The new Act divides trustees duties into two types:
- Mandatory duties that you cannot contract out of;
- Default duties that apply unless stated otherwise in the trust deed
- Understand the terms of the trust deed
- Act in the best interests of beneficiaries
- Act honestly and in good faith
- Exercise powers for proper purpose
- Account to the beneficiaries
- Cannot contract out of personal liability as a trustee
- Impartiality - treat all beneficiaries of the same class even-handedly
- Unanimity of Trustees
- Not to profit from the Trust (trustees are to hold the assets on trust for the benefit of the beneficiaries, not for themselves)
- Invest prudently
- Retain core documents
- Act for no reward - If you want to pay your trustees, your trust deed to specifically state this, otherwise they cannot be remunerated.
- If a beneficiary challenges something the trustees have done, the records will be needed to defend it
- Retain documents for the life of the trust
- Trustee meetings is crucial - so you can show you have carried out your duties as a trustee properly
- section 30 of the new Act
- very high onus on trustees to invest prudently (i.e. having a wide investment portfolio) as if investing property for someone else. If a lawyer or accountant, the trustee must act as if they are investment advisors.
- Example: Allowing settlors to live in trust property rent free is not a prudent investment
- You can contract out of this in the trust deed
- Obligation on trustees to let beneficiaries know they are beneficiaries
- You can contract out of this but need specific wording in the trust deed.
- Beneficiaries need to know who the trustees are so they can hold them to account and obtain information from them
- Important to consider the class of beneficiaries and narrow this if need be
- I.e. distant family members as beneficiaries who you do not want obtaining information about the trust.
- Copy of trust deed and any amendments (i.e. deeds of variation)
- Assets and liabilities
- Income and expenditure (trust financials)
- Information regarding the administration of the trust
- But not trustee reasons
- Best not to put trustees' reasons for a decision in writing as it could be challenged by a beneficiary
- Wishes of the settlors
- effect of giving information
- Practicality of giving information
- Other relevant considerations
- Make it clear in the trust deed what information you are prepared to provide to beneficiaries and what you are not.
Trust could last for a maximum of 80 years previously, but now the trust can last for 125 years.
Incapacity and Trusts
The new Act makes it compulsory to remove incapacitated trustees and enduring powers of attorney are not relevant to trusts.
The new rules mean greater transparency of trustee activity and increased trust compliance requirements because trustee duties are now formalised in legislation.