NEW TRUST LAW MEANS SIGNIFICANT CHANGES FOR TRUSTEES

NEW TRUST LAW MEANS SIGNIFICANT CHANGES FOR TRUSTEES

Protect your trust from the storms of life, by reviewing your trust deed.

After waiting what seems like years the new Trust Act has finally been passed into law, receiving Royal Assent on 31 July 2019 – cleverly entitled the Trusts Act 2019

The majority of the Act doesn’t take effect for 18 months from Royal Assent, but finally we are able to look at the future of trusts in New Zealand with some confidence.  This transition period will allow trustees to review their existing trusts before the Act finally becomes effective.

The new Act replaces both the Trustees Act 1956 and the Perpetuities Act 1964 and is intended to make trust law more accessible, clarify and simplify core trust principles and essential obligations for trustees.  Now for the first time trustees will be able to look to one place for their obligations, which they must comply with and obligations and duties, which they may be excluded from PROVIDED the trust deed permits this.  Hence, there is a period for trustees and their advisors to review trust deeds for any variations that may be necessary (assuming the existing trust deed permits those changes).

The Mandatory Duties must be complied with by the Trustee and cannot be modified or excluded by the trust deed.  These are:

  • Know the terms of the Trust
  • Act in accordance with the terms of the Trust
  • Act honestly and in good faith
  • Act for benefit of beneficiaries or to further permitted purpose of trust
  • Duty to exercise powers for a proper purpose

Whereas the Default Duties are capable of being amended or removed in the deed:

  • General duty of care
  • Duty to invest prudently
  • Not to exercise power for own benefit
  • Duty to consider exercise of power
  • Duty not to bind or commit trustees to future exercise of discretion
  • Duty to avoid conflict of interest
  • Duty of impartiality
  • Duty not to profit
  • Duty to act for no reward – but can be reimbursed
  • Duty to act unanimously
  • Adviser must alert settlor to modification or exclusion of default duty

Here are some other changes in the new Trust Act:

  • The maximum duration of a trust is now 125 years,
  • The age of “majority” which until now has been 20 years is lowered to 18 years,
  • There are presumptive rules for trustees when it comes to notifying beneficiaries of their inclusion in a trust, and what information can be disclosed or must be disclosed to the beneficiaries and when trustees can withhold information
  • Trustees must have access to trust information including the trust deed and financial matters.  This is either by one trustee holding all the information, with the others able to access easily and quickly, or all have access to all the information. 

At Shellock Consulting we have the resources to assist trustees in their obligations in these and many other aspects of taxation law. 

If you need a hand complying with your trustee obligations, then contact us for assistance.

 

Posted: Thursday 29 August 2019