Time To Review Your Trust.

Legislative Changes Under The Trusts Act 2019.

Trusts are increasingly coming under scrutiny. Trustees are being pursued personally for failing to carry out their administrative duties properly. Inland Revenue and the Courts are now looking more closely at trusts. Inland Revenue has the power to look into trusts where a “sham” or tax avoidance is suspected. Furthermore, trustees can be held responsible to beneficiaries of the trust who suffer loss where the trustees have failed to act in the best interests of the beneficiaries.

This new Act aims to provide better guidance and understanding for trustees and beneficiaries. It clarifies and simplifies the core trust principles and essential obligations.

The Key Changes Included:

• Providing core information to beneficiaries going forward;
• Mandatory duties and obligations of a trustee;
• Trustees are required to retain trust documents indefinitely;
• The lifetime of a trust has been extended;

Preparing Your Trust For Compliance.

We want to ensure that your trust is properly managed to lessen the risk of liability. Ensuring that the benefits of having a trust are achieved. It is therefore important to review the provisions of the trust deed for your trust. Ensuring that it continues to comply with those law changes and/or any changes in your personal circumstances.

Issues To Review In Your Trust Deed:

The importance of having an independent trustee

This demonstrates that the ownership of Trust Assets has changed significantly after they were transferred into the Trust – and that the Trust is not a “sham”.

The importance of annual trustee meetings

Again, without an annual meeting it is hard to prove the Trust exists and is not a “sham”.

Ensuring your beneficiaries are the people you want to benefit

It is best to ensure that your siblings, their spouses and your children’s spouses are not beneficiaries of your Trust as the new Act gives beneficiaries of your Trust the power to request information about the way it is being managed.

Appointing and removing beneficiaries and trustees

Checking who holds the power to carry this out today and in the future. Especially for Trusts you may set up for children.

Removing Trustees who lose capacity

Checking that there is a provision in the Trust deed for the removal of trustees that lose their capacity. This will avoid the time and cost involved in a Court application that would otherwise be needed.

Trustees responsibility for trust investments

Diversify the trust’s investments in order to achieve the best return on investments. Check that there is a contracting out within the trust deed from the high onus on trustees; and

Completion of Gifting

Gift duty has now been abolished. You now need to ensure that all gifting is completed so as to defeat potential claims by creditors and/or spouses/de facto partners, where appropriate.

Why Reviewing Related Documents Matters.

It is also important to review your wills, memorandum of wishes, enduring powers of attorney and related documents. Take into account any changes to your personal circumstances.

If you feel you could use some specialist advice, don’t hesitate to contact the Trusts & Wealth Protection Team.