Trusts Act 2019 Changes

The Trusts Act 2019, which comes into force on the 30th of January 2021, has made some important changes to trust law which beneficiaries and trustees alike should be aware of going forward. It is essential that changes are made to trust administration in order to comply with the new Act before it comes into force. 

Some key changes brought forth by the Act will affect both trustees and beneficiaries. The changes include the imposition of mandatory and default duties on trustees, changes to communication of trust information to beneficiaries, and greater responsibility required on the part of trustees. 

Mandatory and default duties 

Sections 23-27 of the Act outlines the mandatory duties of trustees which cannot be altered or written out of in the Trust Deed. These include a duty to;

  • Know terms of the trust

  • Act in accordance with terms of trust 

  • To act honestly and in good faith  

  • To act for the benefit of beneficiaries or to further the permitted purpose of the trust 

  • To exercise powers for proper purpose. 

Sections 29-38 outline the default duties of Trustees, which apply unless modified or excluded by the Trust Deed. These include a; 

  • A general duty of care 

  • Duty to;

    • Invest prudently 

    • Not exercise power for your own benefit 

    • Consider exercise of power

    • Not bind or commit trustees to future exercise of discretion 

    • Avoid conflict of interest or impartiality 

    • Not profit from office 

    • Act for no reward

    • Act unanimously 

These duties are essentially restating existing law but will be in statutory form when the Act comes into force.

Trustee’s responsibility to keep core documents 

Each trustee, for the duration of their trusteeship, must keep documents(copies are permitted) necessary for the administration of the trust which include; the trust deed, variations made to the deed, records of trust property, records of trustee decisions, written contracts entered into, financial statements, resolutions of appointments and removals of trustees, and finally any memorandum of wishes from the settlor. Where there are no financial statements it will be necessary to at least have a record of trust assets, liabilities, income and expenses in a collated format.  This is an increased responsibility on the part of trustees. Where there are multiple trustees every trustee must keep the trust deed and variations to it, but the remainder of the documents may be kept by only one of the trustees. Electronic copies are fine and originals are usually kept by your professional advisor in their deeds system. 

Communication of trust information 

Another significant change to trust law on enforcement of the new Act, is a change in the communication of Trust information to beneficiaries. The purpose of this part of the Act is both transparency and enforceability; to ensure that beneficiaries have sufficient information to enable the terms of the trust and the trustees’duties to be enforced against the trustees. 

Upon enforcement of the Act, trustees must notify beneficiaries of basic trust information, unless upon consideration of certain factors (some of which are noted below), this presumption is overruled. Trustees must be willing to shoulder this added responsibility to anticipate both disclosing information and claims for disclosure by beneficiaries.  Basic trust information includes; 

The fact that a person is a beneficiary of the trust,

  • The name and contact details of the trustee, 

  • The occurrence of, and details of, each appointment, removal and retirement of a trustee as It occurs, and

  • The right of the beneficiary to request a copy of the terms of the trust or trust information. 

There is also a general presumption that trustees must give information within a reasonable period of time, on request. Should the trustee reasonably conclude that information should not be given to the person, the presumption does not apply and a trustee may decide to refuse the request. 

The factors contained in the procedure for deciding whether either presumption applies are numerous and include;

  • The nature of the interests in the trust held by the beneficiary, 

  • The effect on the beneficiary of giving the information and 

  • In the case of a family trust, the effect of the information on familial relationships. 

For example, if the disclosure of certain trustee information would detrimentally affect a familial relationship between the beneficiaries, trust information could reasonably be withheld.  

Trustees have an active duty to consider at reasonable intervals whether to make basic trust information available. This should become a routine part of trustee meetings. 

In summary it’s all about accountability. 

Age

Beneficiaries will be considered to be adults under a Trust deed at 18 years old when previously it was 20 years. 

Perpetuity period 

The perpetuity period (maximum duration) of a trust has changed from 80 years to 125 years. 

In order to ensure that you are aware of how your trust may be affected, whether it is still relevant and meets your needs, is still operating efficiently, and in the manner you wish, contact Kannangara Thomson for a review and consultation.

Dinuki Karunasekera

 

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