Appointment out of 2yr Disc Trust into 125yr Disc Trust?

I have a Scottish deed of variation signed by my client that places the whole of her late brother’s residuary estate into a discretionary trust. The trust is expressed to have a lifespan of 2 years from the date of death. The original will left the residue to her as an outright gift. The DT names her and her 2nd sibling as potential beneficiaries. She is the trustee along with the Scottish solicitor.

I have no idea why such a restriction was placed on the trust period by the Scottish solicitors as the intention was to create an ordinary discretionary trust via the deed with the usual 125 year trust period. I suspect they have misunderstood the clients wishes and prepared the wrong type of trust. So I am now looking for a way to solve this problem.

My idea was to appoint the residuary estate out of the two year trust onto a new trust with the correct lifespan on the basis that this would be for the clients benefit as she would be a trustee of that fund as well as a beneficiary.

My concern is that there may be some issues with perpetuities if you effectively prolong a trusts lifespan by appointing to a new trust every time the existing trusts lifespan expires. Does this matter here? If the combined lifespans of the two trusts were (say) 80/100/125 years would that solve any issues?

Many thanks for any guidance

Tom Rodgers
Fogwill & Jones Legal Services Ltd

Regardless of the governing law of the late brother’s estate, the applicable law governing the trusts arising under the deed of variation would appear to be Scots Law (unless the deed specifies otherwise).

Whilst, under English Law, this may be a straightforward matter requiring rectification (if it can ever be straightforward), if the deed is subject to Scots Law, the question is whether rectification is available under Scots Law. It would be interesting to learn the views of any Scots Law contributors on this point.

I recall that there is no perpetuity period in Scotland, so that the 125 year referred to could suggest an intention that the trust be an English Law trust.

If a Scots Law trust has been created where the intention was to create an English Law trust, that merely adds another layer of complication.

I suggest it would be appropriate firstly to identify the law applicable to the trusts under the deed and, if Scots Law, to find out if there is power for the deed to be rectified (provided that the settlor’s intention can clearly be identified). There are a number of law firms both sides of the border who have English and Scottish qualified lawyers, so that it may be possible to have advice under both legal systems in the same instruction (reducing both the time taken and cost).

At this stage, I would not be inclined to try to resolve the situation by appointing the trust fund, as that would preclude rectification and might just exacerbate the situation.

Paul Saunders

Paul is right about there being no perpetuity period in Scotland.

As for the two year lifespan, that may just be a default in the absence of trustee intervention. A common arrangement (in wills rather than DoVs, but it may be a will style which is being imported) is to give the trustees power to postpone the vesting date, or to appoint onto further trust provisions within the two year period. Are the trustees given these powers?

Dale Ross
Blackadders LLP