always act in the interests of the Trust, taking into consideration the Settlor’s Letter of Wishes where appropriate.