Trustees need to consider carefully and be aware of the implications of the Trusts Act 2019.
The Trusts Act 2019 comes into force 30 January 2021.
The key sections to consider are the Trustee Duties in Part 3 of the Act as set out below.
Trustees’ duties and information obligations
1. Subpart 1—Duties of trustee
21. Guiding principle in performing duties:
In performing the mandatory duties set out in sections 23 to 27 and (except to the extent modified or excluded by the terms of the trust) the default duties set out in sections 29 to 38, a trustee must have regard to the context and objectives of the trust.
22. Mandatory duties:
The duties set out in sections 23 to 27 are mandatory duties that—
- (a) must be performed by the trustee; and
- (b) may not be modified or excluded by the terms of the trust.
23. Duty to know terms of trust:
A trustee must know the terms of the trust.
24. Duty to act in accordance with terms of trust:
A trustee must act in accordance with the terms of the trust.
25. Duty to act honestly and in good faith:
A trustee must act honestly and in good faith.
26. Duty to act for benefit of beneficiaries or to further permitted purpose of trust:
A trustee must hold or deal with trust property and otherwise act—
- (c) for the benefit of the beneficiaries, in accordance with the terms of the trust:
- (d) in the case of a trust for a permitted purpose, to further the permitted purpose of the trust, in accordance with the terms of the trust.
27. Duty to exercise powers for proper purpose:
A trustee must exercise the trustee’s powers for a proper purpose.
28. Default duties:
The duties set out in sections 29 to 38 are default duties that must be performed by the trustee unless modified or excluded in accordance with section 5(4) and (5).
29. General duty of care:
When administering a trust (other than when exercising a discretion to distribute trust property), a trustee must exercise the care and skill that is reasonable in the circumstances, having regard, in particular,—
- (e) to any special knowledge or experience that the trustee has or that the trustee holds out as having; and
- (f) if the person acts as a trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession.
30. Duty to invest prudently:
When exercising any power to invest trust property, a trustee must exercise the care and skill that a prudent person of business would exercise in managing the affairs of others, having regard, in particular,—
- (g) to any special knowledge or experience that the trustee has or that the trustee holds out as having; and
- (h) if the person acts as a trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession.
31. Duty not to exercise power for own benefit:
A trustee must not exercise a power of a trustee directly or indirectly for the trustee’s own benefit.
32. Duty to consider exercise of power:
A trustee must consider actively and regularly whether the trustee should be exercising 1 or more of the trustee’s powers.
33. Duty not to bind or commit trustees to future exercise of discretion:
A trustee must not bind or commit trustees to a future exercise or non-exercise of a discretion.
34. Duty to avoid conflict of interest:
A trustee must avoid a conflict between the interests of the trustee and the interests of the beneficiaries.
35. Duty of impartiality:
- (1) A trustee must act impartially in relation to the beneficiaries, and must not be unfairly partial to one beneficiary or group of beneficiaries to the detriment of the others.
- (2) This section does not require a trustee to treat all beneficiaries equally (but all beneficiaries must be treated in accordance with the terms of the trust).
36. Duty not to profit:
A trustee must not make a profit from the trusteeship of a trust.
37. Duty to act for no reward:
A trustee must not take any reward for acting as a trustee, but this does not affect the right of a trustee to be reimbursed for the trustee’s legitimate expenses and disbursements in acting as a trustee (see section 81(2)).
38. Duty to act unanimously:
If there is more than 1 trustee, the trustees must act unanimously. This duty is usually amended by the terms of the trust deed of most charitable trusts. It is important for trustees of charitable trusts to check the terms of their trust deed and if there is not a provision in the deed amending this duty the trust deed should be varied to allow for decisions in a charitable trust to be decided by a majority.
The following sections are also relevant for Trustees of Charitable Trusts:
Documents to be kept by trustees
45. Trustee must keep core documents:
Each trustee of a trust must keep, so far as is reasonable, the following documents relating to the trust:
- (a) the trust deed and any other document that contains terms of the trust:
- (b) any variations made to the trust deed or trust:
- (c) records of the trust property that identify the assets, liabilities, income, and expenses of the trust and that are appropriate to the value and complexity of the trust property:
- (d) any records of trustee decisions made during the trustee’s trusteeship:
- (e) any written contracts entered into during that trustee’s trusteeship:
- (f) any accounting records and financial statements prepared during that trustee’s trusteeship:
- (g) documents of appointment, removal, and discharge of trustees (including any court orders appointing or removing trustees):
- (h) any letter or memorandum of wishes from the settlor:
- (i) any other documents necessary for the administration of the trust:
- (j) any documents referred to in paragraphs (a) to (i) that were kept by a former trustee during that person’s trusteeship and passed on to the cur- rent trustee.
46. Keeping documents where there is more than 1 trustee:
If there is more than 1 trustee of a trust, each trustee must comply with the obligation in section 45 by—
- (k) holding the documents specified in section 45(a) and (b) or copies of those documents; and
- (l) being satisfied that at least 1 of the trustees holds the other documents specified in section 45 and that those documents or copies of them will be made available to the other trustee or trustees on request.
47. Documents must be kept for duration of trusteeship:
A trustee must keep, so far as is reasonable, the documents for the duration of the trustee’s trusteeship.
48. Trustee must pass on documents:
At the time that the trusteeship of a trustee ends, if the trust continues, the trustee must give at least 1 replacement trustee or continuing trustee the documents that the trustee holds at that time.
The following points are also relevant for Trustees of Charitable Trusts:
- The provisions of sections 51 to 55 relating to the duties of trustees to provide information concerning the trust to beneficiaries do not apply to Charitable Trusts.
- The Trusts Act contains provisions relating to powers of trustees including investment powers and powers concerning the appointment, retirement and removal of trustees. These sections should be referred to if the terms of the trust deed do not adequately address issues trustees are facing.
- The Trusts Act is written in relatively plain English. At least a couple of the Trustees should always be aware of its broad terms.