The Trusts Act 2019

On 30 January 2021 the Trust Act 2019 came into effect.  This new Act has increased Trustee accountability and transparency for beneficiaries. It has also extended the lifetime of a trust from 80 to 125 years from the date it was created. As a result the responsibility, compliance and liability of all trustees has increased and there are duties that they need to be aware of.  These duties are divided into two main groups; mandatory, and default duties.

 Mandatory duties

These are duties which the trustee must comply with; they cannot be modified or excluded by the terms of the trust. The trustee must:

  • Know the terms of the trust;

  • Act in accordance with the terms of the trust;

  • Act honestly and in good faith;

  • Act for the benefit of the beneficiaries, and hold or deal with trust property for their benefit; and

  • Exercise the trustee’s powers for a proper purpose.

Default duties

These duties are not compulsory; they can be modified or excluded by the trust deed, but they will apply unless they are expressly excluded. The following duties will apply to existing trusts from 30 January 2021 and to new trusts. The trustee must:

  • Exercise reasonable skill and care in administering the trust,

  • Invest prudently

  • Act impartially between beneficiaries

  • Act unanimously with the other Trustees

  • Not make a profit from being a Trustee

  • Not exercise their power for their own benefit, directly or indirectly

  • Regularly and actively consider whether they should be exercising their Trustee powers

  • Not bind or commit Trustees to the future exercise or non-exercise of their powers

  • Avoid conflicts of interest

  • Not take any reward for being a Trustee

Obligations to hold documentation

The Act stipulates that each trustee must retain copies of core Trust records.  These can be paper or electronic copies and include the following:

  • The Trust Deed and any other documents which contain the terms of the Trust

  • Amendments and variations to the Trust Deed or Trust

  • Documents for the appointment, removal and discharge of Trustees

  • Records of the Trust property which identify the Trust assets, liabilities, income, and expenses which are appropriate to the value and complexity of the trust property

  • Record of Trustee decisions

  • Any written contracts entered into by the Trust

  • Accounting records and financial statements memorandum of wishes from the settlor

  • Any other documents necessary for the administration of the Trust

  • Documents referred to above that were kept by a previous Trustee and passed onto the current Trustee

Disclosure of Information to beneficiaries

Under the Act Trustees are expected to give basic trust information about the Trust to ALL beneficiaries (or their representative).  This information includes:

  • The existence of the Trust and that they are a beneficiary

  • The names and details of the Trustees, and any changes to the Trustees when these occur

  • The beneficiaries right to request a copy of the Trust Deed and Trust information

The beneficiaries have the right to request further information from the Trustees which can include details of assets, distributions and loans that the trust has made and to whom.  Trustees can decline the request or limit the information provided in certain circumstances.

 

Going forward Trustees will need to consider what the requirements will be for their trust and the potential increased administrations costs due to the increased reporting requirements.

If you are a Trustee or Trust Settlor we recommend that you review your Trust with an advisor to understand your obligations and consider whether your trust is still needed.

Law ChangesCathy de FariasTrusts