The long-awaited Trusts Act 2019 (“Trusts Act”) came into force on 30 January 2021 and is the most significant change to trust law in over 60 years.
The Trusts Act is set to modernise trust law and gives more transparency to beneficiaries whilst promoting trustee compliance and accountability.
The most significant changes include:
An obligation to disclose information to beneficiaries: The Trusts Act outlines what information trustees are obliged to give to beneficiaries, with some exceptions
Mandatory and default duties: The Trusts Act imposes mandatory and default duties on trustees, such as:
- A duty to know the terms of the trust
- A duty to act in accordance with those terms
- A duty to act honestly and in good faith
- A duty to act for the benefit of beneficiaries
- A duty to exercise the trustee’s powers for proper purposes
Record retention requirements: The Trusts Act prescribes information that trustees must keep, such as:
- The trust deed and any variations to the trust deed
- Records of trust property
- Records of trustee decisions
- Written contracts entered into
- Accounting records and financial statements
- Any changes to trustee documents and other relevant documents
Trust Duration: The Trusts Act now extends the maximum duration of a trust to 125 years.
What does the Trusts Act 2019 mean for a Trustee?
Trusts will now require more regular maintenance going forward with an increase in obligations on trustees as they spend more time ensuring those obligations are met.
All assets of a trust will need to be considered regularly by the trustees (and any settlors or advisory trustees) to ensure they are appropriate to meet the objectives of the trust. Beside the time and effort invested in coordinating these regular meetings, trustees will need to advise any associated professionals on decisions made at these events and ensure that any necessary actions are taken.
Once that’s done, they’ll need to maintain appropriate records which may be requested by interested parties, including all beneficiaries, at any time. This process is time consuming and can be a burden for those trustees who are not professionals or inexperienced with trust law.
What does the Trusts Act 2019 mean for a Settlor (those who established the trust)?
As trustees will need to spend more time complying with their obligations and maintaining records, it is likely the trust’s legal and accounting costs will increase. For a trust settlor, now is the time to consider the future of a trust and to ensure the reasons for setting up a trust are still relevant.
What does the Trusts Act 2019 mean for a Beneficiary?
As trustees will be required to disclose some trust information to all beneficiaries, including the fact that they are beneficiaries, you will be notified of the existence of any trust that you are a beneficiary of.
There has also been a change to the age of majority (the age that a person can inherit) from 20 years to 18 years.
Beneficiaries also have the right to request other information of the trust such as a copy of the trust deed and trust’s financial statements. However, there are certain circumstances where information can be withheld such as if it is commercially sensitive or personal in nature.
Why have a Trust?
Despite the increased costs of compliance and greater transparency of trusts, they still play an important role for estate planning purposes.
- Protecting assets to provide for a partner or spouse whilst preserving an inheritance for your children or grandchildren
- The managed distribution of a farm or business to the next generation
- Providing for vulnerable loved ones who may not be able to manage their own affairs
- Providing for specific purposes such as the education of your grandchildren
- Charitable purposes.
We have been preparing for the Trusts Act 2019 to ensure compliance with the new regulations and helping our clients understand this significant piece legislation.
If you are the trustee of a trust worried about the implications of the Trusts Act 2019, or thinking about whether a trust is right for your circumstances, we recommend talking with one of our Trust specialists.