Question: can assets held in a trust be considered to “belong” to the settlor for the purposes of applying EU sanctions?

Answer of the Advocate General: It depends on the individual circumstances and on the trust structure and the applicable law. However, even where the settlor of a trust has ceased to be its beneficiary, the trust assets may become available to them again if the beneficiaries, for example, waive their rights to the assets or if the trust is terminated early.

This interpretation allows a formal approach to determining the settlor’s control powers, despite the recommended “individual” approach in such cases.

Accordingly, a negative practice may emerge in the EU: if the settlor is added to EU sanctions lists, the function of the trust as a tool for “separating” assets from the settlor and protecting them from external claims may be undermined.

In addition, although there is no automatic presumption that a trust will become subject to sanctions if the settlor is listed, in order to confirm the absence of control over the trust it will be necessary to disclose its structure and the mechanisms for managing the assets to EU government authorities, which entails a risk of loss of confidentiality.

Source: Trusts and sanctions. What will change in the EU’s approach to cases involving Russians :: RBC