The new law simplifies trust law making it 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.
What do I need to know?
Beneficiaries must now be notified that they are beneficiaries. Previously, you could be nominated without your knowledge. Not only do beneficiaries now need to be told they’re a beneficiary of a Trust, but also advised that they are entitled to certain information about the Trust. The Act sets out certain factors which the Trustees must consider before providing information that has been requested beyond ‘basic Trust information’ meaning iinformation can only be withheld in certain circumstances.
Trustees face increased compliance requirements and greater transparency around Trust activity.
- 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.
- 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.
Other provisions of the Act to be aware of:
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.
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.
What does this mean for my Trust?
Trusts are an important part of asset protection and asset planning, and provide an excellent option for managing assets under the right circumstances. They’re particularly useful for estate and succession planning purposes, e.g. blended families or providing for those with special needs.
However, for Trusts existing before the Trusts Act, it could mean that:
- Compliance duties will increase the time and cost of administering some Trusts, meaning some are no longer cost-effective
- Greater transparency will put things in the open that some Trustees might prefer to keep private
- Some Trustees (individuals, professionals and professional Trustee companies) may choose to no longer act as Trustees due to the increased compliance requirements
What do you need to think about?
If you’re a Settlor or a Trustee, you need to start administering your Trust in line with the new law from 30 January 2021. We recommend you consider whether:
- You’re willing and able to undertake the increased obligations
- You have access to the advice you need about the new requirements
- The current Trustees are willing and able to continue to act as Trustee
- You’re comfortable with providing the increased information to beneficiaries
- The reasons for setting up the Trust are still relevant
- The Trust will offer the same protection
- The Trust will still be cost-effective given the increased compliance requirements
Kendons is here to help you understand requirements of the Trusts Act 2019 and what that may mean for you. We appreciate that all Trusts are unique, with many holding significant wealth. In some cases, a Trust may no longer be appropriate. If you’d like to discuss whether your Trust should continue, we can undertake a Trust Review to determine whether your Trust still meets your requirements or whether it should be wound up. Please contact us.
We recently held a webinar “How Robust is Your Trust?” – if you would like to view the recording of this webinar you can view it here.