Here We Go Again: Representation Of A In The Matter Of The G Trust
What's this - surely not another mistake/Hastings-Bass briefing from those people at Walkers? Well, yes, but in our defence, there have been several judgments from the Royal Court on this topic in the last few months, and if anything, it underlines our previous observation that this is a helpful regime for trustees, settlors and beneficiaries. Also, this particular case involves an error by a settlor in establishing a new trust, rather than by a trustee in relation to its administration of an existing one. The relevant statutory provisions are different, even if relief will often be available in both cases. The purpose of this note, therefore, is to briefly illustrate how settlors who find themselves in difficulty can seek to unravel the creation of their trusts.
Background
The salient facts are as follows:
the settlor was a successful Greek entrepreneur who was neither resident nor domiciled in the United Kingdom; for succession purposes, and following discussions with his private banker, he wished to establish a trust; a part of the assets he wished to settle into trust comprised funds held in a Eurobank account in Luxembourg; the settlor no longer wished to use that particular bank for those funds; the private banker therefore arranged for a new account to be opened for the settlor in order that the settlor could then transfer the funds from that account to the trustee of the new trust; the new account was opened for the settlor through the London office of the bank; and the settlor then made a number of transfers into the trust from his London bank account, as well as transferring a portfolio of investments. Anyone familiar with UK personal taxation will have spotted the impending disaster half way down the above list: by virtue of the location of the branch of the bank, the assets in the account were UK-situs assets, leading to a charge to UK tax on their settlement into the trust (principally, a 20% entry charge for Inheritance Tax purposes and exposure to future exit and ten-yearly charges). This was inadvertent. The settlor had assumed that if any tax advice was needed, he would have been told, and he had no reason to believe that there were any potential tax consequences that were not being addressed. As Commissioner Clyde-Smith said in his judgment:
"It follows from this that not only was the setting up of his London bank account completely unnecessary, but it gave rise to UK tax liabilities that were entirely avoidable by the...
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