The law relating to trusts has been comprehensively reviewed. This review has culminated in the Trusts Act 2019 which was passed in July and comes into full force on 30 January 2021. The Act applies to all trusts, both existing and any new trusts.
The main theme of the Act is accountability for beneficiaries and transparency of trustees’ actions. The Act imposes high standards of trustee action, decision making, administration and disclosure from January 2021.
Over the next 18 months, all family trusts will need to be reviewed to ensure they are fit for purpose. Trustees will need to up-skill to make sure they meet the strict new requirements of the Act.
Implications for Trustees
Mandatory duties under the Act will require a trustee always to:
- know the terms of a trust including who the beneficiaries are, the length of the trust period and what powers and discretions the trustee has;
- act in accordance with the terms of the trust;
- act honestly and in good faith;
- act for the benefit of the beneficiaries or to further another permitted purpose; and
- exercise their powers for the proper purpose.
Additional default duties will apply to trustees, such as the duty to invest prudently, to act for no reward, to avoid conflicts and to alert the settlor to any modification or exclusion of any default duty listed in the Act.
While none of these duties are new, the fact that they have been codified means it will be easier for beneficiaries to hold trustees to account.
That is especially so given that from January 2021, beneficiaries must be told by trustees that they are a beneficiary of a trust and be regularly provided with information about the trust without requesting this information. This mandatory disclosure requirement heralds a significant change to the way in which trusts are managed and administered.
What will you have to do to comply with the Trusts Act?
Settlors and trustees need to consider carefully whether the purpose of the trust is still relevant, and if it is, ensure that they comply with all the duties under the Act from 30 January 2021.
In particular, Trustees will have to be willing to comply with the additional compliance requirements under the Act. Make no mistake; the additional compliance required to satisfy these duties will increase the time and cost of administering most trusts. With the additional compliance for trustees, will the trust remain cost-effective?
Requirements to disclose trust information to beneficiaries will also put things in the open that some settlors or trustees may want to keep private. With such openness, will the trust still offer the same protection as it has to date? Settlors and trustees will need to consider these fundamental issues and decide whether or not they are comfortable with beneficiaries having this information. If not, changes will be required to the trust.
What can Anthony Harper do for you?
- Anthony Harper can review your situation and provide comprehensive advice in light of the Act.
- We can provide guidance on what is required by you as a trustee under the Act.
- We can assist to update and/or amend the trust deed or even restructure the trust arrangements, if and as may be required, in order to accommodate the changes under the Act.
- If you are not sure whether your trust is still required, we can discuss this with you and if appropriate, we can assist with winding up the trust.
- We can provide professional trustee services in some circumstances.
Trusts continue to be an important part of estate planning and asset protection. In the right circumstances, trusts will continue to provide an excellent way to manage and protect assets.
To ensure you meet your obligations under the Act, or to review your trust, please contact a member of our Trusts and Asset Planning Team.
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