Overview of Trusts Act 2019
The Trusts Act 2019 was passed into law in the same year and becomes operative on 30 January 2021. The time in between remains critical as we all review the changes outlined. Existing best practice around trust law, together with the thinking and documentation dovetailed into the mix, is currently in the process of being updated around the country.
The last statutory rethink around trusts was in 1956. Both the use of trusts and how they have been judicially interpreted, has been major and influential during the period since then. What trusts have been used for, what they have been used to protect and how they have affected the structure of corporate life along with family succession planning – these are the contributions trust law have made.
The new Act updates current thinking while requiring greater transparency with beneficiaries regarding basic trust information, thereby satisfying current decision making norms and trends. Whether trust busting had been necessary for fairness and equity, or judicial and other forms of the decisions and administration, our relationship with trusts has evolved markedly.
A trust has three main players: the Settlor, the Trustee and the Beneficiary – and multiples of each of these. As each individual trust is reviewed in the light of the new Act, important questions need to be asked again by and of each ‘player’ to ascertain its relevance. A Settlor will ask whether the underling objectives and reasons for setting up the trust remain relevant. The Trustee will ask whether the true role is being carried out with independence of thought along with rigour of decision making. Linked to that is whether the liability associated with the future scrutiny of what the trust does, is worth the risk of being a trustee at all. The Beneficiary muses on whether he or she has the right to seek and receive information as the trust progresses on, bearing in mind whether they are discretionary or final beneficiaries.
Many of the changes made are linked to either common law or statutory rights in the trust law arena being challenged or examined. Accordingly, as at the operative date of the Trust Act, each trust must be revisited to reach an upgraded level of compliance and equity. Documentation must include reasons, timely interventions to maintain asset values, and accurate directions to best guide the assets entrusted to a trustee’s care. Personal agendas, conflicts and prejudices surrender to the common objects and objectives. Failure to do that will embarrassingly come to light if there is a delving into the workings of the trusts down the track.
A trust may no longer gather dust. All assets must be examined for relevancy and value. These principles require at least an annual meeting followed by a suitable vehicle and process for reporting to all interested parties. Without a doubt a trust is driven by its trustees. Often a trustee could wear the hat of a settlor and/or a beneficiary. There is a strong common law duty of care which falls on to the trustee’s shoulders. The key parameters are set out in the updated Act.
Your professional advisors are critical to any overview you may now undertake. Often their trustee companies may provide an independent decision making avenue. It is worth a visit to explore with them how your trust can be transparent and relevant with its operations in 2021, while carrying out in good faith its intended purposes.