A practical approach to trusts
The Trusts Bill introduced on the 1st August this year updates the Trustee Act 1956 and reflects decisions made about trusts in common law. It also provides solutions for issues that have been facing lawyers and trustees for some time. Here is a summary of the most important aspects of the Trusts Bill.
The Bill defines an ‘express trust’
An express trust clarifies that trust property is separate from a trustee’s personal property, a matter which has sometimes been unclear. A trustee must administer trust property according to the duties and obligations set out in the trust deed. Beneficiaries can also hold trustees accountable for compliance with their duties defined in the deed and by law.
Trust life has been extended
Trusts currently have a lifespan of up to 80 years. That number is specified in the trust deed, or it is determined against perpetuities according to the current, confusing rule. The Trusts Bill replaces these rules. Trusts will now continue for 125 years if the trust deed doesn’t specify the lifespan of the trust or define the appropriate conditions for the trust’s dissolution. Trust deeds can also specify an earlier end date if required.
Greater accountability for trustees
As we’ve noted in earlier articles, the Trusts Bill also sets out compulsory duties for trustees. Trustees must know the purpose and terms of the deed, act honestly, in good faith and according to the terms set out in the deed. Trustees may only exercise their powers for a proper purpose and for the benefit of beneficiaries. All trustees are accountable for these duties and they cannot be modified or removed from the trust deed.
Unless the trust deed specifies otherwise, trustees will also have a number of default duties, which are mostly stated in the existing law. Our trust lawyers expect the purpose of listing these duties in the Bill is to help beneficiaries understand the function of trustees and for trustees to understand their obligations.
Storage of trust information
If you’re a trustee, do you currently keep copies of the trust deed, any other deeds that alter the trust, a record of assets and liabilities, trust accounting records and financial statements, and any letter of wishes from the settlor? If you answered no to any of the above, then you should obtain copies of those documents. The Bill requires all trustees to keep this information, and if you retire, to pass it on to the new trustee.
The Bill clarifies beneficiaries’ rights
One of the important changes clarified in the Bill is the disclosure of trust information to beneficiaries. The purpose of this is to ensure beneficiaries have sufficient information to hold trustees accountable for their actions, or if they wish to challenge trustees’ decision-making. The Bill also details this process.
Trustees are required to notify beneficiaries about basic trust information. The information that must be disclosed includes the fact that they are beneficiaries, that they have a right to request a copy of the trust deed and/or other trust information, and the names and contact details of all trustees.
The Family Court will have wider powers
As mentioned last month in our articles about trusts being challenged in relationship property proceedings, the Family Court will have wider powers to make directions in circumstances such as these. This means if the parties are in dispute, they may consent to allow the Family Court to make orders usually reserved for the High Court, allowing for faster, more effective resolutions to relationship property proceedings involving trusts.
Our trust lawyers anticipate there will be changes before the Bill reaches the end of the process and other provisions relevant to people who have a trust or administer one. We will update you as information comes to hand.