Finance – Trust law changes

The Trusts Act 2019 comes in effect on January 30 next year and replaces the Trustee Act 1965 and the Perpetuities Act 1964.

The new Act is designed to provide better guidance for trustees and beneficiaries, and makes it easier to resolve disputes.

A lot of people who have trusts are now reconsidering whether the trusts suit the purposes they were set up for and we are hearing that a lot of trusts are being closed down.

Important points to note are:
Under the Act, the trustees must have regard to the context and objectives of the trust. That means that all trusts deeds need to be varied to detail the objectives of the trust, as objectives have not previously been clearly stated in the trust deed. In most cases the family trust objectives will be to provide a home for and to look after the settlors while they are alive, and to look after the loved ones after they die. When the trust deeds are properly prepared in a manner which details the settlors objectives, and prioritises the needs of beneficiaries, the potential for disputes is minimised.

Those setting up trusts must now ensure they are tailormade for the people wishing to have a trust, and fit for purpose.

The trust must be administered in a way that is consistent with the terms and objectives of the trust.

The mandatory duties and default duties of trustees, based on established legal principles, include: knowing the terms of the trust and acting in accordance with them; acting honestly and in good faith, and for the benefit of the beneficiaries.

Default duties need to be reviewed by a trust lawyer – some of the duties in a trust, as it stands now, can be modified, and some cannot. Changes must be made only by trust experts.

January 2021 is coming up quickly. If you have not discussed your trust with your lawyer you should contact them as soon as possible.