The New Trust Act, What you Need to Know.

The new Act aims to provide better guidance and understanding for trustees and beneficiaries by clarifying and simplifying the core trust principles and essential obligations. This is the most major change to trust law since the passing of the Trustee Act in 1956.

One of the most interesting parts to the new Act is the requirement to provide certain information to beneficiaries. The new law is a combination of existing case law and new requirements on trustees. It also follows the growing trend of giving more power to those perceived to have less power. In the same way that the law has moved to protect the perceived weaker party in landlord/tenant relationships and employer/employee relationships, the new Trust Act goes someway to giving greater power to beneficiaries.

Why review your trust?

Trusts are increasingly coming under scrutiny and trustees are being pursued personally for failing to carry out their administrative duties properly. Inland Revenue and the Courts are now looking more closely at trusts and Inland Revenue has the power to look into trusts where a "sham" or tax avoidance is suspected. Furthermore, trustees can be held responsible to beneficiaries of the trust who suffer loss where the trustees have failed to act in the best interests of the beneficiaries.

So, what are the key points to review?

1. Know who the beneficiaries of the trust are. 
   If the class includes people who you never intended to benefit, can they be removed as beneficiaries?
   
   
2. The terms of the trust deed.
   Is there anything mentioned regarding the settlor’s intentions as to what information can be provided to beneficiaries, and if not, is there the ability to include something in the deed?
   
   
3. The memorandum of guidance for the trust.
   This is the document that tells the trustees what the settlors want to happen with the trust assets both now and in the future (akin to a will for the trust). This may need to be updated so that you can be very specific as to what the trust was established for and what kind of information, if any you envisaged the beneficiaries being able to access. Check the trustee resolutions to make sure you are simply recording your decisions, not the reasons for making those decisions.

We want to ensure that your trust is properly managed to lessen the risk of liability and to ensure that the benefits of having a trust are achieved. It is therefore important to review the provisions of the trust deed for your trust to ensure that it continues to comply with those law changes and/or any changes in your personal circumstances.

Further issues we assess:

• The importance of having an independent trustee: This demonstrates that the ownership of Trust Assets has changed significantly after they were transferred into the Trust and that the Trust is not a “sham”.
  
  
• The importance of annual trustee meetings: Again, without an annual meeting it is hard to prove the Trust exists and is not a “sham”.
  
  
• Ensuring your beneficiaries are the people you want to benefit: It is best to ensure that your siblings, their spouses and your children's spouses are not beneficiaries of your Trust as the new Act gives beneficiaries of your Trust the power to request information about the way it is being managed.
  
  
• Appointing and removing beneficiaries and trustees: Checking who holds the power to carry this out today and in the future, especially for Trusts you may set up for children.
  
  
• Removing Trustees who lose capacity: Checking that there is provision in the Trust deed for the removal of trustees that lose their capacity in order to avoid the time and cost involved in a Court application which would otherwise be needed.
  
  
• Trustees responsibility for trust investments: Checking that there is a contracting out within the trust deed from the high onus on trustees to diversify the trust's investments in order to achieve the best return on investments; and
  
  
• Completion of Gifting: Now that gift duty has been abolished, ensure that all gifting is completed so as to defeat potential claims by creditors and/or spouses/de facto partners, where appropriate.

If you feel you could use some specialist advice, don’t hesitate to contact the Trusts & Wealth Protection Team.

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