Trusts Act 2019 - Trustees Take Stock Now!
COVID-19 has forced us to slow down, take a breath and re-focus. For Trustees it is now a good time to take stock of the trust that is under their control, particularly with the impending implementation of the new Trusts Act 2019. When the alert levels reduce and the world starts to wind up again, the months between now and 30 January 2021 will pass by quickly. We therefore encourage you to take this opportunity to consider your duties and obligations as Trustee, under the new Trusts Act. We have set out below a brief overview of some of the considerations you need to be aware of and we recommend you put a plan in place to prepare for the changes before time runs out.
Trusts are one of those things that once set up, tend to sit in the background and unless called upon, Trustees go about their daily lives. However, the time has now come for Trustees to step up and take action because on 30 JANUARY 2021, the TRUSTS ACT 2019 (the “Act”) comes into effect and Trustees must be prepared.
The Act now clearly sets out in plain English what is expected of Trustees:
- Mandatory Duties - these cannot be contracted out of and include knowing the terms of the trust deed (what the trust deed actually says, who has what powers, and to whom the Trustees owe a duty), acting for the benefit of beneficiaries in good faith and honestly, and exercising trustee powers for a proper purpose.
- Default Duties - these apply unless the trust deed expressly modifies or excludes these provisions. Example default duties include among other things, a general duty of care, the avoidance of a conflict of interest between the Trustees and the beneficiaries, a duty to act impartially and in accordance with the terms of the trust deed, a duty not to profit from the trusteeship nor to act for reward, and a duty to act unanimously with all other Trustees (including any independent Trustee).
- Provision of Information to Beneficiaries - the Trustees must make available to a beneficiary or beneficiary’s representative the basic trust information, including the fact that they are a beneficiary, the names and contact details of the Trustees, the details of who has been appointed and retired as Trustee, and the rights of the beneficiary to request a copy of the terms of the trust or other trust information. This disclosure requirement may prove challenging for some Trustees particularly where the trust deed has a wide class of beneficiaries or if the Settlor did not intend for one or more beneficiaries to know they may have an interest in the trust.
- Core Documents - Trustees also have a duty to keep core documents and pass all those documents (or copies of) to any new Trustee. Documents include, the trust deed and any variations, assets and liabilities registers, records of trustee decisions, any contracts, accounts, statements, and documents appointing or removing Trustees, along with any letters or memoranda of wishes from the Settlor, and any other documents necessary for the administration of the trust.
- Powers and Indemnities - There are a number of powers that Trustees need to familiarise themselves with as these will assist the Trustees to fulfil their obligations. In addition, Trustees need to be aware that a trust deed cannot contract out of, limit or indemnify a Trustee from compliance with the mandatory duties or any liability for breach of trust arising from dishonesty, wilful misconduct or gross negligence. If the current trust deed purports to do this then that provision will be deemed invalid.
Where to from here?
The new Act will apply to all Trustees of both existing and future trusts and is intended to ensure Trustee accountability for the administration of the trust.
Now is the time to have the conversation with your trust lawyer to ensure you are sufficiently prepared. Inadequately managed trusts, or reliance on invalid or inadequate trust deed provisions will result in unnecessary risk to you as Trustee.
The longer you delay, the greater the risk that you will not be ready for 30 January 2021.
What you need to do:
Request a review of your trust deed and associated trust documentation and discuss the following with your trust lawyer:
- What was the purpose of the trust and is that purpose still valid?
- Should the trust be:
- Varied to ensure compliance with the Act;
- Wound up (terminated) and the trust assets distributed; or
- Resettled into a new trust with updated terms.
- If the trust purpose is still valid:
- Who are the Trustees and will those Trustees continue?
- Do all of the Trustees know and understand their obligations under the Act?
- Who are the individuals that meet the definition of beneficiary under the trust deed and what are their contact details?
- Does the trust deed achieve its purpose and does it comply with the new Act?
- Is the trust administration up to date i.e. a current asset and liability register, up to date resolutions, gifting, accounting, memorandum of wishes etc? Are copies of all the key documents and records available?
- What is required to get the trust in order?
- What steps will you need to take as Trustees to fulfil your obligations to the beneficiaries once the new Act comes into effect on 30 January 2021?
- Take active steps to talk with your trust lawyer to review the trust sooner rather than later.
- Seek advice on the best course of action going forward.
- Be prepared early or risk non-compliance when the Act comes into force.
- The Schnauer and Co Trust team is available to assist you to prepare for the upcoming changes before the rush to have it done by 30 January 2021.
- Contact us via email@example.com to arrange a time to discuss your trust needs.