Comply with the law to stay out of hot water Heading into the seasonal…
The Trusts Act 2019 comes into full force and effect on 30 January 2021. The purpose of the Trusts Act is to set out the core principles relating to trusts including discretionary family trusts such as the Trust and to make trust law more accessible. The Trusts Act also introduces default administration rules and mechanisms for trust related disputes.
The main changes that are relevant to you are:
the introduction of mandatory duties that are duties to:
- know the terms of the trust
- act in accordance with the terms of the trust
- act honestly and in good faith
- act for the benefit of the beneficiaries, and
- exercise your powers for a proper purpose
The introduction of default duties that apply unless modified by a trust deed. These are the duties:
- of care administering a trust
- to invest prudently
- not to exercise power for your own benefit
- to actively and regularly consider exercising trustee powers
- not to bind or commit trustees to future exercise or non-exercise of a discretion
- to avoid conflict
- to act impartially. However, this does not mean that all beneficiaries must be treated equally
- not to profit from being a trustee
- to act for no reward (other than to be reimbursed for legitimate expenses)
- to act unanimously where there is more than one trustee.
A new presumption that trustees will give basic trust information to every beneficiary and provide trust information on request. The basic trust information is:
- the fact that a person is a beneficiary
- the name and contact details for each trustee
- details regarding any change of trustees as these occur, and
- the beneficiary’s right to request a copy of the terms of the trust or trust information.
The Trusts Act also introduces a range of factors to assist trustees to decide whether the presumption to give basic trust information applies and whether to withhold basic trust information from one or more beneficiaries. The factors are also to be taken into account when responding to requests for trust information. Importantly, the presumption regarding basic information is ongoing and you are required to consider this at reasonable intervals. The Trusts Act does not specify what comprises a reasonable interval. However, to date the general expectation is that this means at least annually.
Requirements that each trustee keeps a copy of the trust deed and any variations and that at least one trustee retains all of the core documents
The repeal of the Perpetuities Act 1964, which limited the term of the Trust to 80 years, and the introduction of a new 125-year maximum duration. This new maximum duration does not apply automatically and will not apply to the Trust unless the trustees decide to exercise their powers to amend the trust period
New provisions that apply to the appointment and removal of trustee; a more streamlined vesting procedure where there is a change of trustee; and a removal by way of notice. Where removal notice is given the removal takes effect 20 working days after the removal notice is given unless the trustee makes a court application to prevent the trustee’s removal
New dispute resolution options that permit trust disputes to be determined by alternative dispute resolution unless the terms of a trust do not permit this.
We recommend that you seek legal advice if you think your Trust needs to be reviewed in light of the Trusts Act.
If you wish to familiarise yourself with the Trusts Act, you can access it here Trusts Act 2019.