A Trust should be administered in a way that is consistent with its terms and objectives and avoids unnecessary costs and complexity.   Now is the time to review your Family Trust, make any amendments necessary and be prepare for the changes on 30 January 2020 when the new Trusts Act 2019 comes into effect.  Trust Deeds were written to reflect what was considered appropriate at the time that they were created, however that may no longer be the case.  The following areas are the most likely to need consideration:


Purpose of the Trust

  • Is the trust still fit for purpose?
  • Would it be appropriate to wind up the Trust?
  • Remember, there may be tax and legal implications of winding up the Trust.  Please seek appropriate advice.


Documentation

  • As Trustee do you have access to all the relevant Trust documents and are these up to date?

 

Trustees

  • With the increased obligations and responsibilities imposed by the Act, are your current Trustees willing to continue on or should they retire and do new Trustees need to be appointed. 

 

Beneficiaries

  • Who will the Trustees need to make disclosures to?
  • How wide are the beneficiary classes?
  • Do the number of beneficiaries need to be changed?
  • The Act provides that if there is a wide class of final beneficiaries and no clarity is provided as to how assets are to be divided on wind up, these are to be equally distributed. 

 

Priority of Beneficiaries

  • Has the priority of beneficiaries in terms of distributions been set out.  The Act specifies that the Trustees must act impartially, and this can give rise to issues where the settlors intended that certain beneficiaries would be given distributions before other beneficiaries.  For example, the settlor may also be a beneficiary and expect that they will receive preferential distributions over their children during their lifetime.  This may have been set out in a memorandum of wishes but should be reviewed and consideration given to whether this should now be inserted into the Trust Deed.   


Prudent Investment

  • Are the Trusts assets held in a diversified fashion or are all the investments in one or two places?  There is a default duty that the Trustees should invest prudently however, this can be overruled by the trust deed by adding a clause that the assets can be held in a non-diversified manner. 

 

Conflict of Interest

  • Are Trustees of the Trust also Beneficiaries.  If so, there is a default duty that the Trustees cannot exercise their power for their own benefit.  Ensure that your Trust Deed allows for decisions which will effect the Trustee as Beneficiary can be made safely.   This can be by way of a clause being added to expressly allow a Trustee to act in their own benefit as beneficiary or by allowing the other Trustees to make decisions to benefit that Trustee as beneficiary.