The New Trusts Act 2019 has implications for all trustees and their obligations whether private trusts or charitable trusts. In this article we discuss the impacts it will have on charitable trusts. The Act came into force on the 30 January 2021 so trustees need to understand the changes now in place.
What are key changes to duties?
The Trusts Act 2019 imposes some key changes to the duties of trustees. These duties are set out in Sections 21 to 38 of the Act and are separated into 5 mandatory duties and 10 default duties. Mandatory duties cannot be modified or excluded by the terms of the trust. However the default duties can be modified.
Trustees should become familiar with the duties imposed on them by the new rules. The mandatory duties to be performed by the trustee include that trustees must: know the terms of the trust; act in accordance with the terms of the trust; act honestly and in good faith; act for the benefit of the beneficiaries or to further the purpose of the trust and exercise their powers for a proper purpose. The latter is very important for charities as a trustees duty should always be performed in the light of bringing about the charitable purpose of the charitable trust.
The default duties, that may be excluded or modified by the trust deed, are that trustees must: exercise reasonable skill and care; invest prudently; not exercise trustee powers for their own benefit; consider their exercise of power; not bind trustees to a future exercise of discretion; avoid conflicts of interest; act impartially; not profit from their position; not act for reward; act unanimously. If a trust deed is not clear on these duties then trustees could consider modifying their rules. For example, it may be appropriate to be clear that decisions do not need to be unanimous. In our view some of these duties are expressed with private family trusts in mind so modifying for a charitable trust context will often be important to do.
The new Trusts Act 2019 also sets out a list of ‘core documents’ the trustees must keep. These include:
- The trust deed and any other document that contains terms of the trust
- Any variations to the trust deed or the trust
- Records of the trust property that identify assets, liabilities, income and expenses
- Any records of trustee decisions
- Any written contracts entered into during the trusteeship
- Any accounting records and financial statements
- Documents of appointment, removal and discharge of trustees
- Any letter or memorandum of wishes from the settlor
- Any other documents necessary for the administration of the trust
- Any documents referred to above that were kept by a former trustee during their trusteeship
While all trustees must have a copy of the trust deeds and its variations, the core documents may be held by one trustee on behalf of all of them. The documents should be made available to the other trustees upon request.
How else will this impact on Trustees of Charitable Trusts?
The Trusts Act applies to Charitable Trusts and in turn its trustees are bound by the mandatory and default duties set out in the Act. This will impact trustees of charitable trusts as it imposes more onerous duties on trustees, increases their responsibilities, while also providing more guidance as to their obligations. The one duty that will not impact trustees of Charitable Trusts is provided for by Sections 51 to 55 of the Trusts Act 2019. This is the duty of trustees to disclose information to the beneficiaries which does not apply to Charitable Trusts or its trustees.
Is this an opportunity?
Maybe the glass is half full here. This is an opportunity for trustees to revisit the terms of their trust deed to determine what duties must be complied with and what duties may be excluded or modified. For example, the decision making duty should be varied to ensure decisions made by the charitable trust can be decided by a majority. The trustees should make sure they hold all the core documents required by the Act.
Other resources?
The following resources may help!
- See the new Trusts Act 2019 here
- To see a Charities Services Guidance on what the new Trusts Act means for registered charities click here
- Hui E website has good resources here
- Here is an article we did on liability of Trustees
- An article on governance for faith based organisations
- An article we did on governance for trustees here
- We also did an article on the reporting obligations of charities click here
This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. We would be happy to assist in your journey. Please feel free to contact Steven Moe – stevenmoe@parryfield.com
