The Trusts Act 2019 has celebrated its first birthday, albeit, without much fan fair or celebration.
With this milestone, we wanted to highlight some of the positive changes that are cause for celebration.
- A trust can now last for 125 years – up from 80 years.
- There is more guidance for a trustee who is also a beneficiary on how to manage their conflicting roles.
- Trustees are now held more accountable for their actions.
- A trust deed can now be amended in some circumstances, without having to go to court.
Who does what in a trust?
Like organising a birthday party, people have different jobs and that’s the same for a trust too.
Settlors:
They are responsible for gifting assets to the trust and will typically be the people who formed it.
Trustees:
They hold the assets of the trust as dictated by the trust document and can only act for the benefit of the beneficiaries. Essentially, they are the gatekeepers who are accountable for how the assets in the trust are administered.
Beneficiaries:
They are the people who benefit from the trust - a little like the birthday boy or girl. Without the birthday person, there would be no party, and similarly, without the beneficiaries, there would be no trust.
Turning the spotlight on the trustee
The duties of the trustees are set out in the Act and there’s certain duties they must perform. For example: know and understand the terms of the trust, act in accordance with those terms, act honestly and in good faith, and for the benefit of beneficiaries. If the trust deed does not make provision for a trustee to be paid, the trustee cannot charge for their services.
Trustees must talk to each other
No longer can decisions be made by only some of the trustees. All the trustees must agree unanimously unless the trust document says otherwise, and all decisions must be recorded.
Trustees must read the trust document and know why it was formed
Trustees must know the terms of the trust; know who the beneficiaries are; and if the trust was formed for a specific purpose, then act according to that purpose.
Beneficiaries can now sleep easier
The good news is that beneficiaries can sleep easier knowing the gatekeepers are watching. ALL the trustees must be involved in any decision-making, and manage the trust properly for the beneficiaries.
Increased transparency
In the past, trustees may have kept quiet about the trust and acted without the beneficiaries knowing that it existed, but the question was always, who keeps the trustees accountable if nobody knows about the trust?
Now it’s clear that beneficiaries are entitled to basic trust information like the trust deed. It’s presumed trustees will make information available to the beneficiaries, and that includes information like telling them they are beneficiaries, and providing the names and details of the trustees.
That doesn’t mean the trustees must give the beneficiaries everything or allow beneficiaries to go on a fishing expedition - a list of factors must be considered before making information available.
Who keeps the trust documents?
The trustees must have a copy of the trust document and any variations to it. They must also hold records that show:
- the assets and liabilities of the trust
- the trust’s income and expenses and any other accounting and financial records
- decisions of the trustees
- written contracts
- the memorandum of wishes for the trust – if there is one
To ensure continuity, when a trustee steps down, all records must be passed onto the incoming or continuing trustees.
The requirement that documents be kept in a central place will ensure trustees are more accountable for the way they operate, and that an (electronic) paper trail is there to speak to the history of the trust.
But the celebration’s not over
Asset preservation and the evolving role of trusts will continue, so the party’s not over yet.
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