CHANGES TO TRUST LAW

Introduction

The new Trusts Act will come into effect on 30 January 2021. As a general comment, the Act gives beneficiaries of trusts more rights and imposes more obligations on trustees. Some provisions of the Act merely restate existing law, but the Act does create a number of changes to the law.

Disclosure of Information to Beneficiaries

There is a presumption in the Act that all beneficiaries of a trust must be given basic information about the trust. This includes being told that they are beneficiaries of the trust, being given contact details for the trustees and being told that they have a right to request further information about the trust. The Act does list a number of factors for trustees to consider before giving that information to the beneficiaries, including the age of the beneficiary and the effect on the beneficiary of receiving that information.

There is another presumption in the Act that if beneficiaries do make a request for further information, they will get that information within a reasonable period of time. If such a request is made, the trustees must consider whether to disclose that information, and the same factors that must be considered before trustees give the initial basic information to beneficiaries are also to be considered before any disclosure of additional requested information is made.

Obligations on Trustees

The Act imposes a number of duties on trustees. Five of those duties are referred to in the Act as “mandatory duties” and those will apply in all circumstances. These duties are knowing the terms of the trust, acting in accordance with those terms, acting honestly and in good faith, acting for the benefit of beneficiaries or to further another permitted purpose and exercising their powers for the proper purpose. There are then ten duties referred to in the Act as “default duties” that will also apply to trustees unless they are specifically excluded by the Trust Deed.

One practical example of what all trustees must do to comply with their obligations under the Act is hold a copy of the Trust Deed and any variations to it. In addition, at least one trustee must have copies of other “core” documents, such as minutes of trustees’ meetings and records identifying what the trust owns. As mentioned above, there is a presumption that such information would be made available to a beneficiary upon request.

Other Points

The new Act also deals with a number of other points. These include the duration of trusts, the minimum age of trustees, trustee indemnities and the procedure for removing an incapable trustee.

Conclusion

The changes to trust law are likely to make information about a trust more available to beneficiaries but will impose more obligations on trustees. Trustees should now take the time to consider their trust. Considerations might include whether the list of beneficiaries in the Trust Deed is appropriate, whether all documentation is available and whether they are still willing to be a trustee given the likely increase in the time that will be involved in being a trustee. Thought might even be given to winding up the trust completely and distributing assets

If you would like advice about your particular circumstances, please contact us.

Disclaimer: This information is of a general nature. It is not intended as a substitute for specific professional advice and should not be relied upon for that purpose. If you require advice on the new Act, you should contact Williams McKenzie for advice relating to your specific circumstances.