Trusts - Head 7

Variation & Termination of Trusts

beneficiary power common law

‘the rule in Miller’s Trs [(1890) 18 R 301)

A sole beneficiary or unanimous multiple beneficiaries can decide to bring a trust to an end in certain circumstances

beneficiairy power - statute

S 58 - s.59 2024 Act: an ‘arrangement’ can be made if agreement or approval is given ‘by or on behalf of each beneficiary, and of each potential beneficiary, of the trust in question.’

approval by the court on behalf of s.59(5) beneficiaries

s.60

• must be satisfied the arrangement would not be prejudicial to the person on whose behalf the approval is sought.

• Unless approving on behalf of a potential beneficiary that the court does not think likely to become a beneficiary due to the qualifying event or birth being unlikely to happen

Prejudicial?

• Economic or other benefits/detriments to the person of the arrangement

• Welfare of any member of the person’s family

• Such other factors as seem to the court to be material

When court approving on behalf of persons under 18 years of age, further specialities

s.63 2024 Act

• if aged 16 but not yet 18 the court must ‘have regard to the person’s views in relation to the arrangement’

• If under 16 the court is to give that person an opportunity to express views in relation to the arrangement in a manner they prefer or in a manner suitable if no preference expressed or not possible, and then have regard to any views expressed, taking into account the person’s age and maturity 

• Under 16 presumed able to form a view, but the court need not take account of views if satisfied the person is unable to form a view

Gray v Gray’s Trs (1877) 4 R 378, at 383 per Lord Gifford

every possible beneficiary desires and consents to a particular course being adopted – all the beneficiaries being of full age and sui juris and none of them being placed under any restraint or disability by the trust deed itself – then no-one has any right or interest to object and the court will not interfere to prevent the sole and unlimited proprietors doing what they like with their own.”

court power to alter trust

Trusts and Succession (Scotland) Act 2024

S 65 Alteration of trust purposes

• Where there has been a material change in circumstances since the trust was created [inter vivos] or executed [testamentary]; or such change is reasonably in prospect

• The court may alter the trust purposes ‘in so far as it is in the opinion of the court expedient to do so to offset the effect of the change in circumstances’

• If mortis causa trust the truster must be dead

who can apply for s.65 order?

a) trustees; (b) the truster if an inter vivos trust; (c) a descendant of the truster; (d) a beneficiary or potential beneficiary; (e) a descendant or ancestor of a beneficiary or potential beneficiary; (f) an appropriate person in relation to a beneficiary or potential beneficiary; (g) judicial factor; (h) protector or supervisors not excluded by trust deed.

time limits probiting alteration - inter vivos

Trusts and Succession (Scotland) Act 2024

S 65 Time limits

Inter vivos trust: 

• if trust deed expressly prohibits alteration for the lifetime of the truster and/or a period of 25 years from creation of the trust, s 65 alteration not available during those periods

• If trust deed expressly prohibits alteration for MORE than 25 years, then it is to be treated as prohibiting alteration for whichever is the later of the death of the truster or a period of 25 years

• So, essentially, a truster can only prevent alteration of a trust for up to 25 years or the date of his death whichever is the later date from the creation of the trust.

time limits probiting alteration - mortis causa

If trust deed expressly provides purposes of the trust may not be altered for a period of up to 25 years from the date of the death of testator, no s 65 alterations during that period

If trust deed expressly provides purposes may not be altered for period of more than 25 years from date of death, no alterations under s 65 until 25 years elapsed [so, can only bar alteration for up to 25 years]; there is further special provision for situation where the testator lost capacity after executing trust but before death, allowing the 25 year clock to run from the loss of capacity

court powers - advances from capital

Trusts and Succession (Scotland) Act 2024

S 24 Advances from capital

Default power for trustees to advance part or all trust capital to beneficiaries, including with conditions attached to the advance

2 requirements for s.24 advance

A right to the capital must be vested in the beneficiary, or there is possibility that it could vest in future

Other beneficiaries consent to the advance OR the court authorises the advance on the basis that non-consenting beneficiaries are withholding consent ‘unreasonably’ or is incapable of giving consent

• Court can give payment earlier than the trust deed dictates for the trustees. 

• Only if there is a right in capital to an actual beneficiary.

termination - Hedderwick’s Trs v Hedderwick’s Trs 1910 SC 333:

ruster in a testamentary trust provided that it benefit employees of the firm (i.e. partnership) of which he was a partner; but the partnership converted to a limited company: so held that the purposes of the trust had failed. (If this case happened today, it might be ‘saved’ under s 65?) 

• Where a trust fails a “resulting trust” is created over any remaining trust property, so that it is held on trust for the truster or her heirs