This update is only for those clients who have a family Trust. If this does not apply to you then please disregard this email or have a read of the new Trustees Act changes just FYI.
The Trusts Act 2019 (Act) is coming into force on 31 January 2021. We wish to advise our clients who have a trust that changes to your trust deeds are necessary in order to give the Trustees the flexibility/benefits under the new Act. The new Act I feel is a positive step forward and (depending on your trust deed) we can easily make the changes by way of "Deed of Variation".
These are your options that we will discuss with you:
- Do nothing and leave your trust as is.
- Go to your lawyer and request they peruse the trust deed and advise the best way forward.
- Request that we (Giles & Associates) prepare the documentation to update the trust.- we will work with your lawyer where necessary
At the same time we are strongly encouraging that you also take this opportunity to update your wills, statement of Wishes for the trust and your Power of Attorney. Think of this as a warrant of fitness for your trust to ensure that it continues to work correctly to enable you (and subsequent beneficiaries) to benefit from the trust protection of your assets.
Please contact me if you wish us to start your review straight away. Otherwise we will be in contact soon to discuss which of the three options you would like to choose.
The below report outlines the changes:
The new Trusts Act 2019 will come into effect on 30 January 2021. Much of the Act updates or restates law that exists already, either in statute or in case law. There are, however, a number of changes about which trustees and settlors should be aware.
The Act contains 'mandatory' and 'default' duties for trustees.
Mandatory duties: Mandatory duties cannot be modified or excluded by the trust deed so all trustees will be required to abide by these duties.
These duties are to:
• Know the terms of the trust
• Act in accordance with the terms of the trust
• Act honestly and in good faith
• Deal with the trust property and to act for the benefit of the beneficiaries in accordance with the terms of the trust deed, and
• Exercise the trustees' powers for a proper purpose.
Default duties: Default duties are obligations by which trustees must abide - unless the settlor decides otherwise when the trust is established. These default duties include
a general duty of care,
a requirement to invest prudently,
a prohibition on trustees acting in their own interests,
a duty to consider the exercise of trustees' powers,
a duty not to fetter a trustee's discretion,
a duty to act unanimously and duties not to profit from the trusteeship or benefit from the exercise of trustee discretions.
Default duties can be modified or excluded if this is how the settlor wants to set up a trust. For example, a settlor might want the trustees to be able to purchase depreciating assets such as retirement village units. The settlor may want trustees to be able to act with a majority in favour of any particular decision, or it may be desirable to allow a trustee (who is also a beneficiary) to take part in decisions despite a conflict of interest.
Trust documentation: Trustees will also have new duties relating to trust documentation. This should bring a new level of rigour to trust record-keeping, which can sometimes be lacking.
Each trustee will be obliged to keep copies of the trust deed and any variations. They will have to either keep their own copies of 'core trust documents' (which are defined in the Act) or to ensure that at least one of the other trustees holds all of the core trust documents and will make them available on request. If a trustee is not confident in their fellow trustees' ability with paperwork, they will need to keep these documents personally.
Beneficiary access to basic trust information: The Act also creates a presumption that 'basic trust information' must be made available to beneficiaries. That includes information that a person is a beneficiary of the trust, the name and contact details of the trustees, details of trustee changes as they occur and the beneficiary's right to request further trust information.
There is also a presumption that if a beneficiary requests further trust information, including a copy of the trust deed, the trustee must provide that information within a reasonable period of time. The trustee may ask the beneficiary to pay the reasonable costs of providing that information.
Trustees do have the ability to decide that either, or both presumptions, do not apply. A list of factors is set out in the legislation and the trustees must consider these factors when deciding whether these apply in the circumstances.
Those factors include, amongst other things:
• The nature and interests of the beneficiary (including whether the beneficiary is likely to receive trust property in the future)
• The nature and interests of other beneficiaries
• The intentions of the settlor when the trust was established
• The age and circumstances of the beneficiary in question and the other beneficiaries of the trust
• The effect of giving the beneficiary the information
• The nature and context of any request for further information, and
• Any other factor a trustee reasonably considers is relevant.
Trustees will have to carefully consider any decision not to disclose information.
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