New Zealand’s Trusts Act 2019 comes into force on 30 January 2021 and applies to existing and new trusts. Key areas of the Act include duties of trustees, keeping core documents and beneficiary rights to information.
What do I need to know?
The Act imposes mandatory and default duties on trustees.
Mandatory Duties – these can’t be modified or excluded by the trust deed. All trustees must comply with them. Trustees must:
- Know the terms of the trust
- Act in accordance with the terms of the trust
- Act honestly and in good faith
- Deal with the trust property and act for the benefit of the beneficiaries in accordance with the terms of the trust deed, and
- Exercise the trustees’ powers for a proper purpose.
Default duties – these apply unless modified or excluded by the trust deed. They include:
- General duty of care
- Invest prudently
- Not exercise power for own benefit
- Actively and regularly consider exercise of powers
- Not to bind or commit trustees to future exercise of discretion
- Avoid conflict of interest
- Not to profit from trustee position
- Act for no reward
- Act unanimously
The Act requires trustees to keep core trust documents for the lifetime of the trust. Core documents include the trust deed and variations to the deed, details of assets and liabilities, financial statements, records of trustee decisions, contracts, appointment and removal of trustees, letters of wishes by the settlor, and other documents necessary for the administration of the trust.
Disclosure to Beneficiaries
The Act requires trustees to provide beneficiaries with basic information about the trust.
Basic trust information includes:
- The fact a person is a beneficiary
- Name and contact details of the trustee
- Details of changes to trustees as they occur
- The beneficiary’s right to request a copy of the deed or further information.
The Act lists factors the trustees must consider before providing information to beneficiaries and includes a procedure trustees must follow if they reasonably consider that information should not be disclosed.
What does it mean for my trust?
Trusts are an effective asset planning tool when used correctly.
Many of the duties and disclosure obligations in the Trusts Act 2019 already exist in current legislation and case law. The impact of the Act will depend on how you have administered your trust in the past.
Settlors and trustees should think about:
- Are the reasons for setting up the trust still relevant?
- Does the trust deed need any changes?
- Are we performing our duties in accordance with the Act?
- Where are all the trust documents? What do we need to do to comply with the Act?
- How will we meet our obligations to provide information to beneficiaries?
- How much will the increased compliance obligations cost?
Don’t panic. Your trust may still be a vital tool for protecting your home and other assets and providing financial assistance to members of your family.
The Trusts Act 2019 combines existing legislation and case law into one Act and clarifies trustees’ duties, record keeping and disclosure obligations.
Settlors and trustees should review their trusts to ensure they are relevant and meet current and future needs. Trustees should ensure they administer their trusts in accordance with the Act.
At Raymond Khouri Chartered Accountants we can help with your trust document obligations. Contact Us about our Trust Risk Review Service which includes:
- Checking that deeds and minutes are up to date and on file
- Checking that registers recording Trustees, beneficiaries, significant events and gifting programmes are properly maintained
- Ensuring that the Trustees are undertaking a regular and appropriate review of trust investments and other strategies for the future
- Checking that your Wills, powers of attorney and Memorandum of Wishes are up to date