Power to change a Trust - Reservation of benefit

[marc02]

Where a Trust Deed has a Power to Change the Trust, does it cause an immediate reservation of benefit? Especially if the Trustee is the Settlor?

For example a Trust might stipulate the exclusion of settlor, settlor's spouse and minor children as excluded beneficiaries, BUT if the Trustee was the Settlor and there was a Power to Change the Trust, the Trustee could change the provisions allowing the spouse or minor children to benefit.

Therefore could such a Trust be seen as a reservation of benefit? Of only if such a Power was executed in this way does it then become a problem?

[AGoodman]

The identity of the trustee is irrelevant; to avoid a reservation of benefit it must be impossible for the settlors to benefit.

Most exclusion provisions in trust deeds will override any power of amendment/appointment/advancement. If they do not then you could have a GROB irrespective of whether the trustee is the settlor or independent.

[maths]

As AGoodman states where a properly drafted "settlor exclusion clause" is contained in the Trust Deed this should usually override any powers to amend/change the provisions of the trust.

It may also be useful to check if there is a "default clause" designed to preclude a settlor benefitting under a resulting trust.