Transferring Assets In To A Trust? A Timely Warning About Documentation…

Was the trust empty, or emptied?

The Privy Council decision in Gany Holdings (PTC) v Khan and Others (on appeal from the Court of Appeal of the British Virgin Islands) provides a timely warning on the importance of properly documenting transfers of assets into a trust. It also highlights the dangers for trustees of not knowing what assets are in a trust before making distributions to beneficiaries.

Mr Rangoonwala (Mr R) established a discretionary trust for the benefit of himself and his family 16 years before his death. The primary issue in the case was what assets had been properly transferred to the trust before his death. The secondary issue was whether the trustee's decision to distribute the entire fund to the settlor's son, Asif, shortly after the settlor's death could be set aside if the trustees had an incorrect understanding of what assets were in the trust.