Follow by Email

27 February 2015

Taxation of trusts - part 2, Revocability

Feel free to join the Tax in Israel Facebook group

The trust laws relate to the revocability of the trust. This can affect which type of tax rules apply to a particular trust (see here for the introduction to trust taxation).

This post will consider what makes a trust revocable or irrevocable from the point of view of the Israeli tax law. In subsequent posts we will see how and when this becomes relevant.

A trust is considered irrevocable if it is not a revocable trust. The following is a list of situations whereby a trust is considered revocable. Only one of these situations need to apply for the trust to be considered revocable:

1. It is possible to cancel the trust or otherwise revert the ownership of the trust assets or incomes to the settlor, their spouse or a corporation controlled by the settlor.

2. The settlor or their spouse are, or can become, one of the beneficiaries.

3. A child, aged 18 or under, of the settlor is a beneficiary - provided that the settlor or their spouse is still alive.

4. A company controlled by either the settlor, their spouse or their child aged 18 or under, is a beneficiary.

5. The trustee is a settlor.

6. The trustee is a close relative of the settlor. This is unless it can be shown that the settlor had no undue influence on the decision making of the trustee.

7. The identity of a beneficiary is unknown. This is unless it can be shown that the unidentified beneficiary is NOT the settlor, their spouse, their child aged 18 or under or a company controlled by one of the above.

8. Beneficiaries were added or exchanged against the terms of the trust deed.

9. The relevant reports were not made for an irrevocable trust.


This last point can make it crucial to ensure that planning is done with relevant professionals before the trust goes into effect.

No comments:

Post a Comment