When I was growing up, it was thought that the Romans did not have a law of trust. Then a young lawyer at Cambridge, David Johnson, proved to the contrary and became the youngest regius professor of civil law at that University since Henry VIII endowed the chair. Whether you see the essence of something is often a question of how far back you stand. It’s worth the effort to explore, as there is often a prize.
The essence of trust lies in the rule that its property (which can be financial, real estate and other assets) is owned by one party but there are rights against that property in another group. Trusts protect property and can protect beneficiaries from themselves. Critically, absent insolvency around the time the trust was set up, the debts of the truster are not good against the trust property. Nor are the debts of the beneficiary. It is a glorious idea. What the trustees may do is controlled principally by the trust deed but is also controlled by the general law. So, for example, there are default rules that apply even if the trust deed is silent (and sometimes when it’s not).
Whilst not formally trusts, the same might be said of the two family law regimes. Where there is a Scottish marriage property may well be owned by one spouse but the other spouse and children, natural, adopted or accepted, are given rights good against that property. A different less precisely defined set of rights arise out of the fact of cohabitation. Again property might be owned by one party yet might benefit their cohabitee and, in some circumstances, the children living in the household again natural, adopted or accepted.
The trick is categorisation, life planning lies not in seeing the shared essence but the differences between the three regimes. The principal point is that the creditors of the truster and beneficiaries have no claim against the trust property. In the two other regimes they do, sometimes preferred rights.
In summary, all three regimes allow the parties considerable power over what rights they create in each other and any children. That power is exercised in the drafting of a trust deed or pre or post nuptial or cohabitation agreements. There are circumstances when a trust will be more suitable than a nuptial or cohabitation agreement, therefore, it is important to know what is possible and have a clear view of the desired outcome in a range of predicted scenarios to avoid harm and ensure efficient protection for your family.
If you have any questions on how best to legally protect your family’s property, please get in touch with a member of our team.
