The Trusts and Successions (Scotland) Bill was approved by the Scottish Parliament on December 20, 2023, and received Royal Assent on January 30. In this article, we will examine two aspects of the law that impact individuals who have created or plan to create a trust, known as settlors.
It is crucial for a trust to have at least one competent trustee who can manage the affairs of the trust. Since trusts can last for years, it is often necessary to appoint new trustees to replace those who have passed away, retired, or can no longer continue due to health issues. The settlor decides who the original trustees are, usually specified in the trust deed itself. Then, it is the trustees themselves who appoint new trustees or replacements. It is important to always check the contents of the trust deed, as occasionally the power to appoint new trustees is exclusively reserved for the settlor during their lifetime or granted to a third party. Although most trust deeds leave this matter to the discretion of the trustees, issues arise when there are no capable or surviving trustees to manage the appointment of new trustees, as the affairs of the trust cannot be managed without them.
The law provides the settlor with a fallback power to appoint a new trustee in case there is no competent or traceable trustee. Once a new trustee is appointed, they can in turn appoint other trustees to reinitiate the affairs of the trust. Under the right circumstances, this avoids the need to resort to the courts to appoint new trustees, which would be the next step for many trusts and involve additional time and expenses. However, both settlors and trustees should not rely solely on this power, as the settlor may not be alive or mentally capable at the crucial moment. Active and ongoing review of the trustee group remains the best option to ensure that there is always a reasonable number of reliable trustees to rely on.
In conclusion, it is crucial for settlors to be aware of these changes and their implications before they become law in 2024. The appointment of new trustees and the periodic review of their roles are pillars for the trust and proper functioning of trusts.
– Trust: a legal agreement in which a person, the settlor, transfers property or assets to another person, the trustee, to manage for the benefit of a third party, the beneficiary.
– Settlor: the person who establishes the trust and transfers the property or assets to the trustee.
– Trustee: the person or entity who administers and manages the property or assets of the trust for the beneficiary’s benefit.
– Parliament of Scotland
– Scottish Government