Legitimate Concerns in Trust Law
In 2017, 48.1% of the 670,000 births in the UK were babies born to parents who were not married or in civil partnerships. In the past being "legitimate" (ie born to parents who are married) was extremely important and the law reflected this. Social attitudes to legitimacy have rightly changed, but while the changes in the law over the last fifty years have done much to reduce the legal disadvantages of illegitimacy, some notable exceptions still exist. For example illegitimate children born before 1 July 2006 cannot receive British citizenship from their father. Children born out of wedlock are not currently able to inherit peerage or baronetcy titles, or succeed to the throne.
One might think that legitimacy is no longer an issue when looking at trusts, but the recent case of PQ v RS shows that it can still be an issue for older trusts and is a salutary reminder to trustees to review and consider the terms of their trusts.
PQ v RS
The case concerned an £80 million discretionary trust set up for the benefit of 'the settlor's children and remoter issue, their respective spouses, widows and widowers'. The question at issue was whether a child born shortly before her parents' marriage was within the class of beneficiaries.
The trust had been set up in 1968 and was therefore subject to the common law rule that a child is legitimate only if that child is born or conceived in wedlock. At the time the trust was settled in 1968 the law stated that a child born to parents who were not married would not automatically be legitimated on their marriage. This position was changed under the Family Law Reform Act 1969 and subsequently under the Family Law Reform Act 1987 so that in most cases the subsequent marriage of a child's biological parents 'legitimates' that child. While this happens automatically, the law as it stands requires the parents to re-register the birth within three months of their marriage or be liable to a fine. However both the 1969 and 1987 acts only applied to "dispositions" made after they came into effect – they did not apply to dispositions made prior to their enactment.
The child in question, the settlor's great grandchild, was born shortly before her parents were married and so on a strict interpretation of the terms of the trust was excluded from any benefit on the basis that she was illegitimate according to the law at the time the trust was created.
All parties, including the other beneficiaries, agreed that it was right for the child to be included as a beneficiary. Evidence was also produced to show that the settlor never intended to exclude that particular child.
The court held that it was not possible to construe the beneficial class as including a child born before marriage. However, the court agreed that the trustees were able to use their powers under the terms of the trust to appoint funds to a new trust which included illegitimate and adopted children within the class of beneficiaries, so that any beneficiary born before their parents were married could benefit.
While the legitimacy is largely immaterial in daily life, issues may still arise in relation to some areas of the law. The case of PQ v RS shows that trustees of older trusts should review the terms of their trusts and take advice if there is any doubt as to either the status of beneficiaries or the powers held by trustees.