“Put not your trust in Money, but put your money in Trust”
– Oliver Wendell Holmes, Sr

The Trusts Act 2019 has fine-tuned the expectations on trustees to invest prudently. But, what does prudently mean?
A trustee has always been expected to uphold their trustee duties and to act in line with the trust deed however the new Trusts Act 2019 now requires the trustees to turn their mind to investing prudently by utilising any special knowledge or experience that the trustee has which would be reasonable to expect from a person with that level of knowledge. Therefore, it is now wise for trustees to have an investment strategy of some sort, taking an increased level of care when making decisions around the assets and liabilities of the trust keeping in mind the interests of the beneficiaries.

How does this impact my trust deed?
The duty to invest prudently is a “default duty” under the new Act, but it is able to be modified to a reasonable extent. Therefore, it is important that your trust deed is reviewed to see what current provisions there are around investment by the trustees, and consideration is given to what modifications may be sensible under the new rules.

Example
You have started a new business and wish to protect your family home from the new business risk and the personal guarantee you have had to give your commercial landlord.
You set up a trust and transfer your home to the trust, continuing to live in the property rent-free.
As a protection mechanism, this will protect the home once your gifting has been completed and the claw-back timeframes have run, but from a prudent investment point of view are the trustees of the trust investing the trust assets wisely when there is only one asset (i.e. no diversification) and the asset is not generating any income?

If you were to modify the investment clause in your trust deed to provide you with the freedom to make a decision on desirable investments for the benefit and needs of a beneficiary despite the care, diligence and skill a prudent person will be required to exercise, then you could proceed with the “investment” above without being in breach of the duty of investing prudently and the duty of care.