Clifford Chance

Turkish delight: revocable trusts and settlors' creditors

30 June 2011

If a settlor of a trust retains the power to revoke the trust, judgment creditors of the settlor may be able to enforce their judgments against the assets secreted in the trust. This can be achieved by the court appointing a receiver over the settlor's power of revocation, and the receiver then exercising that power. Once the trust has been revoked and the trust assets put back in the hands of the settlor, those assets are fair game for the settlor's creditors. Many will consider this to be obviously the right result, but the Privy Council decision that reached it only did so by reversing the decision of the lower courts and by revisiting some basic trust principles.

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