Are you ready for the changes to Trust Law?
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Dec 11, 2020
On 30 January 2021, Trust Law will be changing. It’s important anyone involved with any kind of Trust – or thinking of establishing one – understands the changes and the new obligations these bring.
What are the changes?
The new Trusts Act updates the general law governing Trusts for the first time in 60 years, replacing the Trustee Act 1956.
As well as updating outdated language and concepts, the new Act is seeking to make Trust Law easier to understand, easier to work with, and ensure proper checks and balances are in place.
If you’re a Trustee, below are three things you’ll need to make sure you’re doing.
1. Make sure your files are in order
Every Trustee must hold a copy of the Trust Deed and any variations made to it. The Trust’s “core information” (that’s all documentation relating to the Trust including accounts, contracts and records of decision making) must be held by one Trustee, and be readily available to others and beneficiaries. You’ll need to gather your documents together and select one Trustee to hold the full suite of documents.
2. Keep beneficiaries informed
Trustees will be required to disclose basic Trust information to beneficiaries. “Basic Trust information” means:
The fact that a person is a beneficiary of the Trust
Names and contact details of all Trustees
Details of any changes to Trustee appointments and
The right to request the terms of the Trust or Trust information
The purpose is to ensure beneficiaries have sufficient information to hold Trustees accountable and to enable the Trust to be enforced.
The Trustees have a positive obligation to provide the basic trust information to every beneficiary – whether or not the beneficiaries have requested that information. The Trustees are also required to consider at reasonable intervals whether they should be making basic Trust information available.
There are a number of factors trustees must consider before giving information to beneficiaries. If after taking into account those factors the Trustees reasonably consider that the information should not be given, Trustees may be able to withhold the information.
3. Understand your duties
Trustees will have “mandatory” and “default” duties. Mandatory duties cannot be modified or excluded by the Trust Deed.
Mandatory Duties are to:
Know the terms of the Trust
Act in accordance with the terms of the Trust
Act honestly and in good faith
Deal with the trust property and to act for the benefit of the beneficiaries in accordance with the terms of the trust deed; and
Exercise the Trustee’s powers for a proper purpose
Default Duties
Default duties apply unless they are specifically excluded or altered in the Trust Deed.
Default duties include: exercising reasonable skill and care in administering the Trust, a requirement to invest prudently, not acting for their own benefit, not to profit from the trusteeship, a duty to regularly and actively consider whether they should be exercising their powers and to act unanimously with the other Trustees.
Default duties can be modified by the terms of the Trust Deed. For example, the settlor may want to allow a Trustee who is also a beneficiary to take part in decisions despite a conflict of interest.
Do you have questions related to your Trust?
If you are a Trustee of a Trust, or are thinking about establishing a Trust, please get in touch with us and find out how the new Trusts Act will affect you – we’d be happy to help.
The information in this article is provided to summarise this topic and is of a general nature. If you have any questions, please contact us.