The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
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.
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 of new trusts but it may also be a more minor change in the terms of an existing trust. Although variation in this context may be brought about by the trustees or beneficiaries in the same way that resettlement or partition is effected, the term applies more specifically to variation with the assistance of the court.
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