Trusts Act 2019 – Recent changes to modernise and clarify trust law
The recently legislated Trusts Act 2019 (the Act) has been given an 18 month transitional period to 30 January 2021 to provide all settlors and trustees a chance to get up to speed with the required changes and time to get the wheels in motion to comply.
The significant parts of the legislation are designed to bind Trustees by mandatory and default duties providing greater accountability, to provide transparency around the Trust activities, to increase compliance, to provide mechanisms to resolve trust-related disputes and the obligation to provide greater levels of information to beneficiaries.
These are summarised below:
- Introduction of Mandatory Duties – there are 5 duties that must be performed by the Trustees that are unable to be modified or excluded by the terms of the Trust. The 5 duties include the duty of Trustees to know the Trust, to act in accordance with the terms of the Trust, to act with honesty and in good faith, to act for the benefit of beneficiaries and a duty to exercise powers for proper purpose.
- Introduction of Default Duties – there are 10 duties that must be performed by the Trustees unless modified or excluded by the terms of the Trust. The 10 duties include the general duty of care and the duty to invest prudently, to not exercise power for ones own benefit, to consider exercise of power, to not bind or commit Trustees to future exercise of discretion, to avoid conflict of interest, to be impartial, to not profit, to act for no reward and to act unanimously.
- Information that must be retained and length information must be retained for – Trustees have an obligation to keep and give trust information. There is a requirement that core documents must be retained, not only do they need to be retained, but each Trustee must be familiar with these documents.
- Giving information to Beneficiaries – basic information must be made available including the fact that that person is a Beneficiary, the name and contact details of Trustees, changes to the Trust Deed as they occur, and the right for a Beneficiary to request a copy of the Trust Deed.
- Indemnities – restrictions have been introduced around the use of Trustee exemption and indemnity clauses.
- Ability to delegate powers – there are circumstances where powers can be delegated, cannot be delegated and circumstances when all powers can be delegated.
- The maximum length of a Trust’s life has been extended to 125 years from 80 years.
- Introduction of dispute resolutions – alternative dispute resolution mechanisms have been made available such as mediation and arbitration in order to reduce court actions.
As with any legislation, at the introduction, it requires us to fully understand them before we can communicate this through to you. We will continue to develop our understanding with this new piece of legislation and report back in due course. This is not a one size fits all project especially as Trusts continue to hold an important place in estate planning along with protection and management of assets and everybody’s circumstances are different. As Trustees, you need to ensure you understand your obligations, with our guidance of course. There is a lot more information to come if you have concerns always feel free to talk with us.