In the matter of the Lochmore Trust [2010] JRC 068 (30 March 2010)

In the matter of the Lochmore Trust [2010] JRC 068 (30 March 2010)

The trust was set aside because the settlor made a fundamental mistake as to the nature of the transaction, believing it was a sale rather than a gift, which resulted in an unintended and substantial inheritance tax liability. The mistake was sufficiently serious to render it unjust for the beneficiaries to retain the property.

Citation
[2010] JRC 068
Parties
Applicant: Settlor; Trustee: Lutea Trustees Limited; Beneficiaries: Adult beneficiaries (four children and wife of settlor); Representative of Unborn Beneficiaries: Advocate Goulborn
Jurisdiction
Jersey
Judgment Date
30 March 2010
Procedural Posture
Application to Set Aside Trust / Judgment on Application
Outcome
Trust set aside as invalid due to mistake.
Legal Topics
Setting Aside Trusts for Mistake, Inheritance Tax Liability, Mistake in Trust Formation
Trusts Equity Taxation Setting Aside Trusts for Mistake Inheritance Tax Liability Mistake in Trust Formation

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Parties

Settlor

Applicant

Lutea Trustees Limited

Trustee

Adult beneficiaries (four children and wife of settlor)

Beneficiaries

Advocate Goulborn

Representative of Unborn Beneficiaries

Procedural Posture

Application to Set Aside Trust / Judgment on Application

Legal Issues

  1. 1 Whether the Lochmore Trust should be set aside on the grounds of mistake by the settlor

Ratio Decidendi

The trust was set aside because the settlor made a fundamental mistake as to the nature of the transaction, believing it was a sale rather than a gift, which resulted in an unintended and substantial inheritance tax liability. The mistake was sufficiently serious to render it unjust for the beneficiaries to retain the property.

Court Disposition

Trust set aside as invalid due to mistake.

Orders

  • Declaration that the Trust was established by reason of mistake and is invalid.
  • Transfer of the shares in the Company to the Trust set aside.