News & Updates

Trusts and Succession (Scotland) Act 2024

Sarah-Jane Macdonald

Published bySarah-Jane Macdonald

2nd February 2024

Trusts and Succession (Scotland) Act 2024

We finally have it – the long-awaited and much-debated, Trusts and Succession (Scotland) Act 2024. It received Royal Assent on 30 January 2024, marking the most substantial reform of trust law in Scotland in over 100 years.

After a series of consultations culminating in the draft Bill in 2014, hopes of reform had started to dwindle until the centenary in 2021 garnered support and attention with Parliament. Fast forward to where we are now, and with Royal Assent now granted, we have the reform we’ve all been vying for.

The Act will be the foundation of all trust law moving forward, replacing the previous legislation.

WJM Partner SJ Macdonald, an Accredited Specialist in Trust Law, provides some detailed guidance on the evolution of the Bill and its terms:.

How did we get here?

The Bill was introduced to Parliament on 22 November 2022, which largely reflected a draft prepared by the Scottish Law Commission, but with the addition of “Part 2” including minor amendments to the law of succession.

The Delegated Powers and Law Reform Committee then opened a Consultation, which ran from 6 January to 17 March 2023 and received over 25 responses.

In addition, the Committee held various sessions at Parliament throughout May 2023 seeking views on key issues. Lady Ann Paton and Lord Drummond Young spoke to the initial work undertaken by the SLC and the construction of the Bill. Evidence was then heard from trustees, key academics, firms, and representatives for the Faculty of Advocates, Law Society of Scotland and STEP Scotland, which covered a variety of discussions around the practical and legal implications.

The final amendments were debated and agreed in Parliament on 20 December 2023, when the Bill was passed by Holyrood.

What issues have been debated?

Trustee Liability & Expenses
This was a fundamental point that really hit at the heart of trust law. In the Stage 2 version of the Bill, it stated “a trustee has personal liability for any loss to a beneficiary which results from …the trustee’s own acts or omissions …”. Whilst s65 also provided that where a trust is exhausted and cannot cover expenses as part of a litigation, any shortfall would be met by trustees personally.

The proposed switch was a very dangerous precedent to set – the role of acting as a trustee would be very unattractive and would make Scotland undesirable as a trust jurisdiction. Thankfully, the final version of the Act has made it clear that s36 (previously s32) is not to be read in isolation,but is subject to “the other provisions of this Act concerning the personal liability of trustees”. Likewise, s65 has been suitably reworded.

Decision making & signature of documents
The Act has also amended how trustee decisions are to be made. Under s13 decisions can be validly made by a majority “of those for the time being able to make it”. This seemed an inclusive way of allowing trustees whose capacity fluctuates to remain in office without hindering trust administration.

However, s44 was amended during the process following feedback from conveyancers such that for a document to be valid, it must be signed by a strict majority.

This means that whilst a decision can be validly made, trustees may be unable to implement it if they cannot achieve a strict majority to sign documentation. This may require some trustees to be removed from office (following the procedures of intimating trust decisions to them) and if time is of the essence, opportunities could be missed.

The removals and resignations of trustees
New grounds were introduced where co-trustees can remove a trustee without going to court – a welcome change for a swift (and inexpensive) removal.

Those grounds include where a trustee has been convicted of an offence involving dishonesty or sentenced to imprisonment. Unfortunately, despite pleas to the Committee, these are not retrospective if the conviction, or otherwise, was prior to this section coming into force.

That said, one of the additions from the consultations with the Government was the ground to remove professional trustees in certain circumstances. It will certainly be beneficial for those stung by failed trust planning schemes.

Incapable trustees
There was much debate around the removal of trustees who become incapable. In most situations, this power is a good, practical, step forward from the current law. However, concerns were raised around the potential for abuse by placing the decision of capacity on the co-trustees.

During the consultations a sensible solution was offered, which would be to provide statutory authority for any attorney or guardian to resign on behalf of a trustee. It was a delight to many to see this was adopted into the final version of the Act at s6.

Trustees’ duties to provide information
s29 provides a basis to go to court to request information if trustees are unwilling to release it. It was argued at the evidence sessions that the ability to do so was too widely given. A change was suggested (and embraced) to restrict it to those who have a genuine interest in the trust and to exclude parties whose interest is so remote that it would be negligible. This might avoid the disruptors from raising unnecessary litigation.

The role of Protectors

S53(1) reflects what most practitioners will recognise from other jurisdictions, which is that a trust deed can appoint a protector. s53(2) states that a settlor can confer “powers” on protectors, however, there are no restrictions as to what those may be.

There were various concerns raised that protectors should not be given powers that ought to be reserved to trustees, such as an ability to direct who to appoint assets to (or restrict from entitlement). A particular concern here could be settlors appointing themselves as protectors and acting akin to a shadow-trustee. How this will play out, we shall need to wait and see.

A new power to alter trust purposes

S65 of the Bill introduces a new power to apply to the court to have the trust’s purposes changed if there has been a material change in circumstances. Unlike seeking a trust variation, there are a wide range of parties who can apply to the court under this section, so it opens the doors for what could be some very interesting case law.

Interestingly, it would be possibly for a descendant of the settlor to seek to have trust purposes altered, and so if they were purposefully excluded, but circumstances change later in life – they could seek to have those purposes altered.

What next?

The sections relating to succession (ss 76 – 77) will automatically come into force in three months’ time. However, none of the trust provisions are enacted as yet and we await regulations by the Scottish Ministers to bring these into force.

 

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