Trust Beneficiary Disputes: Defining ‘Children’ in Trust Law

The wording of a Trust is far more than a matter of style. It determines who will ultimately benefit from its provisions. Phrases that seem straightforward, such as “my children”, can carry significant legal implications if left undefined and in the event of any uncertainty. For example, does it include adopted children, stepchildren or children born after the Trust was created. Ambiguity can lead to disputes and outcomes that may not reflect the settlor’s true intentions. Whilst careful drafting and the use of a Solicitor can assist to limit potential uncertainties, unknown facts at the time of drafting can create issues.

An example of this was seen in the case of Marcus v Marcus[1], where the Settlor created a Trust in favour of his children only for it to be later discovered that one of his children was instead fathered by another man following an extramarital affair. In 2003, the Settlor created the SN Marcus Settlement, a discretionary trust benefiting “the children and remoter issue of the Settlor”. The Settlement holds significant shares in family companies worth about £14.5 million. His wife created a similar trust. The Settlor and his wife married in 1973 and had two sons: the Defendant (born 1978) and the Claimant (born 1981). Both were raised as brothers and believed the Settlor was their father. In 2010, the Settlor’s wife told the Defendant that his biological father was not the Settlor but was someone else; the Settlor never knew this. The Claimant learned of this in May 2023, after the Settlor had died in 2020. The Claimant proceeded to issue a claim seeking a declaration that the Defendant was not the biological son of the Settlor and therefore not a beneficiary of the Settlement.

The Claimant argued that, if the Defendant is not the Settlor’s child, he falls outside this class of beneficiaries and should not benefit under the Settlement. The Claimant sought to rely on his mother notifying him as to the Defendant’s real father in support.

The Court focused on whether the Defendant was the Settlor’s biological son and how the term “children” in the Settlement should be construed. The first issue involved determining the Defendant’s paternity, in respect of which DNA testing confirmed that the Claimant and the Defendant shared only one parent. The second issue concerned whether “children” in the trust included only biological children. The starting point was that the natural and ordinary meaning of the term, generally refers to biological children unless the context indicates otherwise. The Court considered whether “children” could include stepchildren or those treated as children within the family. It examined the drafting of the Settlement, the absence of express wording to extend the definition and common law principles which state that “children” does not ordinarily include stepchildren. The Court also assessed the factual context at the time of execution including: the Settlors age, their stable marriage and the Settlor’s belief that the Claimant and Defendant were his sons. A reasonable person in the Settlor’s position would have intended “children” to mean the Claimant and Defendant, not subject to biological qualification.

The Court therefore found that the Defendant was not the Settlor’s biological son but concluded that, in the context of the Settlement, “children” included the Claimant and the Defendant, reflecting the Settlor’s intention at the time. The Defendant therefore remained within the class of beneficiaries.

The Claimant appealed the decision on the grounds the Court erred in law by extending the meaning of children to extend to the Defendant and instead the word should be given its natural and ordinary meaning.  The appellate Court upheld the original decision, confirming that “children” included the Defendant despite non-paternity, as context showed that the Settlor intended for both sons to benefit equally.

This case demonstrates the issues that may arise following a finding that an intended beneficiary for technical reasons falls outside of the class. The Court’s decision demonstrates the powers available to the Court to ensure the Settlor’s intentions are given effect.

[1] [2024] EWHC 2086 (Ch)