Trusts Act 2019 – what you need to know

We now have a new piece oflegislation that deals with Trusts - the Trusts Act 2019.  The new Act doesn’t make sweeping changes tothe law applicable to Trust in New Zealand, instead it largely restates theexisting law in a way that is more accessible to those who use and interactwith Trusts. 

Whilst the new Act was passed lastyear, it doesn’t come into force until 30 January 2021 (there is some debateamongst the law fraternity on the actual commencement date with some suggestingthat its 31 January 2021 - either way its in the weekend) so you still havetime for you to get a better handle on what this might mean for you and yourTrust, and get some specialist advice, if you think you need it.

Here are some of the key aspectsthat we think you should know about.

Disclosure of information tobeneficiaries

The Act places a positive duty ontrustees of a Trust to provide basic trust information to the beneficiaries of thatTrust. Remembering that a trust is more than the trustees, the trustee’s holdthe assets on behalf of the beneficiaries. The basic trust information thattrustees are required to give to beneficiaries is:

• thefact that they are a beneficiary;
• thename and contact details of the trustees;
• thedetails or removals and appointments of trustees; and
• theright of a beneficiary to request a copy of the trust deed and/or trustinformation.

If a beneficiary or arepresentative of a beneficiary requests trust information, there is apresumption that the trustees must, within a reasonable period of time, give thebeneficiary or the representative the trust information that has been requested. 

Whilst there is a presumption infavour of disclosure, there are circumstances where it is reasonable fortrustees to refuse to disclose basic or additional trust information.  The Act lists certain factors that trusteesmust considered before refusing disclosure.

Duties of trustees

Trustees have a number of duties –things that the law requires them to do in relation to the Trust.  At the moment most of these are common lawduties (established through cases) rather than statutory duties (set out in legislation). 

The new Act changes this and codifiesa number of the settled common law duties. There are two categories of under the Act - mandatory duties and defaultduties.  The mandatory duties apply toall trusts and cannot be excluded by the trust deed.  The mandatory duties are:

• Theduty to know the terms of a trust
• Theduty to act in accordance with the terms of a trust
• Theduty to act honestly and in good faith
• Theduty to act for the benefit of beneficiaries or to further the permittedpurpose of a trust

The default duties apply except tothe extent that they have been modified or excluded by the Trust Deed).  The default duties are:

• Thegeneral duty of care
• Theduty to invest prudently
• Theduty not to exercise a power for a trustee’s own benefit
• Theduty to consider the exercise of a power
• Theduty not to bind or commit trustees to future exercise of discretion
• Theduty to avoid a conflict of interest
• Theduty of impartiality
• Theduty not to profit
• Theduty of a trustee to act for no reward
• Theduty to act unanimously

All trustees need to understand andensure that they comply with these duties.  

Record keeping

Under the Act, trustees arerequired to keep core trust documents for the duration of the trustee’strusteeship and must pass these documents on to replacement trustees, to ensuretrust records are retained for the lifetime of the trust.

The core trust documents thattrustees are required to keep are

• The trust deed and any other document that contains terms ofthe trust;
• Variationsmade to the terms of the trust;
• Recordsof the trust property that identify the assets, liabilities, income andexpenses of the trust – in most cases, we suggest preparing annualfinancial statements each year;
• Accountingrecords and financial statements;
• Recordsof trustee decisions;
• Writtencontracts;
• Documentsof appointment, removal and discharge of trustees;
• Memorandumof wishes from the settlor; and
• Anyother documents necessary for the administration of the trust.

What does this mean for you?

Whilst the new Act doesn’tsignificantly change the law relating to Trusts, it is still sensible for thosewith Trusts to review their Trust arrangements, not only to ensure that theyare compliant and that their Trust documents are still fit for purpose, butalso to check whether their Trust still serves a purpose. 

 We are finding, more often than not, that manyof the reasons why clients originally established their Trusts no longer exist(e.g. estate duty planning).  If they dostill exist, often the Trust is no longer the best solution.  In these cases, it may be appropriate to windthe Trust up. If your trust still serves a purpose, you should at least reviewwho the beneficiaries are, as there was a time where the legal view was to addall and sundry.

If you would like any further information on the Act, or if you would like to discuss whether your Trust is still appropriate in your circumstances, please get in touch.