Parliamentary plastic surgery is in store for the Trustee Act, to make trust law easier to access and understand.
On 1 August, Justice Minister Amy Adams introduced the Trusts Bill to Parliament. This will be the first significant change since the introduction of the Trustee Act 1956.
The old Act has been viewed as being narrow in scope, with trust administration being complicated and expensive.
Most trusts, like family trusts, business trusts and protective trusts, are set up with a trust deed or other document, like a will. These are known as express trusts.
In the new Bill, it expressly states that trustees will have to:
- Know the terms of the trust
- Act according to the terms of the trust
- Act honestly and in good faith
- Hold trust property
- Act for the benefit of the beneficiaries or the permitted purpose
- Exercise trustee powers for a proper purpose.
Although a trustee must not use a trust for self-benefit or act where there is a conflict of interest, many trust deeds specify situations in which a trustee can act in their own interest, such as when a trustee is also a beneficiary.
The Bill does not address relationship property issues, which will be considered as part of a broader review of relationship property law, by the Law Commission.
There should also be no need to change existing family trusts, as the new Act will largely restate existing law.
A new process for disclosure
The draft Bill includes a process for disclosure of trust information. This includes the trust deed, documents relating to the property and administration of the trust, and other information holding trustees accountable. Trustees will have some flexibility with disclosure, but the Bill favours keeping beneficiaries informed.
Exceptions for specified commercial trusts
If a specified commercial trust arrangement was created before the beginning of the Act, it will be exempt from some provisions. That could reduce the need to amend existing terms, like trustees keeping particular information and providing certain information to beneficiaries.
Specified commercial trusts created after the beginning of the Act will be able to modify or exclude particular provisions, like preventing beneficiaries terminating the trust by unanimous consent where that would run across financing arrangements made to protect the rights of lenders and borrowers.
The FMCA and trusts
Particular express trusts subject to the requirements of the Financial Markets Conduct Act are not subject to some of the Bill’s requirements. The FMCA is to be amended to reflect the Bill’s wording with regard to various duties relating to the functions of supervisors and managers.
If you would like to discuss what a trust would entail or what your responsibilities might be as a trustee, contact us.
What does all this mean for you?
Quite possibly, little or nothing. But if you’ve had a trust quietly ticking away in the background for some years, it could mean a lot. Our advice is to get in touch with us to discuss your trust and any possible impact. A few minutes doing this now could save a lot of pain later.