The Edinburgh Tax Network celebrated the 100th anniversary of the Trust Scotland Act 1921 by hosting a web event for stakeholders this week, which STEP attended. The centenary of the Principal Statute on 19 August has prompted the Scottish Law Commission to submit a draft bill for potential reform, the Trusts (Scotland) Bill, to the Scottish Parliament.
The web event panel consisted of Lady Ann Paton (Chair of the Scottish Law Commission), The Hon Lord Tyre and Lord Drummond-Young who discussed the overwhelming need for modernisation. They noted that current legislation has been heavily amended, making it convoluted and difficult to use, and much of the content is now largely obsolete.
The panel stressed that reform is essential in order to shape an innovative and high tech economy, comply with the more modern applications of trust law, and support businesses recovering from the pandemic.
The Scottish Law Commission’s proposals for reform include, but are not limited to, the following:
- recognition of trusts’ inherent simplicity and flexibility;
- appointment of Protectors;
- recognition of the commercial use of trusts. The current legislation fails to deal with commercial trusts, which have significantly developed in the last 40 years;
- express recognition of private purpose trusts;
- trustees’ powers should be flexible and wide, similar to a natural person managing his or her own affairs;
- courts given simplified and effective powers to deal with trust litigation;
- courts given power to remedy defects in the exercise of fiduciary powers;
- coherent provisions governing decision-making by trustees, beneficiaries’ information rights, delegation to agents, trustees’ liability for breach of trust and trustees’ liability to third parties.
The Scottish Law Commission’s review runs concurrently with the announcement of the Law Commission of England and Wales to reform trust law earlier this year under its 14th Programme of Law Reform. The EW review will focus on modernising legislation that has not been updated since 1925, and will explore modern and efficient structures in other jurisdictions to bring it up to international standards.
Both Law Commissions say it is essential to update trust legislation to uphold competitive economies and maintain their status as international financial centres.
STEP will continue to keep members apprised on both of these legislative developments.