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The Issue With ‘Issue’ – Difficulties Arising With Potential Distinctions Between Children Born Inside and Outside Marriage

The position of illegitimate versus legitimate children is often considered consigned to history but for those dealing with trusts on a day-to-day basis, the distinction may remain a live issue.

This is illustrated by a recent Californian case. Hollywood financier Steve Bing died in 2020, leaving two illegitimate children, Kira and Damian. Steve’s father, Peter Bing, had established a number of trusts for the benefit of future grandchildren in 1980.

Prior to Steve’s death, some litigation had been concluded in respect of these trusts. The dispute focused on the meaning of the word “grandchild” as used in the trust instruments. The Trustee had taken the view, supported by legal advice, that “grandchild” did not include grandchildren born out of wedlock who had not lived as a regular member of the household of their natural parent whilst minors. Steve had not lived with his children as regular members of his household and hence the Trustee had come to that conclusion.

Whilst the legal findings have little application in Bermuda, it raises issues common to many jurisdictions in respect of definitions used in trusts and also highlights a recent change to trust law in Bermuda.

Generally speaking, there is a more relaxed societal approach to children born out of wedlock such that the legal distinction between legitimate and illegitimate children has been largely abolished. However, for some individuals, the distinction remains important and they wish assets to pass through a legitimate line.

In Bermuda, the legislation that equalised the position of legitimate and illegitimate children was introduced in 2002 and originally intended to protect children in areas such as care and supervision of children and custody arrangements. One result of the legislation was that it also made it more difficult to exclude illegitimate children from trust arrangements. The Trusts (Special Provisions) Amendment No. 2 Act 2020 now provides that illegitimate children can be excluded if the trust instrument expressly states a contrary intention.

To date, there has been no case law on what constitutes a “contrary intention” and it may be that none arises for some time. However, when drafting a new trust deed, it may be that avoiding a class gift for individuals, which has an ordinary or statutory meaning, could be avoided and a bespoke definition which accurately reflects the intentions of the settlor is preferable. This may be particularly attractive when the class has yet to come into being or where the settlor has strong views about children born outside marriage, adopted children, or those conceived via assisted fertility. Where individuals in the proposed class of beneficiaries are in existence, it is possible to simply name the individuals in question, though other issues may arise if the class increases unexpectedly and the terms of the trust do not permit the class of beneficiaries to be altered.

Read the full article here.

This article was originally published in IFC Review.

 


Peter A.S. Pearman
Director, Global Head of Private Client & Trust

Bermuda   +1 441 299 4996


Grace Quinn
Associate

Bermuda   +1 441 278 7921


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