Trusts, such as family trusts, are there to hold and protect your assets and provide for your chosen beneficiaries.
A number of changes are coming in relation to trusts in 2021
A good trust will provide you protection from creditors, lawsuits and ex-partners. However, a badly set-up trust can bring about its own problems. Our team can advise you on the best way to do things right, for you and your family.
The first major trust law reform in 70 years took effect on 30 January 2021. The Trusts Act 2019 aims to make trust law more accessible to everyone, and will make it easier for beneficiaries to hold trustees to account.
If you have a family trust, you need to be aware of how the changes might affect you.
Contact us to review your trust and give you the right advice for your situation
Here’s a round-up of the changes you need to know about.
Mandatory and default trustee duties. Duties are now categorised as “mandatory” (which must be performed by trustees and can’t be contracted out of) or “default” (which can be overridden). Any attempt to exclude a mandatory duty will have no effect. Trying to do so might be taken as evidence there was no real intention to create a trust, thereby invalidating it.
A presumption requiring trustees to make information available to beneficiaries. That’s basic information to all beneficiaries, and further trust information to beneficiaries who request it. There are exceptions to this, and in some cases, a trustee can withhold information.
Appointment and removal of trustees. The powers for appointment and removal of trustees have been updated and broadened to minimise the need to involve the court.
Records retention. Trustees will be required to keep and hold key trust documents. In addition to documents such as the trust deed and deeds varying it, it will include copies of trustee resolutions and minutes, contracts and financial statements, amongst others. This will require a significant change in practice for some trustees, through more involvement and regular trustees meetings and records of the resolutions adopted.
Exemption and indemnity clauses. The Act makes it clear that trust deeds must not limit a trustee’s liability or provide an indemnity for dishonesty, wilful misconduct or gross negligence. This means trustees can no longer rely on broad indemnity clauses to protect them against gross negligence. They may still obtain protection in relation to ordinary negligence.
Ability to delegate certain trustee powers or functions to another person. In practice, this could be, for example, an investment adviser for a family trust looking to place money somewhere. It could also be helpful for trusts where a life-interest is involved.
Special trust advisers. The Act allows special trust advisers to be appointed to advise and assist trustees. They don’t have the powers or duties of a trustee, and there’s no obligation for trustees to follow the advice they receive.
Abolition of the rules against perpetuities and accumulations. The rule against perpetuities and remoteness of vesting is abolished. Trusts that might otherwise have breached the rule against perpetuities for failing to specify a termination date are deemed to terminate after 125 years.
Other changes include a reduction of the age of majority from 20 to 18; and the ability for beneficiaries to act unanimously to bring a trust to an end.
Each of these changes could have an impact on your family trust, so for a fuller explanation or advice, please get in touch.
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