The (long-awaited) review and reform of the Trustee Act 1956 has finally been completed. On 30 July 2019, the new “Trusts Act 2019” received royal assent. The new Act comes into effect on 31 January 2021 and replaces the old 1956 Act.
The new Act updates and restates trust law to reflect the current legal and social environment. Much has changed in how trusts are used and relate to other areas of the law since 1956 and more particularly since the 1990s. This is most apparent in terms of the laws governing relationship property and rest home subsidies.
The themes of the new Act are, firstly, a heightened expectation on trustees’ performance and duties and, secondly, to provide a “consumer focus” for trusts. The consumer focus is a brand new concept for trusts. Beneficiaries are the consumers and with this comes beneficiary rights. The most significant change in terms of beneficiary rights relates to a new “disclosure regime” which will apply to all trusts. From 31 January 2021, all trustees of all trusts will have a proactive and ongoing obligation to provide all beneficiaries with a raft of information about the trust, including providing the beneficiaries with a copy of the trust deed and financial information about the trust assets and income. The disclosure regime effectively moves trusts out of the shadows, where they have traditionally sat. Trusts will become very public for those who may benefit from them.
There is now a transition period. This will allow you time to make important decisions about the future of your trust. We recommend that if a trust is to continue in the new environment then the trustees pre-plan how the flow of information will work. A large part of this will be the preparation of the information that will need to be available. Consideration will include:
A natural consequence of this will be a review of who the beneficiaries are and consideration of whether all the listed beneficiaries should remain as such.
Trust deeds often contain a variety of extended family members such as the parents or siblings of the settlors or charities. Is that what you want?
The new Act also tightens up the requirements for trustee conduct, oversight, and administration. The Courts are likely to punish trustees who continue to adopt a casual approach to trust administration and the performance of trustee duties. The days of “this is my trust and I’ll do what I want” will no longer be acceptable in the new environment.
We believe that for people who are not able to accept or adjust to the new environment, a trust is probably not the right vehicle to hold assets.
We will be writing to our clients who have trusts in more detail about these changes in the New Year. If you have any questions or concerns in the meantime please contact Andrew Logan, Partner (DDI 03 343 8452 /email@example.com).