Resettlements and variations

By Tolley

The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Resettlements and variations
  • Meaning of resettlement, variation and partition
  • Resettlements by trustees
  • Resettlements by beneficiaries
  • Tax implications of resettlements
  • Variations
  • Variations without the assistance of the court
  • Variations under the court’s jurisdiction
  • Variations under statutory powers

Meaning of resettlement, variation and partition

The trustees or the beneficiaries of a trust may wish to change the way in which the trust operates; or they may wish to hold or allocate trust property under different terms. This guidance note and the Partitioning trust funds guidance note examine how the change can be achieved.

There is a degree of overlap between the terms used and there are no clear definitions.

In this guidance note, the term ‘resettlement’ refers to a transfer of trust assets from one trust to another. The trustees of each trust may be the same or different, and the ‘transfer’ may be merely notional in that legal ownership does not change. However, the key features are that:

  • new trusts are declared over the trust property with the result that its use or application is modified, and
  • it is brought about by the exercise of existing powers

A typical example of resettlement is where the trustees wish to postpone the date on which a beneficiary is to become absolutely entitled to trust assets because of immaturity or vulnerability.

Pilkington and Another v IRC & others [1962] 3 All ER 622 (subscription sensitive)

The Partitioning trust funds guidance note examines the situation where beneficiaries wish to distribute or resettle trust assets. This may be because the rationale for the trust has changed or perhaps because there is disagreement over how the trust should be managed.

Therefore, resettlement and partition both refer to the creation of new trusts. Resettlement is carried out under the trustees’ existing powers but partition is brought about by the beneficiaries.

The term ‘variation’ refers to any change in the trusts under which property is held. It may involve the creation

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