The Trust Act 2019 comes into effect on 30 January 2021. This involves reasonably significant changes that will generally apply to all trusts.
To prepare for the changes, consider following the steps listed below:
As a result of the changes, the first step if you have a trust is to consider why you have the trust and if the reasons for it are still valid.
Often, the initial reasons for setting up a trust change and may no longer remain relevant.
Going forward, there are likely to be a significant increase in costs in administering and maintaining a trust. Therefore, it is important to examine the reasons for having a trust and deciding whether you still want the trust to continue.
If you do decide that you wish the trust to continue, then it is important that each trustee familiarises themselves with the key trust documents. There will now be a requirement for all trustees to keep core documents for the trust. If you do not have such core documents, you should make sure you acquire copies of them from your advisor or the law firm that set up the trust for you. You then need to become familiar with the terms of such documents.
The Act creates mandatory and default trustee duties.
The mandatory duties will apply to all trusts from 30 January 2021. The default duties will apply unless they have been modified or specifically excluded.
The resulting changes to these duties are intended to ensure that trustees conduct themselves properly and are responsible for their actions.
It is important to review the trust deed and compare it to the default duties to determine whether there needs to be any variation or further knowledge about what the duties are.
One of the key changes to the Act is new disclosure requirements imposed upon trustees.
There is now a presumption that the trustees must disclose basic trust information to all beneficiaries. In the case of minors (i.e. beneficiaries under the age of 18 years), disclosure is to be given to their guardians.
The information that needs to be disclosed is:
- The fact that a person is a beneficiary of the trust;
- The name and contact details of each trustee;
- The occurrence and details of each appointment, removal and retirement of trustees as they occur; and
- The right of each beneficiary to request a copy of the terms of the trust and “other trust information”. This is widely defined and there is no clear guidance as to exactly what information does or does not need to be disclosed over and above the trust deed.
The obligation to disclose information to beneficiaries is all part of the overriding policy to have greater accountability of trustees. However, there often may be valid reasons for withholding such information, and there will need to be care and thought by the trustees as to what information they do disclose. If decisions are made not to disclose information, there needs to be clear documentation and reasoning behind the non-disclosure.
It is probably best for trustees to be proactive in this regard to help avoid beneficiaries potentially making incorrect assumptions.
There are other key changes that trustees will also need to be aware of. It is important to take time to review all matters.
All trustees need to take the time now to review the purpose of the trust and if decisions are made to wind up the trust or continue it, then steps need to be taken now rather than leaving matters until next year.
There is increasing scope for beneficiaries to access trust information and hold trustees accountable for their performance in ensuring that they are complying with their duties.
If you have any questions about your trust and the implications of the new Act, it is important that you contact your lawyer.