The new Trusts Act came into law on 30 January 2021. The Act introduces the biggest change in this area of law in 60 years. The Act has new provisions in regards to disclosure to beneficiaries, it codifies the duties of trustees and it introduces a new concept of gross negligence, which affects the existing limitation of liability and indemnity clauses in favour of trustees in all trust deeds.
We recommend that all clients with a family trust contact us to arrange for a trust review. All trust deeds require variation in order for the trust to be compliant under the Act. You may also wish to review and update the definition of beneficiaries in your trust deed.
This is a good opportunity to consider whether you need your family trust. There are good reasons for keeping a trust. If you have a business, a trust assists you in ring fencing your personal property from your business risks. You may wish to keep your trust in order to hold trust assets for future generations, or to assist any adult children living with a disability.
Some clients have been coming to us with outdated trust deeds that are not able to be varied. In this instance, the only option is to resettle the trust on to a new trust, to ensure compliance with the Act.
It may be that the reasons you set up your family trust in the past are no longer valid. Many of our clients are winding up their family trust in order to simplify their personal affairs.
You should be aware of your new obligations as trustees to disclose certain trust information to the beneficiaries of your family trust. The Act provides that there is a presumption in favour of disclosure. The trustees must consider the issue of beneficiary disclosure annually. There are factors which may be taken into account by the trustees if the decision is made to not disclose to some or all beneficiaries. However, it is very important to carefully document the decision for either disclosure or non-disclosure, and the reasons for this decision.
We are very happy to help, whatever decision you make as to the future of your family trust. The essence of this message is that if you have a family trust, you must do something. Please contact our trust team for assistance.