Trusts Act Overhaul – What You Need To Know

The Government has introduced significant changes to trust law that will impact anyone that is a trustee or beneficiary of a trust in New Zealand.  It is important for trustees and beneficiaries to be aware of the influence the changes will have on their rights and obligations.  In short, trustees will face increased compliance requirements and beneficiaries will receive a greater amount of information about the trust.

The Trusts Act 2019 (“the Act”) passed by Parliament on 30 July 2019 replaces the long-standing Trustee Act 1956 and Perpetuities Act 1964.  It is intended to modernise and simplify trust law for the general public.

Changes to Trust Law

The key provisions in the Act can be summarised as:

• The life of a trust is extended from 80 years to 125 years;
  
  
• Mandatory and default duties of trustees are now codified;
  
  
• There are 5 mandatory duties that must be contained in all trust deeds and cannot be modified.  The duties are to: 
  
  
  
  • know all terms of the trust;
    
    
  • act honestly and in good faith; 
    
    
  • act in accordance with the terms of the trust;
    
    
  • hold or deal with trust property for the benefit of the beneficiaries, in accordance with the terms of the trust, and 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; and
    
    
  • exercise the trustee’s powers for a proper purpose.

• There are also 10 default duties that apply unless otherwise expressly excluded or modified in the trust deed;
  
  
•  Trustees must retain trust information and documents relating to the trust, including: the trust deed, any deeds of variation of the deed or change of trustee, documents relating to the assets and liabilities of the trust, and all documents related to the administration of the trust;
  
  
• Trustees must make basic information about the trust available to the beneficiaries of the trust.  The Act favours keeping beneficiaries informed, including the requirement for trustees to provide notice to qualifying beneficiaries, so to provide beneficiaries with sufficient information to keep trustees accountable; and
  
  
• New mechanisms have been introduced to allow for the decisions and actions of trustees to be reviewed, and for disputes to be resolved with alternate dispute resolution.

Although some of the changes listed may appear minor, trustees should be prepared for more onerous obligations and reporting requirements.  The Act will come into force on 30 January 2021, giving trust settlors and trustees a transitional period to organise their affairs. However, there is a substantial amount of information for trustees to consider, and as the changes will apply to new and existing trusts, it is advisable that existing trusts be reviewed, and potentially varied or wound up.        

If you have any questions about the changes to trust law, how the changes may affect your trust or your obligations as a trustee, or if you require assistance with reviewing your trust, please contact Sarah, Mark, or Jono