The Trust Act 2019 – key points

The intention behind the recently passed Trust Act 2019 was to take principles and rules in relation to trusts and administration of trusts from the old 1956 act and also rules and principles that are now in common law as a result of cases over the years, and put them into easily accessible legislation.

Two sets of Trustee duties

  1. Mandatory duties that can’t be varied or excluded from a trust.  These are fundamental core duties:

  • Know and act in accordance with the terms of the trust

  • Act honestly and in good faith

  • Hold and deal with the trust property and otherwise act for the benefit of the beneficiaries in accordance with the terms of the trust

  • Exercise the trust powers for a proper purpose.

 
These seem like ‘no brainers’ but are now listed in black and white and are something beneficiaries can refer to if they believe the trustees are not doing their job correctly.

  1. Default duties including:

  • Duty of care and skill that is reasonable in the circumstances having regard to any special knowledge, experience and skill that a trustee may have (or you would expect them to have due to their profession e.g. lawyer as a trustee).

  • To invest prudently.

  • To not exercise the trustee’s power for their own benefit.

  • To actively and regularly consider whether the trustee should be exercising one or more of the trustee’s powers i.e. not simply being passive.

  • To be impartial and avoid conflicts of interest.

  • To not make a profit or reward from the trusteeship.

 
These default duties can be excluded or modified by the trust deed.  For example, if a trust is set up to own shares in one specific company, the duty to invest prudently could be modified.

If any default duties are modified, then the professional adviser setting up the trust must ensure the settlor is aware of the modification and its practical effect.

Again, these duties are for the most part what is already known but having them prescribed and set out clearly in the Act is both a good guide for trustees and a reference for beneficiaries who want to hold trustees to account.

Other duties of trustees include keeping core trust documents and a duty to provide beneficiaries with information.

Giving information to beneficiaries
The act includes two “presumptions” in relation to this duty:

  1. A trustee must make the basic trust information available to every beneficiary.

  2. The trustee must give a beneficiary trust information that the beneficiary has requested.

The trust information is any information regarding the terms of the trust, the trust administration or the trust property that is reasonably necessary for the beneficiary to have to enable the trust to be enforced (but excludes the reasons for trustees’ decisions).

Before giving out the information, the trustee needs to consider factors before deciding if the presumption applies. Those factors include:

  • The nature and degree of the beneficiary’s interest in the trust and the likelihood of that beneficiary receiving trust property in the future.

  • If the information is confidential (the beneficiary might have a competing business).

  • The intention of the settlor.

  • The ages of the beneficiaries.

  • The effect on the beneficiary of getting the information.

  • In the case of a family trust – the relationships within the family.

  • Practicality – e.g. if a huge number of beneficiaries.

  • The nature and context of the request for information by the beneficiary.

  • Any other factor that the trustee reasonably considers is relevant.

 
If a trustee refuses a request for trust information, the trustee can be required to apply to the Court for directions as to whether their decision was reasonable in the circumstances.

Limitation of liability
The new Act provides that in addition to willful misconduct and dishonesty, a trust deed cannot limit a trustee’s liability for something arising from the trustee’s gross negligence.

When deciding if a trustee’s action (or inaction) is gross negligence, the Court will consider:

  • the nature and seriousness of the breach

  • the skills and knowledge of the trustee and the purpose they were appointed

  • whether the trustee has been paid for being a trustee.

 
If you have queries about how the new Act will impact your trust situation, please get in touch.
 
We thank Sainsbury Logan Williams, Napier for their assistance in compiling this article.