Following a lengthy and comprehensive review of the law relating to trusts undertaken by the Law Commission, and the introduction of the Trusts Bill to Parliament in 2017, we now have the Trusts Act 2019 which will come into force on 30 January, 2021. There are important changes for trusts, which should be noted by all trustees and beneficiaries of family trusts.
There will now be five mandatory duties for trustees. These include a duty to know the terms of the trust, to act in accordance with those terms, to act honestly and in good faith, to act for the benefit of the beneficiaries of the trust, and to exercise the trustees’ powers for proper purposes.
In addition, there are ten default duties which will apply unless they are specifically excluded by the trust deed. These include a duty to invest prudently, not to exercise power for their own benefit, to avoid conflict of interest and to act unanimously.
Perhaps the most significant change is the requirement to manage and disclose information to beneficiaries of the trust. Trustees will be required to notify all those who are qualifying beneficiaries that they are in fact beneficiaries and that they have a right to request information about the trust.
It will no longer be possible for Mums and Dads to set up a family trust of which they and their children are beneficiaries and to operate the trust without considering the needs of all beneficiaries. Trusts are expensive to set up an maintain and in future, trust administration and management will come under close scrutiny. There are certain circumstances in which trusts provide much needed protection or benefits, however these need to be weighed up against the costs and other disadvantages. No doubt many trustees will give serious consideration to winding up.