The new Trusts Act comes into effect on 30 January 2021 and if you are a trustee or a beneficiary of a trust you may need to review your trust deed.
The end of the year is typically a time for reflection, this year more than ever before considering how much has changed. Another thing to consider at this time of year is your trust structure.
The Trusts Act 2019 (Act) will mean significant changes to trust law from 30 January 2021. Some of the most important areas to consider include narrowing the list of beneficiaries and variations to trusts.
Know your beneficiaries
The Act states that trustees must provide certain "basic trust information" to every beneficiary. This means trustees need to voluntarily disclose:
- the fact that a person is a beneficiary of the Trust;
- the name and contact details of the trustees;
- the occurrence of, and details of, each appointment, removal, and retirement of a trustee as it occurs;
- the right of the beneficiary to request a copy of the terms of the Trust or further information about the trust. This could include a copy of the trust deed and information around any assets and liabilities.
If a beneficiary requests information about the trust, that information must be provided by the trustees in a timely manner. However, “reasons for trustees’ decisions” are not part of the information that beneficiaries are generally entitled to.
The provision of information is subject to an obligation on the trustees to consider, before supplying any information, a range of factors set out in the Act. These factors include the likelihood of the beneficiary receiving Trust property in the future, and the expectations and intentions of the settlor at the time the Trust was established.
Given that some trusts have been set up a long time ago to protect future generations, the number of potential beneficiaries may have grown exponentially. So the new Trusts Act is an ideal time to review the list of beneficiaries and a great opportunity to add or remove beneficiaries to a trust, particularly any beneficiaries who are not intended to, or likely to benefit from the trust’s assets.
Narrowing the number of beneficiaries who could potentially request information about the trust under the new legislation is likely to make things less complicated for the trustees.
Variations and duties
Trustees need to ensure there are specific powers to vary the Trust Deed. Otherwise if there is no specific clause in the Trust Deed, trustees will either need all the beneficiaries’ consent, or apply through the Court.
Under the new legislation there is the option to exclude or modify certain duties from the trust deed. The compulsory duties for trustees, which cannot be changed, include:
- A trustee must know the terms of the trust.
- A trustee must act in accordance with the terms of the trust.
- A trustee must act honestly and in good faith.
- A trustee must deal with trust property for the benefit of the beneficiaries.
- A trustee must exercise the trustee’s powers for a proper purpose.
The optional duties, which can be changed in the trust deed, include:
- A trustee must exercise the care and skill in administering a trust that is reasonable in the circumstances.
- When investing, a trustee must exercise the care and skill that a prudent person of business would exercise in managing the affairs of others.
- A trustee must not exercise a power directly or indirectly for the trustee’s own benefit.
- A trustee must consider actively and regularly whether the trustee should be exercising one or more of the trustee’s powers.
- A trustee must not bind or commit trustees to a future exercise or non-exercise of a discretion.
- A trustee must avoid a conflict between the interests of the trustee and the interests of the beneficiaries.
- A trustee must act impartially in relation to the beneficiaries and must not be unfairly partial to one beneficiary or group of beneficiaries.
- A trustee must not make a profit from the trusteeship of a trust.
- A trustee must not take any reward for acting as a trustee, but this does not affect the right of a trustee to be reimbursed for the trustee’s legitimate expenses and disbursements in acting as a trustee.
- If there is more than one trustee, the trustees must act unanimously.
Your advisor will be able to advise you which optional duties can or should be changed in your trust deed and the implications of any changes.
Who controls the trust?
The new Trusts Act makes it more important than ever to get the details of your will and your Enduring Power of Attorney in order.
Trustees should ensure there is an ability to transfer the Power of Appointment of Trustees and Beneficiaries (either by will or by deed) to ensure that the people in control of the Trust are the people you want in control (as opposed to default Trustees). Also, in the event that the person with the Power of Appointment becomes incapable, the correct people will take over.
If you are a trustee or beneficiary of a trust and have any questions about the new legislation, please feel free to call us at Aspiring Law to talk through your options.