If your children knew that they were beneficiaries of a trust how do you think that would affect them?
Would they work hard and forge their own way in business? Would they ferret money away for their future so they could buy a house? Or would it foster a trust-fund mentality? A $7 million trust could cause a big problem. Even smaller amounts may encourage a different kind of thinking from your children.
What if your beneficiaries include extended family?
Perhaps grandchildren, siblings, nieces and nephews. Maybe along with the spouses or de facto partners of such extended family members? We’ve even seen trusts include former spouses and blood relatives of former spouses.
Maybe you don’t have children but have set up a trust to leave a legacy for someone, perhaps a young person. But you don’t want them to know in advance in case it proves a moral hazard. It could disrupt their life once they know they’re getting some serious money further down the track.
There are many circumstances in which you may not want the beneficiaries of your trust to know.
But you’re going to be out of luck. The new Trusts Act (2019) is knocking at your door. And you better have your ducks in a row before it comes into force.
The scariest change might be that all beneficiaries (yes, ALL) need to be told that they are a beneficiary. You’ll have to tell them certain basic trust information. There’s no getting around it. If they’re a beneficiary then, by law, you’ll need to tell them. They will have access to all kinds of information you might not want them to have. The beneficiaries will know enough to be able to hold the trustees accountable. And they will be able to enforce the terms of the trust deed. It could be a real train wreck coming down the tunnel.
So too, the obligations of trustees are being stepped up to a great degree. So if you’re a trustee you can expect more paperwork and more governance. If you’ve struggled with this in the past (or ignored it) then it’s a massive step up in the future.
Do your trustees include professionals such as solicitors or accountants? They will also be liable for this new governance and compliance. And no doubt they’ll charge accordingly.
Time to rethink your trust
It might be time to sit back and consider your Trust. Rethink what you’ve set it up for and whether it’s still relevant. Do you need to make changes to it? Are you still up for it? This is especially so if you’re a trustee as your obligations will have increased. You’ll also want to be comfortable with all the information you’ll have to provide to the beneficiaries.
We recommend you drag out your trust deed. Have a good troll through it bearing in mind the upcoming changes to trust law. Sometimes an independent viewpoint can be invaluable. Especially from someone who knows you and your business. This could help get all your ducks in a row before you go to your solicitor. Saves you time, money and in our experience, a lot of confusion.
If this all sounds too hard and you’d like our help you can call us on 09 489 1650 or fill out the form below.