Practitioners continue to discover glitches in, and unexpected aspects of, the rules on protected settlements. It appears that, in some cases, a spouse/civil partner of the settlor may be able to taint a protected settlement. This is due to a deeming provision in the transfer of assets abroad code, which may have the effect of giving ‘settlor’ a wider meaning than might be expected. Taken to its logical conclusion, this deeming provision is capable of producing rather surprising (and arguably unfair) results in the context of the protected settlement rules, and a court may well be prepared to limit its effect. Nonetheless, settlors would be well-advised to keep in mind the potential scope for tainting as a result of transactions between the trust or an underlying entity and the spouse/civil partner.
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Practitioners continue to discover glitches in, and unexpected aspects of, the rules on protected settlements. It appears that, in some cases, a spouse/civil partner of the settlor may be able to taint a protected settlement. This is due to a deeming provision in the transfer of assets abroad code, which may have the effect of giving ‘settlor’ a wider meaning than might be expected. Taken to its logical conclusion, this deeming provision is capable of producing rather surprising (and arguably unfair) results in the context of the protected settlement rules, and a court may well be prepared to limit its effect. Nonetheless, settlors would be well-advised to keep in mind the potential scope for tainting as a result of transactions between the trust or an underlying entity and the spouse/civil partner.
If you are not a subscriber, subscribe now to read this content.
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