CHANGES TO TRUSTS

Some important changes to Trust legislation have been made, with the New Zealand Trusts Act 2019 coming into force from 30 January 2021.  Some of the key changes to be aware of are as follows:

1. Trustees must provide basic trust information to all beneficiaries of the trust.
2. At least one trustee needs to hold all the core documents and records of the trust and keep them up to date. These documents must be held for the duration of the trust (the 7-year requirement does not apply to trusts). The other trustees must each hold copies of the trust deed together with any variations.
3. The maximum duration of a trust has been extended from 80 years to 125 years.

WHAT IS ‘BASIC TRUST INFORMATION’?

1. The fact that a person is a beneficiary of the trust.
2. The name and contact details of the trustees.
3. Details of trustee changes as they occur.
4. The beneficiary’s right to receive a copy of the trust deed.
5. The beneficiary’s right to receive further trust information.

WHAT ARE ‘CORE DOCUMENTS’?

1. The trust deed together with any variations to the deed.
2. Copies of financial statements/records of trust property.
3. Records of trustee decisions.
4. Written contracts.
5. Appointment and removal of trustee documentation.
6. Statement of wishes for the trust.

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DUTIES OF TRUSTEES

The new Act separates Trustee duties into two areas as follows:

MANDATORY DUTIES:

1. Trustees must know the terms of the Trust.
2. They must act in accordance with the terms of the Trust.
3. They must act honestly and in good faith.
4. They must act for the benefit of the beneficiaries or to further the permitted purpose of the Trust.
5. They must exercise trustee powers for a proper purpose.

DEFAULT DUTIES:

1. General duty of care.
2. To invest prudently.
3. Duty not to exercise power for your own benefit.
4. To consider the exercise of trustee powers.
5. Not to bind or commit trustees to future exercise of discretion.
6. To avoid conflict of interest.
7. To act impartially.
8. Duty not to profit.
9. To act for no reward.
10. To act unanimously.

Mandatory duties apply no matter what and cannot be excluded. Default duties can be modified or excluded by the terms of the Trust.

The new Act also contains a presumption that a trustee must make available to every beneficiary the basic trust information, when requested, and within a reasonable period of time. However, there are also certain factors that a trustee needs to consider before deciding whether that ‘presumption’ to disclose applies. Those factors include such things as:

1. The nature of interests in the trust held by the beneficiary and other beneficiaries, including the degree and extent of the beneficiary’s interest and likelihood of the beneficiary receiving trust property in the future.
2. Whether the information is subject to personal or commercial confidentiality.
3. Expectations and intentions of the settlor at the time the trust was created.
4. Age and circumstances of the beneficiary.
5. Age and circumstances of other beneficiaries.
6. Effect on the beneficiary of giving the information.
7. Effect on the trustees, other beneficiaries and third parties of giving the information.
8. In the case of a family trust – the effect of giving the information on family relationships or the relationship between trustees and beneficiaries as a whole.
9. The nature and context of the request for information.
10. Any other factors that the trustees may consider relevant.

The new Act does not give any guidance on how the above factors are to be applied. Accordingly Trustees will need to carefully consider any decision to withhold information.

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ACTION PLAN

In light of the significant changes referred to above, we strongly suggest that you contact your solicitor to have your trust and wills reviewed as soon as possible, to ensure they are kept up to date and meet your requirements.