Do you have a Trust?
Are you a Trustee or Settlor of a Trust?
If you have answered yes to any of the above questions, we would like to inform you of the changes coming in January 2021 under the Trust Act 2019. The Act aims to provide clearer guidance on the administration of trusts, along with providing more transparency for all parties of the Trust including beneficiaries.
There are still very valid reasons for keeping a Trust, including asset protection, estate planning and tax planning. However, the Trust needs to be properly constituted and administered within the Trust Act 2019 to be effective. As a practice we often come across Trusts that were set up for a specific purpose and have not been reviewed since the date they were established. Keeping a Trust that will comply with the Act will undoubtedly carry increased compliance costs in the future.
If ABA acts as an Independent Trustee for your Trust, there will be an extra charge for the increased compliance costs. An indication of these extra costs will be notified to the relevant clients by mid-January 2021.
We encourage you to consider the following points:
- Are you willing to undertake the increased obligations of being a Trustee?
- How will disclosure to beneficiaries affect you or the Trust?
- What was the reason for setting up your Trust initially, and is that reason still valid?
- If the benefits the Trust provide outweigh the increased compliance costs.
If you would like to make an appointment to have a consultation regarding your Trust, please contact us. If we determine that your Trust is no longer required, we can complete a Trust Wind up for you.
Trust Act 2019 – A Summary of the Key Changes
Mandatory and default duties for Trustees to ensure Trustees understand their role and responsibilities.
- Know the terms of the Trust
- Act in accordance with the terms of the Trust
- Act honestly and in good faith
- Deal with the Trust properly and act for the benefit of the beneficiaries in accordance with the terms of the Trust Deed
- Exercise the trustee’s powers for a proper purpose.
Default Duties (Obligations unless the Settlor records otherwise when the Trust is established)
- General Duty of Care
- Invest prudently
- Not to act in own intent
- To consider the exercise of trustees’ powers
- Not to fetter a trustee’s discretion
- To act unanimously
- Not to profit from trusteeship
- Not to benefit from the exercise of trustee discretions
Trust record keeping requirements
The act specifies trust documents that are required to be kept. The importance here is documentation of any decisions or changes made.
Disclosure to Beneficiaries
The Act now requires beneficiaries to be provided with basic trust information.
The basic trust information is:
- Informing them that they are a beneficiary
- The name and contact details of trustees
- The details of any appointment, removal or retirement of a trustee
- Informing them that they have the right to request trust information.
It should be noted that Beneficiaries do not have the right to demand distributions and there can be valid reasons by Trustees to not disclose information to beneficiaries. For example, if the disclosure could have a negative impact on the beneficiary or family relationships.