This post is by Giles Ellis, an experienced business coach and Director at GECA Chartered Accountants. GECA offer Succession Planning and other Business Advisory Services.
The Trusts Act 2019 was passed on 30 July 2019 replaces the Trust Act 1956. The new trust law will be effective from 30th January 2021 and includes clarification of the existing trust laws and some significant changes.
Trustee Obligations and Duties
A lot of our clients have trusts and are also trustees of trusts. However, some of them are not aware of the role and duties of the Trustees, record-keeping and disclosure requirements.
Trustees will no longer be able to keep the trust information from the beneficiaries private, or details of the past and future beneficiary distributions or current account balances owed to the beneficiaries. The beneficiaries now can request for their current account balances to be repaid to them.
The new reforms now require increased compliance requirements from the Trustees and new disclosures to the beneficiaries. Some of the various changes introduced are as follows:
The Act outlines which information the Trustees should maintain and for how long. The trustees should be familiar and comply with the record-keeping requirements.
Important Duty, Obligation and Term Changes:
Default Duties – Settlors and trustees should review and consider whether any of the following duties should be amended or excluded by the Trust
- General duty of care
- Duty to invest prudently
- Not to exercise power for their own benefit
- Consider the exercise of power
- Not to bind or commit trustees to future exercise of discretion
- Avoid conflict of interest
- Duty of being impartial
- Duty not to profit
- Act for no reward
- Act unanimously
Mandatory Duties – Trustees should be aware of the following duties which cannot be amended:
- Know the terms of the trust
- Duty to act in accordance with the terms of the trust
- Act in good faith and honestly
- Duty to exercise powers for the proper purpose
- Duty to act for the benefit of beneficiaries or to further the permitted purpose of the trust
Obligation to Beneficiaries – The act outlines what information trustees should provide to the beneficiaries or their representatives. The disclosures include:
- The fact that the individual is a beneficiary of the trust
- Provide names and contact details of trustees
- Keep the beneficiaries updated with details of any trustee appointment, retirement and removal of trustees as it occurs.
- Provide terms of the trust or trust information if requested by the beneficiary.
Trust Period – the new reforms have now revoked the trust period of 80 years and increased it to 125 years.
Although, there is increased level of disclosure and trustee obligations, the trusts are still a valid structure to use for asset protection and investment structure.
At GECA we also act as a Professional Trustee for some of our clients and we would like to assist our clients who are also trustees of their trusts. We suggest contacting us as a starting point to do a thorough review of your trust deed and assisting you with the new trust requirements.