Trusts are commonly used for asset protection, however the popularity of revocable trusts and reserved powers trusts has led to a tendency to draft trust deeds with extensive powers reserved to the settlor or some other person to ensure that an element of control over the trust is retained. That approach is not without risk and the extent and scope of any reserved powers can have unintended consequences and can lead to a trust’s asset protection characteristics being eroded. In this article we look at some of the key decisions where the use of reserved powers resulted in a loss of the asset protection their trusts sought to achieve, highlighting the risks to trust structures in utilising reserved powers, and offer some practical guidance on how those risks might be mitigated when forming a new structure or dealing with existing structures where extensive powers have been reserved.
Chris Duncan and Henry Brandts-Giesen, The potential vulnerability of reserved powers trusts, Trusts and Trustees, https://doi.org/10.1093/tandt/ttaa118. Published: 19 February 2021.