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Is your trust compliant?

Is your trust compliant?

Published in August 2022

On 30 January 2021 the Trusts Act 2019 (“the Trusts Act”) came into force to update and create new principles relating to the law surrounding express trusts.

The Trusts Act crystalises the obligations that trustees owe to beneficiaries, particularly in regards to information disclosure, such as a new presumption that trustees will disclose basic trust information and have the obligation to retain core trust documents. Basic trust information covers things such as disclosing that a person is a beneficiary, the name and contact details of trustees, details regarding all appointments of trustees, removals and retirements of trustees and the right to request a copy of the Trust terms or other trust information.

The most important change under the Trust Act is the new mandatory and default duties that more clearly define rights and responsibilities of trustees. These include the most basic mandatory obligations to know the trust deed terms and for trustees to act in accordance with those terms. There is a distinction between the default and mandatory duties. Mandatory duties are obligations that must be complied with, and any attempt to vary them will be voided. Default duties are much more specific and relate to the powers a trustee can exercise. Due to this, a settlor, or subsequently the trustees, can vary these duties in order to accommodate how they wish the trust to be operated.

Existing trusts will almost certainly need to be varied even to a limited extent. The first step is to contact a lawyer to discuss firstly why you need your trust and whether it is still required for the purpose it was originally established, and secondly, whether your current trust deed needs to be varied in order to comply with the new laws and regulations.

To ensure that the trust deed complies with the new Trusts Act, there will be a range of changes to consider including:

- Change of vesting day

- Trustee discretion to prioritise beneficiary welfare

- Inclusion of mandatory and default investment discretion and principles

- Attention to whether there is any self-benefit of a trustee

- Power of removal and appointment of trustees

- Limitation of liability and indemnity of trustees

- The ability to vary the trust deed

A review of the trust deed is an opportune time to consult with those who are involved in the Trust to consider if there are any other adjustments that need to be made, including removing discretionary beneficiaries and updating beneficiary names. It can also be a time to add in provisions that allow for a smoother operation of the trust, such as more comprehensive provisions to remove and appoint trustees.

Contact us if you would like assistance in reviewing your trust deed to check if it is fit for purpose and to check what may be required in order to ensure that your Trust complies with the new requirements.

Please contact Mason Lockhart or Josh Muir for further discussions about your trust.

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