The Trusts and Successions (Scotland) Bill was approved by the Scottish Parliament on December 20, 2023, and received Royal Consent 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 essential for a trust to have at least one competent trustee who can manage its affairs. Since trusts can last for years, it is often necessary to appoint new trustees to replace those who have passed away, retired, or are unable to 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 content 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. While most trust deeds leave this matter to the discretion of the trustees, problems 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 available. Once a new trustee is appointed, they can in turn appoint other trustees to restart the trust’s affairs. Under appropriate 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 critical moment. Active and ongoing review of the group of trustees remains the best option to ensure 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 smooth operation of trusts.
– Trust: a legal agreement in which one person, the settlor, transfers property or assets to another person, the trustee, to manage them 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 trust’s property or assets for the benefit of the beneficiary.
– Parliament of Scotland
– Scottish Government