Trust Act 2019
The Trusts Act 2019 came into effect on 30 January 2021. If you are a Settlor or Trustee of a trust you will need to be aware of the Act and how it affects you.
Information to Retain
The Act requires trustees to keep core trust documents including documents setting out the terms of the trust, variations, records of trust property and trustee decisions, appointments, removals and accounting and financial statements.
One trustee may hold most documents but each trustee must hold a copy of at least the terms of the trust and any variation to those terms.
The Act specifies the obligations of a trustee. Trustees must ensure that they manage beneficiary entitlements to information about the trust.
The Act creates a basic presumption that a trustee must disclose ‘basic trust information’ to every beneficiary as well as ‘trust information’ to beneficiaries who request it. In the case of beneficiaries who are minors or who lack capacity, the information must be given to a parent, guardian, attorney or property manager. Basic trust information includes:
- The fact that a person is a beneficiary;
- The name and contact details of the trustee;
- The occurrence and details about any change to the trusteeship;
- The beneficiary’s right to request a copy of the terms of the trust and trust information.
‘Trust information’ is information about the terms and administration of the trust and any trust property that is reasonably necessary for the beneficiary to have the trust enforced. Before providing such information the trustee must reasonably consider whether that information should be reasonably withheld or disclosed.
When considering whether to disclose ‘basic trust information’ or responding to a request for ‘Trust information’ the trustee, the Act lists the following relevant factors:
- The nature of the beneficial interests;
- Whether there are any issues of personal or commercial confidentiality;
- The expectations of the settlor;
- The age and circumstances of the beneficiary
- The nature and context of any request for information;
- The effect of giving the information, including the effect of relationships within the family and relationships between the trustees and beneficiaries; and
- The practicality of giving the information or imposing restrictions or safeguards.
In some cases there is an obligation for the trustees to apply for directions from the High Court where disclosure has not be made to any beneficiary or where the trustee has declined a request for information.
You may consider some beneficiaries may need to be removed, particularly if there are wide classes of beneficiaries in your trust deed. If you would like us to review your trust deed in more detail, please contact us.
Exemption and Indemnity Clauses
The Act sets out that trust deeds must not limit a trustee’s liability or provide an indemnity for dishonesty, wilful misconduct or gross negligence and any terms in a trust deed that purport to limit the liability of the trustee or to indemnify trustees will be in breach of the Act and will be deemed invalid.
Mandatory and Default Duties
The Act specifies the core trustee duties that were already part of the law. It then classifies these duties as either ‘mandatory’ or ‘default’ duties. Mandatory duties may not be modified or excluded by the terms of the trust.
Default duties may be modified or excluded by the terms of the trust, subject to some limits and exceptions.
Appointment and Removal of Trustees
Specific provision in the Act has been made for trustee removals, retirements, replacements and when a trustee has died.
In the first instance, the person nominated in the trust deed has the power to appoint and remove trustees or if no one is nominated in the trust deed, then the remaining trustees have the power of appointment and removal. The new provisions in the Act will cover most instances in which a trustee would need to be appointed or removed. There is also provision in the Act to complete formal requirements to vest property on behalf of a trustee that has lost capacity. This is likely to save significant inconvenience and expense.
If a trustee wishes to retire, the discharge must now be in writing by the person authorised to remove trustees and if not, by the remaining trustees.
Abolition of rules against perpetuities
Under the Act it is now possible to vary a trust to take advantage of a longer trust period. This is currently a maximum of 80 years but may be extended by up to 125 years under the new Act.
If you require any further assistance or if you would like to know more about the changes coming into effect, please contact The Property Law Centre.