Comes into force early 2021
The Trusts Act 2019 will come into effect on 30 January 2021. Much of the Act updates or restates existing law. However, there are a number of changes about which trustees and people with trusts should be aware.
The Act contains ‘mandatory’ and ‘default’ duties for trustees. Mandatory duties cannot be modified or excluded by the trust deed so all trustees will have to observe them. Mandatory duties are:
• Knowing the terms of the trust
• Acting in accordance with the terms of the trust
• Acting honestly and in good faith
• Dealing with the trust property, and acting for the benefit of the beneficiaries, in accordance with the terms of the trust, and
• Exercising trustees’ powers for a proper purpose.
Default duties are duties which trustees must abide by unless the trust deed says otherwise. These include a general duty of care, a requirement to invest prudently, a prohibition on trustees acting in their own interests, a duty to act unanimously and duties not to profit or benefit.
Default duties can be modified or excluded by the trust deed. For example, the trustees might not be required to invest prudently, and therefore may be allowed to lend money to a beneficiary on an interest-free basis. It may also be helpful for trustees to make decisions by majority vote, or for a trustee who is also a beneficiary to be able to take part in trustee decisions despite their conflict of interest.
Trustees will also have new requirements relating to trust documentation. Every trustee must keep copies of the trust deed and any variations. They must either keep their own copies of ‘core trust documents’ as defined by the Act, or ensure that at least one of their co-trustees holds the core trust documents and will make them available on request. If a trustee is not confident in their fellow trustees’ recordkeeping, they will have to keep these documents personally.
The legislation provides that ‘basic trust information’, including the names and contact details of the trustees, changes of trustees, and a beneficiary’s right to request further trust information, must be made available to beneficiaries in most circumstances. The Act presumes that if a beneficiary requests further trust information, including a copy of the trust deed, it must be provided within a reasonable period of time.
Trustees can decide not to disclose basic trust information or to decline a request for further information. There is a process set out in the Act that considers a range of factors such as the age and circumstances of the beneficiary, the nature of their interest in the trust and the context of their request for information. Trustees will have to carefully consider any decision not to disclose information, and trusts generally will not be able to be run in secrecy.
If you are a trustee, involved with a trust, or are thinking of establishing a trust, please don’t hesitate to contact us about how the new Trusts Act will affect you.