The Trusts Act 2019 came into effect on 30 January 2021, impacting all trusts. So even if your trust was set up prior to 30 January, it must still be managed within the scope of the new rules.

The changes largely promote trustee accountability and transparency to beneficiaries. 

Since the new Act came into effect, there’s been a lot of misunderstanding and confusion about the new rules so we’ve set out to demystify some of those in a recent ‘Off the record’ article that you can read here.

So why use a trust?

Trusts are often used to protect assets from being at risk due to debts, business liabilities or relationship breakdowns. They can also be useful when it comes to helping arrange the distribution of assets to younger family members in the future.

How a trust works

Think of your trust a little bit like setting up a club and you are the committee.  

As the committee member you’re required to manage the assets in the trust for the benefit of the club members. Your job is to keep the club documents up to date in case you get ’audited’ by the club members. 

The scope of your role means you have certain performance duties and you’re accountable to the members for carrying out those. You can and will be taken to task if you act contrary to those performance duties.

It is therefore important that the trust deed (a little like a club constitution or basic set of rules for running your club) gives the committee the power to act and manage the trust as they consider fit and that any actions are always carried out within those parameters.

There are no silver bullets

To work well, trusts and wills should be wrapped up together.

When it comes to trusts, one of the most common misunderstandings is people treating the trust assets as their own and not realising what divesting their assets to the trust actually means. 

Divesting your assets to a trust means essentially those assets are no longer yours. This is where it can get a bit confusing. 

When it comes to making your will for example, you may wish to leave your assets to your children, even though most of those assets are in a trust. The assets in the trust cannot just be given away under your will. They can only be distributed by the trustees and according to terms in the trust deed. 

A trust should always therefore, be backed up by a will. Your will should be written to compliment the trust and a memorandum of wishes should also accompany both of those.

That way, your will ties in with your trust and the entire package is wrapped up tight, so you get the outcome you want.