Changes to Trust Law - the Trusts Act 2019
If you have a trust or are a trustee of a trust, you need to be aware of the changes to trust law that will be brought by the Trusts Act 2019 which will apply to new and existing trusts.
The Act will come into force on 30 January 2021, replacing the Trustee Act 1956.
The Act restates and modernises existing trust law, both in statute and case law, as well as brings a number of changes to beneficiary rights and trustee obligations.
Mandatory and default duties
The Act sets out mandatory and default duties of trustees.
Mandatory duties cannot be modified or excluded by the trust deed.
Default duties apply to all trustees unless modified or excluded by the trust deed.
The five mandatory 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 trust property and act for the benefit of beneficiaries in accordance with the terms of the trust deed; and
- Exercise trustees’ powers for a proper purpose.
The ten default duties are:
- General duty of care;
- To invest prudently;
- Not to exercise a power for a trustee’s own benefit;
- To consider the exercise of a power;
- Not to bind or commit trustees to future exercise of discretion;
- To avoid a conflict of interest;
- Not to profit;
- To act for no reward; and
- To act unanimously.
Extension of a trust’s life
The maximum duration period of a trust has been extended from 80 years to 125 years.
Record retention requirements
The Act imposes new duties relating to the retention of trust documentation. It sets out what information must be kept and how long that information is to be kept for.
Beneficiary access to ‘basic trust information’
The Act requires disclosure of ‘basic trust information’ to beneficiaries. The goal is to bring greater transparency to the administration of trusts. This will provide an opportunity for beneficiaries to properly engage and ensure that all beneficiaries are aware of the existence of the trust under which they may have an interest.
Trustees will have the ability to refuse to provide information to beneficiaries only if the need to keep that information confidential outweighs the trustees’ obligation to provide that information. The Act sets out factors that trustees must consider when deciding whether the presumption to provide basic trust information to beneficiaries is to be rebutted.
Introduction of dispute resolution mechanisms
The Act introduces mechanisms to resolve trust disputes. The goal is to keep trust disputes out of Court where possible by providing alternative dispute resolution mechanisms such as mediation and arbitration.
If you are a trustee of a trust or are thinking of forming a trust, it is crucial that you understand and are familiar with your duties under the Act. The Act applies to all trusts – those in existence as at 30 January 2021 that do not comply with the Act will have to be modified to ensure compliance.