Changes To The Trust Act
There have been some changes to the Trust Act which took effect on January 30 2021 and for the first time in 60 years, the legislation around trusts has changed.
This new landscape will focus on making trust law more accessible and understandable for trustees and beneficiaries. The Act introduced various changes to trust law which mean settlors and trustees should be aware of their changing rights and obligations. The changes are likely to make trusts more transparent, but also more intensive to administer for trustees.
The following information relates to the key changes to the Act and how these may impact you if you have or are thinking about establishing a trust.
Here are the principal changes to the Act:
Clarification of trustee’s duties (clearly articulated duties and default duties for trustees);
Clear rules about when trustees are required to provide information to beneficiaries so that beneficiaries can enforce their rights, including providing beneficiaries with information without needing to ask for it;
Practical and flexible trustee powers that allow trustees to manage and invest trust property in the most appropriate way;
Options for removing and appointing trustees without having to go to court in straightforward cases;
Requirements to hold and retain core records for the trust; and
Modern dispute resolution procedures.
One of the biggest changes relates to beneficiary disclosure
One of the biggest new obligations for trustees is in relation to beneficiary disclosure; under the previous Trustee Act, trustees are not specifically required to tell people that they are beneficiaries of a trust, or even that a trust exists. Under the new Trusts Act, beneficiaries are more readily able to hold trustees accountable as generally disclosure will be required as right without a beneficiary even having to ask.
Trust Information will need to be disclosed to Beneficiaries
Generally speaking, beneficiaries of a Trust need to know that they are a beneficiary of the trust, who the trustees are and that they are able to request information about the trust from the trustees, and this includes a request for financial information.
On a continuing basis, trustees will need to consider disclosure of trust information to beneficiaries.
As a Trustee, what does the new Act require me to do?
The new Act requires you to do the following:
Review whether your trust is still necessary and why;
If it is necessary, determine whether your trust is fit for purpose, or what changes are needed to comply with the new Act;
Dissolve your trust if no longer needed.
I haven’t taken any steps to review or make changes to my trust. Will there be any ramifications?
If you choose to do nothing, there could be the following ramifications.
Trust Deeds with terms that do not comply with the new Act;
Default Trustee duties which may restrict the use of trust assets and who they can benefit (e.g. Trustees who are also beneficiaries of the same trust cannot benefit themselves as per the new Act, and 99% of Trusts we see have trustees who are also beneficiaries!);
A Trust that is not administered properly may not provide protection in the event that a claim is made against the Trust.
Trusts with a wide list of discretionary beneficiaries who will then need to be contacted to be made aware that they are a beneficiary and that they can request trust information.
If I need to keep an existing Trust or create a new Trust, what do I need to do to meet my obligations?
As a Trustee, you are now required to have an annual meeting of the trustees whereby the trustees review the use of the trust assets and review all of the following aspects (as applicable) of the Trust:
The assets and liabilities of the trust
The terms of the trust deed
The objectives of the trust
The circumstances of the beneficiaries
Disclosure obligations to the beneficiaries
The nature of the existing investments
The insurance of the Trust assets
The loans to the Trust
The loans the Trust has
The need for outside experts