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Commission's latest trusts paper out for discussion

7 January 2010

The Scottish Law Commission today publishes the latest in its series of discussion papers on the law of trusts.

In Accumulation of Income and Lifetime of Private Trusts (DP142) the Commission seeks views on a number of longstanding rules of Scots law, principally those on the accumulation of income and on the creation of successive liferents.

The accumulation rule, which limits the period for which income can be retained within the trust, dates back to the "Thellusson Act" of 1800, as modified and extended by a number of subsequent statutes. The Commission considers that the resulting legislation is complex, uncertain and not well understood; it can easily catch out the unwary and can prevent reasonable settlements from being made. In addition, the Commission considers that the original justification for the 1800 Act no longer holds good.

Similar considerations apply to the rules which prevent property being tied up by the current owner for too long a period. The main rule is that which governs the creation of successive liferents. Again, this rule has a long history, but today it appears complicated, unclear and capable of producing arbitrary results. The Commission believes that it is in need of reform.

The Commission seeks views on its proposals to replace the existing rules with a new power for the Court of Session to alter the terms of a long-term trust if, after a minimum period (say, 25 years) has elapsed, it is clearly expedient to do so. In order to exercise the power (which is modelled on the existing cy-près jurisdiction in relation to public trusts), the court would need to be persuaded that a significant change in
circumstances had occurred since the trust was set up and that the alteration was justified by that change of circumstances.

Lord Drummond Young, the lead Commissioner, said: "It is essential that Scottish trust law should be suitable for contemporary conditions. The rules under consideration in the latest trust law discussion paper date from a long-gone era and are anachronistic. Many jurisdictions that once adopted similar rules have recently relaxed or abolished them. What we propose is a new system that is fit for current and future needs."

The Commission welcomes comments by 9 April 2010.

Click here to access the discussion paper.


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