Farewell, Trusty Old Law: New Trusts Bill on the Horizon

Document Cited authorities (5) Cited in Related
DOI10.3366/elr.2022.0766
Author
Pages257-262
Date01 May 2022
Published date01 May 2022

At long last, the Scottish Government has indicated that it has begun detailed work towards presenting a Trusts Bill in the Scottish Parliament.1 The key piece of Scots trusts legislation, the Trusts (Scotland) Act 1921, passed its centenary in August 2021. It is therefore welcome news that the Scottish Law Commission’s extensive work in this area, and particularly their proposed Trusts (Scotland) Bill, updated in 2018, will be considered for implementation. This article will consider how the trusts landscape has shifted over the last century, identifying some ways in which trust law is out of kilter with modern practice. It will then analyse some aspects of the proposed legislation which seeks to consolidate and enhance trust law for the benefit of the Scottish economy and people.

Trusts are now used in a wider range of private, charitable and commercial purposes than ever could have been envisaged by the drafters of the 1921 Act. Trust law is flavoured by its neighbouring fields of succession, family, tax, charity, insolvency, financial services, and commercial law, all of which have seen major updates. Many of the motives and incentives for using trusts in these various arenas have expanded substantially.2

The protection of assets held for children or incapable or vulnerable beneficiaries is a major reason to use trusts. In Scotland, a teenager aged sixteen or seventeen inherits outright unless there is a will containing trust provisions.3 Trusts are also used to hold assets for incapable beneficiaries as an alternative (or in addition) to guardianship.4

Laws relating to women’s property rights, as well as increasing rates of divorce and cohabitation over the twentieth century, have shaped modern trusts practice. The Married Women’s Property Acts in 1880 and 1881 helped some women, but women’s property rights were curtailed well into the twentieth century, and the law of primogeniture in Scotland subsisted in relation to heritable property on intestacy until 1964.5 Trusts could get around some of the limitations. Liferent trusts can also be an appropriate safeguard where someone has children from a previous relationship and wishes to protect the ultimate succession rights of their own issue, whilst ensuring their surviving spouse or partner can live comfortably for the remainder of their life.

Trusts may be used for preservation of family wealth. Property held in trust is not owned by the individual so it cannot be regarded as matrimonial property.6 However, if one of the parties is a beneficiary of a trust, that could be viewed as part of the resources of the parties, since “resources” means “present and foreseeable resources”.7 There remains a conceptual difficulty because the trustees of a discretionary trust have no obligation to pay anything to any particular beneficiary. In M v M,8 the husband had set up a trust for his children, but by the time the divorce occurred, he had very few other assets, so the court ordered a transfer of some of the trust funds to his wife. This is a rare example of financial provision trumping trust law, but...

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