The Trusts Act 2019 was passed on 30 July 2019 and replaces the Trustee Act 1956. It comes into effect on 30 January 2021.
The 2019 Act modernises existing trust law, provides better guidance for trustees and beneficiaries, and makes it easier to resolve disputes.
the key changes
1 A description of the key features of a trust to help trustees and beneficiaries understand their rights and obligations. This includes:
· Defining a trust as: a structure where a trustee holds and deals with trust property for the benefit of people who are described as beneficiaries for a permitted purpose and the trustees are required to act in the best interests of the beneficiaries;
· Stating that a sole trustee cannot be a sole beneficiary of a trust;
· Increasing the maximum life of a trust from 80 years to 125 years; and
· Setting the minimum age you have to be in order to hold a formal trust role as 18 years of age.
· Setting the minimum age that a beneficiary has to be in order to receive a distribution as 18 years of age.
2 A list of mandatory and default trustee duties to help trustees understand their obligations.
Mandatory trustee duties cannot be modified or excluded by the terms of a trust and include:
· The duty to know the terms of a trust;
· The duty to act in accordance with the terms of a trust;
· The duty to act honestly and in good faith;
· The duty to act for the benefit of beneficiaries or to further the permitted purpose of a Trust; and
· The duty to exercise powers for a proper purpose.
Default trustee duties can be modified or excluded by the terms of a trust and these duties include:
· The general duty of care;
· The duty to invest prudently;
· The duty not to exercise a power for a trustee’s own benefit;
· The duty to consider the exercise of a power;
· The duty not to bind or commit trustees to future exercise of discretion;
· The duty to avoid a conflict of interest;
· The duty of impartiality;
· The duty not to profit;
· The duty of a trustee to act for no reward; and
· The duty to act unanimously.
We expect that many trusts will be subject to these duties on 30 January 2021 if they do not make changes and this may become an issue if they do not reflect current circumstances and the trust objectives. For example, if the only asset of a trust is a house or holiday home the trust may be open to criticism for not having spread investments across a diverse mix of assets if the obligation to invest prudently is not modified or excluded.
3 Requirements for managing trust information and disclosing it to beneficiaries.
Information for trustees to keep
Trustees must keep the core trust documents for the duration of the trusteeship and these documents must be passed on when a trusteeship changes.
A trustee will either have to keep their own copies of the core trust documents or ensure that at least one of the other trustees holds all of the core trust documents and will make them available on request.
Core trust documents are:
· Copies of the trust deed and any variations to it;
· Records of the trust property that identify the assets, liabilities, income and expenses of the trust;
· Records of decisions made;
· Any written contracts entered into;
· Any accounting records and financial statements prepared;
· Documents of appointment, removal and discharge of trustees; and
· Any letter or memorandum of wishes from the settlor of the trust.
The 2019 Act clearly sets out a presumption that beneficiaries should be informed of basic trust information, unless there is a good reason not to. This is to ensure they are able to hold trustees to account. Basic trust information is:
· The fact that a person is a beneficiary of a trust;
· The name and contact details of the trustee;
· Details of changes in trustees; and
· The right of the beneficiary to request a copy of the terms of the trust or trust information.
The same presumption applies when beneficiaries make a request for trust information. Trust information is:
· any information regarding the terms of the trust, the administration of the trust or the trust property; and
· That is reasonably necessary for the beneficiary to have to enable the trust to be enforced; but
· Does not include reasons for trustees’ decisions.
The Act outlines a number of factors trustees must consider when deciding whether it is reasonable to withhold basic trust information or decline a request for trust information. These factors include:
· The nature and interests of the beneficiary (including whether the beneficiary is likely to receive trust property in the future);
· The nature and interests of other beneficiaries;
· The intentions of the settlor when the trust was established;
· The age and circumstances of the beneficiary in question and the other beneficiaries of the trust;
· The effect of giving the beneficiary the information;
· The nature and context of any request for further information; and
· Any other factor a trustee reasonably considers is relevant. Trustees will have to carefully consider any decision not to disclose information.
4 Further key changes include:
Practical and flexible trustee powers, allowing trustees to manage and invest trust property in the most appropriate way.
Provisions to support cost-effective establishment and administration of trusts (such as clear rules on the variation and termination of trusts).
Options for removing and appointing trustees without having to go to Court to do so.
Modern dispute resolution procedures with the goal of keeping trust related disputes out of Court. This includes the Act providing alternatives, such mediation or arbitration.
1 Consider your current circumstances and how they may have changed since the Trust was established.
· The trust continues to meet objectives.
· Trustees are willing and able to undertake the increased obligations.
· Trustees are comfortable with managing the trust property going forward.
· The Trust will be cost effective with the extra compliance requirements.
2 Consider whether there is any need for the trust to continue.
It may be that there is no longer any need for you to have a trust or the trust may no longer be fit for purpose.
The trust could be wound up and its assets distributed to you or other beneficiaries.
If the trust is to continue, we will need to meet with you to discuss how we can make the trust fit for purpose going forward.