How do you change the terms of a trust deed once it has been executed?

Amendment
First, check the terms of the trust deed. Are you the person who has the power to amend under the deed? If so, you could exercise your power to amend as long as you do so in accordance with the terms of the trust deed.

Variation
Trusts sometimes fall out of step with convention or the current state of the law. They may also fail to take account of the changing face of family relationships or the changes in residence and/or domicile of different generations of beneficiaries. If you don't have a power to amend under the trust, are you a beneficiary? If so, are you and all of the other beneficiaries of the trust adults of full capacity? If so and if you all agree to the amendments being proposed, you may be able to join together to vary the terms of the trust by deed.

If some of your fellow beneficiaries are children, or are incapacitated, or perhaps some beneficiaries have not yet been born, you won't be able to vary the terms of the trust by that method. You may however be able to make an application to Court to vary the trust. The Court will exercise its jurisdiction under the Variation of Trusts Act 1958 to sanction the variation on behalf of those beneficiaries who do not yet have a voice before the Court, for example, children or unborn, unascertained or incapacitated beneficiaries. Before the Court will sanction a variation in these circumstances, the Court will consider in detail the existing trust structure and analyse the benefits or potential benefits to the parties under the existing structure and compare them with the benefits, or potential benefits, to the parties under the proposed structure in light of the strengths of their respective bargaining positions. The Court always retains its discretion in these circumstances but generally speaking, the guiding principle is that the Court will require there to be some form of benefit to those for whom it acts in the variation before it will sanction it.

Rectification
A trust deed can be rectified by order of the Court if it can be demonstrated by reference to evidence that the trust deed fails to express the true intention of the settlor, for example, if there is a clear mistake in its drafting. The application will be made by the settlor and will require strong independent evidence, preferably contemporaneous, as to the intentions of the settlor at the time the deed was entered into so as to demonstrate unequivocally that his intention and the terms of the trust deed are inconsistent. A voluntary settlement by deed will be regarded by the court as a "solemn act intended to be binding upon the person executing it" and as such, the court will not interfere with it lightly. An order for rectification will be retrospective in effect.

Rescission
If you are the settlor of a trust and you are convinced that the settlement is not in the form you intended to establish and you can demonstrate that by reference to affirmative evidence, it is open to you to ask the Court to set the settlement aside and treat it as if it had never been made. If successful on such an application, the assets would revert to the settlor and he could start again with a settlement which accords with his original intentions or he could retain the assets if that is what he wishes.

Rectification and rescission are equitable remedies and timing is therefore important. Parties who discover a mistake and wish to rescind or rectify should try to bring their application promptly.

This note is intended to provide general information and is not intended to be comprehensive nor to provide specific legal advice and should not be acted or relied upon as doing so. For further information, please contact any member of the Trusts & Fiduciary Disputes Team.