Question
What are the consequences of failing to deposit the settled sum on the establishment of a Discretionary Trust?
Answer
This area of the law is potentially complex, however it is preferable that the settled sum is always deposited into the Trust’s bank account, and it should be the first deposit.
The approach of placing the settlement cheque (or a cash equivalent of it) on the file for the Trust can be problematic for a range of reasons, including:
- Where the settled sum is by way of cheque, the cheque will normally go stale after 15 months; and
- Even where cash is stored with the Trust, it is difficult to provide documentary evidence of the settled sum forming part of the Trust if the cash is lost.
Ensuring that the settled sum is deposited into the bank account of the Trust avoids these two issues from occurring.