The trustees of a GBP80-million discretionary settlement executed in 1968 have obtained court permission to treat one of the settlor’s descendants as a beneficiary, although she was born before her parents married.

The trust’s current governing deed requires the trust fund to pay the income for life to the settlor’s grandchildren, RS and TU (all parties are anonymous), and to any of their children that reach majority.

However, a difficulty arose regarding the children of the grandchild RS. He is married and now has three children, but one of them, V, was born a month before the wedding. The trustees were uncertain whether she qualifies as a beneficiary under the current trust, as the trust appointment does not contain any provisions concerning illegitimate children. Moreover, the relevant laws reforming the position of illegitimate children have only prospective effect and do not apply to settlements that pre-date them.

All parties accepted that V should benefit from the trust. The trustees therefore proposed an appointment that would put her position as a beneficiary beyond doubt, and asked the England and Wales High Court to approve it.

Chief Master Marsh had to weigh the arguments for and against the new appointment. In its favour was that it was for the objective benefit of V’s father, RS, to make provision for all of his children; and for TU to make provision for all of his future children, whether or not they are legitimate. It was also for their benefit to ensure that the trust assets were not vested in their children absolutely, but managed responsibly for their long-term benefit.

Moreover, it was what the entire family, including RS and TU, consider to be right. An important consideration was that V’s exclusion could be the source of family dissension, which would not be in the interests of her sisters.

The arguments against were briefly dismissed by Chief Master March, who accordingly granted the trustees’ request. ‘I am satisfied that the Trustees have the power to execute the proposed appointment and that to do so would be a proper exercise of their power’, he commented (PQ v RS, 2019 EWHC 1643 Ch).

SOURCE: www.step.org