Stay in the loop as a trustee! Major changes coming 2021.

For the first time in 70 years there are major changes coming to the laws that govern the establishment and operation of trusts. The Trusts Act 2019 comes into force on 30 January 2021, and while a year might seem like a long time to ensure you’re up to date and compliant with changes, keep in mind how many times you, like us, recently thought how quickly 2019 flew by!

The Act is aimed at making trust law more accessible and bolstering the ability of beneficiaries to hold trustees to account. Here’s a summary of the big changes coming our way.

Trustee Duties

The Act now sets out both mandatory and default trustees duties, this formalises duties that were previously governed by ‘best practice’ or previous case law. Both mandatory and default duties apply to new trusts as well as trusts already in existence (with exception in some specific cases). Mandatory duties are just that – mandatory, while default duties apply unless the terms of the trust modify or exclude them.

Mandatory Duties:

• The duty to know the terms of the trust
• The duty to act in accordance with the terms of the trust
• The duty to act honestly and in good faith
• The duty to hold and deal with trust property, and otherwise act, for the benefit of the beneficiaries or for the permitted purpose
• The duty to exercise the powers of a trustee for a proper purpose.

Default Duties:

• The general duty of care
• The duty to invest prudently
• The duty not to exercise any power directly or indirectly for the trustee’s own benefit
• The duty of actively and regularly considering the exercise of the trustee’s powers
• The duty not to bind or commit trustees to the future exercise or non-exercise of a discretion
• The duty to avoid a conflict of interest
• The duty of impartiality
• The duty not to make a profit from the trusteeship of a trust
• The duty to act for no reward
• The duty to act unanimously.

Trustee’s breach of trust and limitation of liability

The Act, once in force, will mean that the terms of a trust can no longer exclude a trustee’s liability or grant them indemnity in relation to any breach of trust, dishonestly or negligence. Therefore, trustees will be personally liable for any loss occurring to the trust or trust’s property if the trustee/s have been negligent or dishonest in any way.

There is still a provision in the Act for the court to excuse the trustee/s from liability if the court deems they have acted honestly and reasonably and that they fought fairly to be excused.

Provision of information to beneficiaries

The Act revises the information to be provided to beneficiaries, ensuring that beneficiaries have the adequate information available to enable the terms of the trust and trustee’s duties to be enforced. There are two types of information to be made available to beneficiaries:

Basic trust information: This information includes who the beneficiaries are, the names and contact details of all trustees, the occurrence and details of all changes to trustee roles and the right to request a copy of the terms of the trust. Trustees should regularly consider making this information available to the beneficiaries.

Other trust information: This is information that beneficiaries are able to obtain on request and includes information regarding the terms of the trust, the administration of the trust or trust property, and any other information that is reasonably necessary for the beneficiaries to have to enable the trust to be enforced. This does not include reasons for the trustees’ decisions.

There is a procedure under which trustees can decide not to provide information to beneficiaries, some factors involved in this decision include:

• The nature of the interest in the trust held by the beneficiary and the other beneficiaries of the trust
• Whether the information is of a personally or commercially confidential nature
• The expectations and intentions of the settler at the time of the creation of the trust, if this is known
• The age and circumstances of the beneficiary and the effect on the beneficiary of giving the information
• The effects on trustees, other beneficiaries and third parties of giving the information.

 Retention of trust documents

The Act specifies each trustee must hold a copy of the trust deed and any variations to the trust deed. Additionally, there are a number of trust documents that must be held by at least one trustee and be available to all other trustees on request.

The documents that must be held by at least one trustee include:

• The trust deed and any variations
• Records of assets, liabilities, income and expenses of the trust
• Records of decisions of trustees
• Records of changes of trustees
• Accounting and financial records
• Any written contracts entered into
• Any letter or memorandum of wishes from the settlor
• Any other documents necessary for the administration of the trust.

Dispute resolution

The Act also provides an alternative dispute resolution process, such as mediation, for all trusts to cover any disputes between trustees. The courts will also have wide power to review decisions, acts and omissions of trustees.

What do you need to do?

Best practice is to review the effectiveness and necessity of the trust at each annual trustees’ meeting, so now is the best time to start thinking about how these changes might apply to your trust and the administration of it.

While some trustees prefer to administer trusts independently of their lawyers, many of our trust clients are signed up to the Wakefields Lawyers Trust Administration Support Service. This is a simple and cost effective way of ensuring that your trust is well managed and that you and your fellow trustees are meeting all obligations and aware of any changes to legislation.

If you would like to discuss your trust or learn more about the Trust Administration Support Service, give us a call on 040 970 3600 or email info@wakefieldslaw.com.