It has now been more than five years since the Trusts Act 2019 came into force. During the early stages, much of the focus was on understanding the new rules and helping trustees adjust to their responsibilities. The emphasis has now moved to ensuring trusts are being administered well in practice.
Trustees should not treat a trust as something that can simply be set up and left alone. It is important for trusts to be actively managed. If a trust is not administered correctly, it could cause considerable implications for trustees in the future.
In this article we outline some of the key issues trustees should continue to keep in mind.
Why active trust management matters
The Act requires trust to be actively managed. A useful way for trustees to do this is by holding regular trustee meetings, ideally at least annually. These meetings provide an opportunity to review the trust, consider any decisions that need to be made, and ensure the trustees are continuing to meet their duties and obligations under the Act.
They also provide an opportunity to document the meeting and any decisions made by the trustees, which can be important if those decisions are later challenged or questioned. Trustees must be prepared to justify their decisions which makes it all the more important for them to be engaged and actively managing the trust.
Trustees need to know the terms of the Trust Deed
A recurring issue we see is that trustees are sometimes unclear about what the Trust Deed actually says. This can create problems, because the Trust Deed sets out the framework for how the trust must operate.
Trustees should understand their powers, the purpose of the trust, who the beneficiaries are, and any restrictions or processes contained in the deed. Decisions should be made collectively and in accordance with the deed and the Act.
Keeping written records is a key part of this. Minutes, resolutions, and notes of discussions can help show that trustees turned their minds to the relevant issues and acted appropriately.
Beneficiary information
The Trusts Act introduced important expectations around the provision of information to beneficiaries. In general, there is a presumption that basic trust information will be made available to beneficiaries, unless there is a valid reason not to provide it.
Trustees also need to consider requests from beneficiaries for further information. This does not mean every document must be disclosed, but it does mean trustees need to approach requests carefully and record the reasons for their decisions.
This can be particularly sensitive in family trusts, where disclosure may affect personal relationships. A careful and considered approach is important.
Trusts still have an important role
Although trust compliance has become more structured, trusts continue to be a valuable option for asset protection and succession planning.
The key is proper administration. A trust that is not regularly reviewed or managed in line with its Trust Deed and the Act may not achieve the outcomes intended when it was established.
Practical questions for trustees
Trustees may wish to ask themselves:
- Do we understand the terms of the Trust Deed?
- Have we held a trustee meeting in the last year?
- Are our decisions properly recorded?
- Have we considered what information should be provided to beneficiaries?
- Does the trust still serve the purpose for which it was created?
- Should we obtain legal or accounting advice?
Our experienced Trust Management team can support you to administer and maintain the effectiveness of your trust, ensuring it is robust and compliant. Reach out to us to arrange a review of your trust, or to discuss our Trust Management service.
Please note that this article is not a substitute for legal advice and you should contact your lawyer about your specific situation.
