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17 Aug 2017
The long awaited Trusts Act 2017 was introduced to Parliament at the beginning of this month. It follows a comprehensive review by the Law Commission and replaces the outdated Trustee Act 1956.
The new act is in plain English and clearly spells out the rights and obligations of Trustees and Beneficiaries. It has an 18 month transition period (once the Bill is passed) and it will apply to existing as well as new Trusts.
The Act overrides the Trust Deed in most cases but the Deed may impose additional duties or restrictions on the trustees.
Clauses include the extension of the maximum term of a trust from 80 to 125 years, confirming that age of majority is reduced to 18 and stating that a sole trustee cannot be a sole beneficiary of a trust.
The five mandatory duties of a trustee which cannot be overridden by the Deed are to:
There are also default trustee duties, which can be excluded or modified by the Trust Deed. A major one of these is not to use a trust for self-benefit or act if there is a conflict of interest. However, the Deed may permit the trustee to benefit – e.g. be a beneficiary. Another is that all trustee decisions must be unanimous unless the Deed specifies otherwise.
Each Trustee must keep a copy of the Trust Deed and any variations to it. This emphasises the importance that the new Act places on trustees knowing and understanding the terms of the trust.
The balance of the trust records may be held by at least one trustee and be available to the other trustees if required. These documents include a list of assets and liabilities, records of trustee decisions, accounting records and financial statements, documents of appointment and removal of trustees, written contracts entered into, and the Memorandum of Wishes from settlor. If that trustee resigns or ceases to be a trustee, all records must be passed onto to a surviving trustee.
The bill also clarifies the process for the disclosure of trust information to beneficiaries. It lists points which should be taken into account when trustees are considering whether to release information to a particular beneficiary. The overriding condition is that information can only be withheld from all beneficiaries in exceptional circumstances. The disclosure requirement is intended to hold trustees accountable to beneficiaries. Trustees cannot be exempt or indemnified from behaviour that is more than mere negligence.
The Act provides wider default powers in managing the trust property, unless that power is specifically restricted by the Trust Deed It also provides options for removing and appointing trustees without having to revert to the courts.
If you are a trustee, now is a prime time to ensure you have a copy of the Trust Deed and its variations, and fully understand what they mean. Trustees also have an obligation to know and understand their powers and duties under current legislation. This is a responsible position, so if a trustee is not willing to treat it as such, they should retire or be removed.
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