Glossary · UK
What is Settlor?
The person who creates a trust and transfers assets into it, setting the terms under which a trustee must manage those assets for the benefit of the beneficiaries.
Full Definition
A settlor is the individual (or, less commonly, a company) who establishes a trust by transferring assets -- such as cash, investments or property -- into it and setting out the terms on which those assets are to be held and managed, typically in a trust deed. Once assets are placed into trust, legal ownership passes to the trustee(s), who are responsible for managing the assets in accordance with the settlor's wishes and for the benefit of the named beneficiaries, while the settlor themselves generally gives up ownership and control of the assets, though they can also act as a trustee or, in some cases, as a beneficiary. A settlor's tax position does not always end the moment assets go into trust. Setting up most trusts other than a bare trust can trigger an immediate Inheritance Tax charge if the value transferred exceeds the settlor's available nil-rate band, and further "periodic" and "exit" charges can apply to the trust every ten years and when capital leaves it. Where a settlor retains an interest in the trust, or the trust is set up for their minor unmarried children, the "settlor-interested trust" and "parental settlement" anti-avoidance rules can also tax the settlor personally on income or gains the trust generates, even though they no longer legally own the assets -- which is why most UK trusts, along with details of their settlor, trustees and beneficiaries, must be registered on HMRC's Trust Registration Service.