There are a number of ways in which a Trust may end. This may
involve action taken by the Trustees, the Settlor, the
Beneficiaries, a third party or the Court. It may involve a
positive exercise of an express power, or simply because the Trust
no longer holds any assets.
The Trustees have a duty to determine whether the Trust has come
to an end and, if so, who is entitled to the Trust assets. There
are a number of considerations before the Trustees finally
distribute the Trust assets.
Events of termination
A Trust may terminate by effluxion of time, (the Trust has
reached the end of a defined Trust period).
The Settlor may reserve a power of revocation or the Trustees or
Beneficiaries, those who together are entitled to the whole of the
benefit of the Trust fund and who are of full age and not under any
disability, may bring the Trust to an end.
The Trustees should diarise and plan for any known future events
The Trustees must ascertain and pay any outstanding debts and
liabilities and consider if any tax consequences arise on
termination of the Trust. Professional tax advice should be
obtained where necessary and considered and documented.
The Trustees have a duty to identify the Trust assets and ensure
that they are distributed correctly to the right Beneficiaries. Any
exercise of the Trustees’ power to make distributions must
accord with their fiduciary duties both at common law and under
Isle of Man statute. Trustees have a duty to act in the best
interests of the Trust and to exercise reasonable skill and care.
Proper consideration must be given to all relevant matters and
excluding any irrelevant matters.
Full minutes should be prepared of the Trustees’ meeting
to discuss and agree the relevant action points and exercise of
their power pursuant to the Trust Deed.
To protect their position, Trustees can place 2 advertisements,
in newspapers in the Isle of Man and any other relevant
jurisdiction, for claims of which they have no notice, in
accordance with section 26 Trustee Act 1961. A minimum notice
period of at least two months must be given.
Before distributing the remaining Trust assets to the identified
beneficiaries, final Trust accounts should be prepared.
The Trustees should require that the accounts are approved by
the Beneficiaries before final distributions of assets.
Before transferring legal title of the Trust assets the trustees
should also obtain a full discharge, (and where appropriate an
indemnity), and request a release from the Beneficiaries. The
Beneficiaries cannot be required to provide a formal release, but
at the very least should provide a signed receipt for assets
distributed to them.
The distribution of Trust assets should be formally documented
and the Trustees must ensure the validity of the relevant
termination documents in each case.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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