Significant changes to the Law of Trusts are on the horizon. The Law Commission has recently made a number of recommendations and as a result it is likely that the law will be applied more strictly in the general course of administering trusts, especially in relation to trustees' duties.
The Law Commission has made it clear that there will be certain mandatory duties that trustees are unable to contract out of and other default duties that will be implied for every trustee unless excluded by the trust deed or statute.
While those duties largely reflect the law as it stands, the reforms will make trustee's mandatory duties explicit, such as: understanding and adhering to the trust deed; to act honestly and in good faith; to act for the benefit of beneficiaries and account for trust property; and to exercise powers in accordance with the terms of the trust.
The terms of a trust will be restricted as to the extent it can grant a trustee an indemnity or limit or exclude their liability for a breach of trust arising from the trustee's own dishonesty and wilful misconduct. The proposed reforms are also likely to restrict exclusion and indemnity for gross negligence.
The proposed reforms require that trustees must retain a copy of the trust deed; any variations to it; a list of trust assets and liabilities; any records of trustee decisions; any written contracts entered into; and accounting records and financial statements.
Beneficiaries are likely to be given the power to apply to the Court to have a trustee's decision reviewed if there are reasonable grounds to say that a trustee has acted improperly. This broadens the ability to review trustees' actions and decisions.
Sharp Tudhope's trust management systems
We understand that these reforms will take time to digest.
We are currently developing new trust management systems that will
conform to the proposed reforms and offer tailor
made solutions to trustees based on the complexity of the trust. The emphasis of our system will be to show that trustees' duties have been carried out.