The Arrival of the Trusts Act 2019

About the Authors:

VANESSA ROBB

Partner at Anderson Lloyd, Dunedin
Vanessa is a specialist property lawyer with expertise in rural property, subdivisions and property transactions, estate planning and trust law. She also has considerable experience in resource consent matters, conservation estates, district and regional plans.

CAITLIN KEARNEY

Solicitor at Anderson Lloyd, Dunedin
Caitlin is a lawyer in the Property and Private Client team at Anderson Lloyd. Caitlin regularly advises on trusts, wills, land law, conveyancing, Residential Care Subsidy and Enduring Powers of Attorney.

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After much anticipation, the Trusts Bill obtained Royal assent on 30 July 2019, the final stage in becoming an Act of parliament, and is now the Trusts Act 2019 (the Act). The Act makes important changes to trust law in New Zealand and replaces the Trustee Act 1956 and the Perpetuities Act 1964. The Act will come into force in 18 months’ time on 30 January 2021.

It is important that trustees and beneficiaries are aware of the changes and the impacts on their rights and obligations and that trustees use this 18 month transition period to ensure their practices align with the provisions of the Act.

Changes to Trust Law

The Act is intended to modernise and clarify trust law, codify the mandatory and default duties on trustees, simplify the core principles of a trust and provide mechanisms to resolve trust-related disputes. Some of the most notable changes are set out below:

Mandatory Duties of Trustees

There are five mandatory duties that apply to all trustees and cannot be excluded or modified by the trust deed. They impose a duty to:

• know the terms of the trust; 

• act in accordance with those terms; 

• act honestly and in good faith;  

• act for the benefit of beneficiaries; and 

• exercise the trustee’s powers for proper purposes.

Default Duties of Trustees

Default trustee duties apply unless expressly excluded by the trust deed and include, for example:

• a duty to invest prudently;

• a duty not to exercise power for their own benefit; 

• a duty to avoid a conflict of interest and 

• a duty to act unanimously.

Longevity

The length of a Trust’s life has been extended from a maximum of 80 years to a maximum of 125 years.

Disclosure of Trust Information to Beneficiaries. 

The Act favours keeping beneficiaries informed and clearly outlines the basic trust information that is to be provided to every beneficiary. The process of disclosing information also includes a requirement on trustees to notify all those who are qualifying beneficiaries.

Trustees may only refuse to provide information to beneficiaries after considering both their general obligation to provide information and a series of factors as to the nature of the information and the practicalities of restricting that information.

Record keeping

The Act sets out what information trustees must keep and how long documents must be held.

Disputes

Mechanisms have been introduced to resolve trust disputes. In the interest of keeping trust related disputes out of Court where possible, the Act provides for alternative dispute resolution mechanisms such mediation or arbitration.

Powers

The Act clarifies which trustee powers may or may not be delegated and restricts the use of trustee exemption and indemnity clauses. 

Vanessa Robb Caitlin Kearney

Partner, Dunedin  Solicitor, Dunedin  

Anderson Lloyd

Phone: 03 477 3973  l  Web: www.al.co.nz 

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What to Think About:

If you’re a trust settlor or trustee you need to start administering your trust in line with the new law from 30 January 2021. 

Be aware that:

• compliance duties will increase the time and cost of administering some trusts, meaning some are no longer cost-effective; 

and

• greater transparency will put things in the open that some trust owners might prefer to keep private.

We recommend thinking about whether:

• you’re willing and able to undertake the increased obligations

• you’re comfortable with the increased information provided to beneficiaries

• the reasons for setting up the trust are still relevant

• the trust will offer the same protection

• the trust will still be cost-effective with the extra trust compliance requirements.

We advise you to:

• consider what this will mean for you and your trust; and

• seek professional advice.

Source: www.publictrust.co.nz

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