Could an Outdated Trust Put Your Family’s Inheritance at Risk?

A recent High Court decision has highlighted how historic trust arrangements can create unexpected challenges when applied to modern family life.

In Cator v Thynn, the trustees of the Longleat family trusts requested the court’s approval before taking a significant step, which could ultimately allow a child born through surrogacy to benefit from family trusts that were established decades ago. The facts of the case attracted attention because they involved the Longleat Estate and the Marquess of Bath, but the issues in the case are applicable to historic trusts that have been set up within families. The case is a reminder of the difficulties that can arise when older trust documents are required to operate in a world very different from the one in which they were created.

The Challenge Facing Trustees

The Cator v Thynn dispute centred on a series of family trusts connected to the Longleat Estate. The current Marquess of Bath has two sons. His younger son, Henry, is the biological child of the Marquess and his wife but was born through a surrogate arrangement in the United States.

The trustees had received legal advice suggesting there was uncertainty as to whether Henry was deemed to be a beneficiary under the trusts. This was because the trusts specifically required family relationships, including terms such as “child”, “grandchild” and “issue”, to be interpreted according to “pre-1970” legal principles, which would not include a surrogate child.

The trustees considered it unfair that one child might potentially be excluded from benefiting under the trusts purely because of the circumstances of his birth, particularly when his sibling, who was born naturally, would stand to benefit. They decided to ask for the court’s approval to exercise a “power of advancement”, which would give the Marquess the ability to add Henry to the class of beneficiaries in the future.

Why Did The Trustees Need The Court’s Approval?

Trustees are often required to make difficult decisions, that affect (or could affect) current and future beneficiaries. Where a proposed course of action is significant or could give rise to future disputes, trustees may ask for the court’s approval before acting. This is a way of avoiding costly disputes later down the line.

These applications are commonly known as Public Trustee v Cooper applications. Rather than asking the court to make the decision for them, trustees ask the court to confirm that the proposed exercise or decision falls within their powers. If the court agrees, the idea is that this will protect the trustees from future criticism if they were to act in a particular way.

In the case of Cator v Thynn, the court ultimately approved the trustees’ proposal, finding that the decision had been carefully considered. It was reasonable to conclude that the child who was born by surrogate could be added to the class of beneficiaries in the future.

A Changing World For Historic Trusts

Although the case above focused on surrogacy, it is one example of how older trusts may contain provisions drafted to reflect family structures and social norms that have evolved over time.

For many families, trusts may have been created decades ago and passed through several generations without review. During that time, family circumstances may change dramatically. Adoption, surrogacy, blended families, second marriages and other modern family arrangements may not have been contemplated when the original documents were drafted.

As a result, trustees can find themselves facing difficult questions about who is entitled to benefit and how the trust was intended to operate.

Uncertainty can often lead to disagreements between beneficiaries, challenges to trustee decisions or applications to the court for guidance.

Where trustees are dealing with a potentially contentious issue, seeking legal advice at an early stage can often help identify risks and avoid costly disputes developing later.

What Does This Mean For Clients?

Whilst most families will never face circumstances identical to those in Cator v Thynn, the issues raised by the case are highly relevant to many trusts and estates.

The High Court’s decision in Cator v Thynn demonstrates how historic trust arrangements can raise unexpected difficulties when they fall within modern family circumstances.

How Can We Help?

In addition to the issues raised by the above case, our Probate Litigation team regularly advises clients who are concerned about:

• Whether a beneficiary is entitled to inherit under a trust or estate.
• The interpretation of a historic trust and/or the provisions of a will.
• Disputes between trustees and beneficiaries.
• Concerns around the exercise of trustee powers.
• Applications to the court for directions or approval.
• Family circumstances that were not anticipated when a trust or will was originally drafted.

Trust and estate disputes can be complex, particularly where substantial assets or multiple generations of a family are involved. Our team can provide advice or representation at any stage of the process. We encourage trustees, executors and beneficiaries to seek advice at an early stage, to avoid costly disputes from arising.