Now is a good time to assess how your existing trust complies with the new trusts law that becomes effective at the start of 2021.
One of the premises of the new Act is to make trust law more accessible and easier to understand and in many instances it is codifying current case law rather than introducing new concepts. One of the most interesting parts to the new Act is the requirement to provide certain information to beneficiaries.
The new law is a combination of existing case law and new requirements on trustees. It also follows the growing trend of giving more power to those perceived to have less power. In the same way that the law has moved to protect the perceived weaker party in landlord/tenant relationships and employer/employee relationships, the new Trust Act goes someway to giving greater power to beneficiaries. The reason for the new law is that the beneficiaries are really the only ones that can hold trustees to account, and they can only do that if they are entitled to certain information regarding the trust.
From the end of January 2021, there will be a presumption that trustees will provide all beneficiaries over the age of 18 with “basic trust information” – being the fact that the person is a beneficiary, who the trustees are as well their contact details and a copy of the trust deed or other terms of the trust and any variations. The beneficiaries are also entitled to know that they are able to receive other “trust information” if they request it.
Other “trust information” is defined as being the kind of information that the beneficiaries will need to enable the trust to be enforced. This kind of information includes things like financial statements for the trust and may extend to valuations of trust property, legal and taxation opinions sought by the trustees and resolutions of the trustees. It does not extend to the trustees’ reasons for their actions.
This of course may be a problem in many trusts where it was never intended that the beneficiaries even know that they are beneficiaries. It may also be that there is a very wide class of beneficiaries and it was never intended that the people named would ever actually benefit. This is often the case with pre-2002 trust deeds where there are wide classes of beneficiaries which often extend to the spouses and de facto partners of beneficiaries.
The trustees are however, allowed to take into account certain factors when determining whether they should give the information to the beneficiaries. These factors include:
The nature of the interest held by the beneficiaries and the likelihood of the beneficiary receiving a future distribution;
Whether the information sought is subject to confidentiality;
The intentions of the settlor at the time of the establishment of the trust as to whether beneficiaries would be given information;
The age and circumstances of all of the beneficiaries of the trust;
The effect of giving the information on the trustees, the beneficiaries, third parties and family relationships; and
The practicality of giving such information.
In essence this still leaves the law relating to provision of information to beneficiaries, grey and as with many areas of the law, dependent on the facts and interpretation.
So, what can you do with your trust in the meantime?
As the law doesn’t come into force until January 2021, there is still time to review your trust and make sure that you are comfortable with how it fits with the new law. The first thing to do is to read and understand the terms of the deed, and in particular know who the beneficiaries of the trust are. If the class includes people who you never intended to benefit, can they be removed as beneficiaries?
Review the terms of the trust deed. Is there anything mentioned regarding the settlor’s intentions as to what information can be provided to beneficiaries, and if not, is there the ability to vary the deed to include something in the deed.
Check the memorandum of guidance for the trust. This is the document that tells the trustees what the settlors want to happen with the trust assets both now and in the future (akin to a will for the trust). This may need to be updated so that you can be very specific as to what the trust was established for and what kind of information, if any you envisaged the beneficiaries being able to access. Check the trustee resolutions to make sure you are simply recording your decisions, not the reasons for making those decisions.
Trusts are not static entities – times are a changing in more ways than one at the moment, and there is still time to ensure that your trust is fit for the new Act.