Trusts and Succession (Scotland) Bill: business and regulatory impact assessment

Options

• Option 1 – Do nothing

Under this option, the Bill will not be introduced and the legislation will remain as it is. The current perception amongst stakeholders in Scotland that Scots trust law is not fit for purpose will persist and the benefits detailed below will not be realised.

• Option 2 – Introduce the draft Bill

Under this option, the recommendations outlined in the Report and implemented though the Bill will be introduced, realising the changes to the law listed under 'Objective' above.

Sectors and groups affected

The Bill is intended as a replacement for existing trust legislation, other than that dealing specifically with charitable and public trusts. As any member of the public may wish to create a trust, and many do so in their will, for example, the Bill is capable of being used by anyone in Scotland. As concerns succession, the Bill provision will impact on those members of the public who do not make a will, or who, despite making a will, their estate (or part thereof) falls into intestacy.

We have concluded that the Bill will not adversely impact any person by virtue of their particular religion, belief, age, sexual orientation, gender, race, or ethnicity. This is because the Bill only affects those who choose to set up or administer a trust; there is no compulsion to do so. Equally, for those not wishing to be involved with a trust, there is a range of other legal devices which may be considered and which remain unaffected by this Bill.

Benefits

• Option 1

We see no benefits of Option 1. The law in Scotland on trusts will remain uncertain and will continue to constitute an unnecessary hindrance to investment, resulting in a lack of stimulus for business and economic activity in Scotland.

• Option 2

Economic activity

Modernisation of trust legislation in other jurisdictions has led to increased investment and related economic activity. Should the Bill pass through the Scottish Parliament, increased economic activity will likely follow.

Employment opportunities

It is important to remember that a trust is a legal vehicle used to hold property rather than an end in itself. Consequently, it is not so much the use of trusts that generates jobs; rather, trusts can be used in transactions that have that effect. In this connection, updated modern law is of considerable importance.

If Scotland, succeeds in attracting additional trust business, or at least avoids the drain of trust business to other jurisdictions (such as England and Wales), there will be an impact on jobs. In this respect, the figure of the Society of Trust and Estate Practitioners (STEP) membership are significant. Most solicitors and accountants who practise regularly in the trusts area will tend to be members of STEP, and the figures thus give a rough guide to the numbers employed in trust law in various jurisdictions. The figures provided by STEP in 2011 are as follows; they relate to the number of members in each jurisdiction.

The high figures in the offshore jurisdictions are a clear indication of the way that trust law can be developed. From these figures, the number of STEP members in Scotland is proportionately less than that in England and Wales, however and it might be expected that this discrepancy will be reduced in the future, if the law in Scotland is set out in a clear, coherent and modern Bill.

It is worth emphasising that Scotland is already home to an established body of trust practitioners who have a high reputation for expertise and integrity. We wish to ensure that Scots law provides this important sector of the economy with modern trust legislation that is in line with best international practice.

Innovation

As noted under 'Objective' above, the Bill makes express provision for private purpose trusts. Private purpose trusts are not recognised under the law of England and Wales, but they are recognised in many other jurisdictions. There is considerable demand for such trusts.

Reflection of Current Practice

Many of the provisions found in the Bill are default provisions. In selecting default rules, a policy of adopting current best practice has been pursued.

Promotion of Scots law

The proposed changes will greatly assist the accessibility of the law to those who use it, both solicitors and others. This will bring a reduction in costs, and will reduce the need for litigation or complex legal advice by eliminating uncertainties in the law.

In addition, it must be borne in mind that trusts are used as a means to an end rather than an end in themselves. If the Scottish trust is subject to modern legislation, it is likely to become more attractive to those who may be considering the use of a trust. In this connection, there is anecdotal evidence that some Scots are setting up trusts in England because of perceived deficiencies in Scots law. That tendency is unlikely to be stopped unless the legislation is modernised.

A useful comparison can be made with Jersey, a jurisdiction with trust law founded on principles of transparency, high levels of propriety, and accountability. It is very noticeable that Jersey makes great efforts to keep its trust law up to date. Trusts are governed by the Trusts (Jersey) Law 1984, and this has been revised by statutes passed in 1989, 1991, 1996, 2006, 2012, 2013 and 2018. The legislation is generally coherent and easily accessible.

Finally, it is worth noting that the Scottish law of trusts has been influential in the European context as a model for trusts jurisdictions which do not recognise equitable ownership.^[21] Should the proposed changes by implemented, Scots trusts law could become even more influential.

Option 2 will remove the perception that Scots law is not suitable for the creation and administration of modern trusts and increase the use of Scottish trusts.