With settlor-interested trusts, the settlor is liable for all Income Tax due on income received by the trustees, even income that is not paid out to the settlor. However, the trustees are required to pay the tax, as the recipients of the income. The Income Tax rate applied depends on how the trust has been set up.
What happens if a settlor is a beneficiary?
If the Settlor is a Beneficiary then the Settlor will not have divested him/her self of the Trust assets and as a consequence no Trust relationship can exist.
Can a settlor benefit from a trust?
The settlor decides how the assets in a trust should be used – this is usually set out in a document called the ‘trust deed’. Sometimes the settlor can also benefit from the assets in a trust – this is called a ‘settlor-interested’ trust and has special tax rules.
Who are the beneficiaries of a settlor interested Trust?
Mr A and his brother (both non-UK resident) were appointed as trustees of the trust and both were excluded from all benefit under the trust. The beneficiaries of the trust were the children of Mr X and anybody else that the trustees appointed as beneficiaries.
What happens when a settlor dies under a Loan Trust?
Death of a settlor under a Loan trust Under a Loan trust, the settlor lends a sum of money to the trustees who invest it in a bond. The settlor remains entitled to the repayment of his loan on demand whilst any growth is held for the benefit of the beneficiaries, again under either a bare trust, flexible trust or a discretionary trust.
Can a CGT hold over apply to a settlor interested Trust?
Again, the settlor-interested trust provisions will apply. This means that CGT hold-over relief would not apply to any transfers to the trust (resulting potentially in immediate CGT liabilities when the assets were transferred to the trust).
Who is a purposed beneficiary of a trust in India?
According to trust law, Section-9 of the Indian Trust Act[1], “Every person competent of holding assets may be a beneficiary.” A purposed beneficiary may deny his interest under the trust by the disclaimer directed to the trustee. A beneficiary is a person who is designated to the benefit of any trust agreement.
