The Trusts Act 2019 ( Trusts Act) will take effect from 30 January 2021. If you act as a trustee, you will need to make sure that you are familiar with your duties as a trustee prior to the new Act becoming effective.
The delay in application of the Act allows a window of opportunity to review your current trust deed in light of the changes, to make sure it is still “fit for purpose”.
Subject to any restrictions under the trust deed, the trustees could amend the trust deed to take into consideration the effects of Act. It would also be an opportune time to consider other clauses of the trust deed that may be out of date, such as a requirement to pay or apply income within six months of balance date.
It may be that as a result of your review you decide that the trust is not fit for purpose and should be wound up or re-settled onto another trust. Before adopting this course of action, you should carefully consider any tax implications that might arise as a result of the trust disposing of its assets. The distribution of assets to beneficiaries will generally be considered to be a disposal at market value for tax purposes and a new acquisition date for residential land could be set for the beneficiary.
So what are the changes in the new Act that need to be considered?
The Act sets out mandatory duties of trustees – these cannot be avoided by changing the Trust Deed.
These duties include:
A trustee must know the terms of the trust,
Each trustee must keep core trust documents (the list of which is extensive) or ensure that the documents are held by a fellow trustee and be satisfied that those documents will be made available on request.
As well as these mandatory duties, trustees must notify basic information to beneficiaries of the trust, including notifying them of the fact that they are a beneficiary of the trust.
It would therefore be appropriate to review who the beneficiaries of the trust are, consider whether narrowing the class of beneficiaries is appropriate, and including a class of “contingent beneficiaries”. You would need to ensure that altering the beneficiaries did not constitute a resettlement of the trust.
The Act also sets out default duties which will automatically apply unless the trustees amend the trust deed to specifically exclude them. These default duties can be negated in their entirety, and if any are to be retained, these could be separately added. The key duties are:
To invest prudently
Not to exercise a power for own benefit
To act for no reward
To act unanimously