An overview of the new Trusts Act 2019
For those of you with trusts, you may recall we’ve talked about the new Trust Act which will come into effect on 30 January 2021. As Accountants, we have now received further guidance and application of the new Act so we can have some more conversations!
The first point is to consider why you have a trust and whether this is still a valid reason, or whether there are other reasons to have one. You may find it helpful to contact your lawyer to review the terms. We can guide you on some of the processes to become compliant under the new Act, but we do suggest you speak to your lawyer about your Trust as well.
The aim of the Act is to make the law more accessible and easier to understand. Most of the changes relate to Trustee obligations and strengthening the ability of beneficiaries to hold Trustees to account.
If you have a Family Trust or are involved in a Trust in some way, you must make yourself familiar with the provisions of the Act and ensure your Trust is compliant.
The main provisions of the Act provide clarity about:
Trustee Duties: The Act provides for both mandatory and default duties. Mandatory duties can’t be modified or excluded by the Trust Deed; Default duties can be. Any modifications or exclusions must be documented in the Trust Deed.
Retention of information: Trustees are required to retain core Trust documents, such as the Trust Deed and any variations, minutes, accounts, and any other documents necessary for the administration of the Trust.
Disclosure of information: The Act makes the presumption that Trustees must make ‘basic Trust information’ available to all beneficiaries and consider making ‘other Trust information’ available to beneficiaries upon their request. The Act sets out certain factors which the Trustee must consider before providing information that has been requested beyond ‘basic Trust information’.
Exemption and indemnity clauses: Trust Deeds must not limit a Trustee’s liability or provide an indemnity for dishonesty, wilful misconduct or gross negligence.
Appointment and removal of Trustees: Statutory powers for the appointment and removal of Trustees have been modernised and broadened to minimise the need to apply to the court.
Lifetime of a Trust: Trusts can now have a lifetime of up to 125 years, subject to the terms of the Trust. Previously, this was limited to 80 years, so your Trust Deed may need to be updated.
Definition of a minor: The age of minority has been reduced from 20 to 18 years old.
Disputes resolution: An alternative disputes resolution process is set out in the Act to allow for mediation and arbitration.
This article is brief and generic in nature and is no substitute for professional advice for your specific circumstances. If you’re unsure about how these changes may impact a Trust you’re involved in, get in touch for advice.