The long-awaited Trusts Act 2019 (the Act) has received Royal Assent and comes into force from 30 January 2021; it applies to all Trusts – not just new ones established after that date. The Act excludes charitable trusts.
The Act comprises 184 sections, so there are a number of rules to be aware of for those that have a family trust and/or are a trustee.
Some of the key changes that may require immediate investigation or action before the commencement date are outlined below. We recommend talking to your Grant Thornton adviser sooner rather than later to fully understand the impact these changes may have on your trust and your role as trustee.
The new law clearly states two specific types of trustee duties – Trusts Act 2019 Mandatory duties and Trusts Act 2019 Default duties. No changes are permitted to mandatory duties, but some of the default duties can be modified, or excluded, by the trust deed. The Act effectively codifies “best practice” but also makes the role of trustees more onerous and increases their responsibility.
Disclosure of information
This is potentially one of the most contentious changes. Trustees have a duty to make available ‘basic trust information’ to all beneficiaries – including those who may only have a remote chance of receiving a distribution from the trust. It also includes the parent or guardian for a minor beneficiary (or beneficiary who “lacks capacity”).
The basic trust information to be provided includes:
- that the person is a beneficiary
- name and contact details of trustees
- details of changes in trustees as they occur
- the right of the beneficiary to request a copy of the terms of the trust or trust information.
Trust information means any information:
- regarding the terms of the trust, the administration of the trust, or property of the trust
- that is reasonably necessary for the beneficiary to have to enable the trust to be enforced (but does not include the trustees' reasons for decisions).
There are some limited exceptions for not providing or restricting trust information.
Record keeping requirements
The Act has an extensive list of documents relating to the administration of the trust that each trustee must hold. For instance, this includes the trust deed, variations made to the trust, records of trust property identifying the assets, liabilities, income and expenses of the trust, records of decisions and so on.
Where there is more than one trustee, one trustee can hold the documents on behalf of all trustees (noting however that all must still retain a copy of the trust deed and any variations).
Other key changes to be aware of
- The maximum duration period of a trust is extended from 80 years to 125 years (note, there may still be limitations to 80 years for existing trusts)
- Indemnity clauses may not be able to be relied on in certain circumstances
- Varying the terms of the trust deed, changing beneficiaries, resettling or winding up the trust could potentially be more difficult after 30 January 2021 as it may well require the unanimous approval of the beneficiaries
Important changes for trustees
All trustees should:
- become familiar with mandatory and default trustee duties
- review the current list of beneficiaries:
- Is it appropriate?
- Can it be amended or narrowed down?
- review the trust records:
- Does someone hold all the records on behalf all trustees?
- Who will be the nominated trustee be?
- Are the current terms of the trust appropriate? Are they flexible?
- Is the memorandum of wishes up to date?
- Consider the ongoing objective of the trust – is it still fit for purpose?