The New Trusts Act is Now in Force – Does Your Trust Comply?

The previous act had been in place since 1956, and over time had been interpreted by courts, which had amended the letter of the law. The purpose of the new Act is to make trust law more accessible, by codifying the law and making sure everyone can understand their responsibilities and rights under the Act.

“While the reasons why people set trusts up have changed over the years, there are still very good reasons why trusts are still the most flexible asset owning structure we know”, says Tammy McLeod, Director and Trust Specialist at Davenports Law. “The most important part is to ensure that it does the job you want it to. When setting up or reviewing a trust make sure that it will benefit those who you wish to benefit, in the way that you intend.”

The biggest change in the new Act is that beneficiaries have increased statutory rights. Beneficiaries aged 18 and over, have the right to be notified that they are beneficiaries, and be told who the trustees are so they can hold them to account. They are also entitled to copies of the trust deed and any variations, information about the assets and liabilities, trust financials and information regarding the administration of the trust.

Sometimes the beneficiary class of a trust is much wider than what the person setting it up intended, which will mean more people will be able to access trust information. “It is so important to ensure that the beneficiaries of your trust are only the people who you want to benefit from the trust. This is the change that is likely to create the greatest concern for many trusts and it is important to get specialist legal advice if this concerns you”, says Tammy. “There may be options available to amend your trust documents and set out more specifically your wishes in relation to the beneficiaries.”

Under the new Act there is also an increased responsibility on trustees to carry out their duties properly, and have greater accountability to the beneficiaries. The new Act divides trustees’ duties into two broad types: mandatory duties which you cannot contract out of, and default duties that apply unless your trust deed says otherwise. The mandatory duties include understanding the trust deed, acting in the best interests of the beneficiaries and accounting to the beneficiaries.

The default duties which can be modified include that the trustees must act unanimously, that the trustees must invest trust assets prudently and that all trustees must hold core documents. “It is important to check your trust deed in light of the new Act to ensure that the trustees are complying with the mandatory duties and to see if the default duties need to be modified”, says Tammy.

The new Act extends the time period for trusts from 80 to 125 years. This has come about due to increasing life expectancies and people wanting to hold assets in trust beyond one or two generations. The new Act also makes it compulsory to remove incapacitated trustees. This is a welcome change to the previous system which, if the trust deed was silent, required an application to the Court to remove an incapacitated trustee.

While not part of the new Act, it is timely when reviewing your trust structure, to consider your will and any wishes you may leave to the trustees of your trust. “Too often people sign these documents and then don’t look at them again”, says Tammy. “It is important to constantly review wills and wishes to ensure that they still reflect your wishes and give good guidance to those you leave behind.”

Now that the new Act is in force, it is important to review existing trust structures and accompanying documents to make sure they comply, are doing the job you want them to, and are fit for purpose.