Trusts Act 2019 – CHANGES TO TRUST LAW
You may not be aware that there has been a significant change to Trust Law in New Zealand, which will affect anyone who is a trustee or a beneficiary of a trust. This article sets out some of the major changes that you need to be aware of.
The Trusts Act 2019 (the “Act”) received royal assent on 30 July 2019. The Act will come into effect on 30 January 2021. The Act contains a number of important changes to trust law which people setting up trusts and existing trustees need to know about.
The Act records the duties that a trustee must perform. Some of the duties are ‘mandatory’ and some are ‘default’ duties.
The Mandatory duties recorded in the Act cannot be modified or excluded by the terms of the trust deed. All trustees need to perform these duties.
The Mandatory duties are that all trustees must:
- Know the terms of the trust;
- Act in accordance with the terms of the trust;
- Act honestly and in good faith;
- Hold and deal with the trust property and to 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 are duties that a trustee must perform, unless the duties have been modified or excluded under the deed establishing the trust. There may be valid reasons for why some of these duties should be modified in or excluded from your trust deed.
Examples of these Default duties include:
- a requirement to invest prudently;
- a prohibition on trustees exercising a power for the trustees own direct or indirect benefit;
- a duty to actively and regularly consider the exercise of trustees’ powers;
- duties not to profit or take reward from the trusteeship; and
- a duty to act unanimously.
Every trustee will be obliged to keep copies of the “core trust documents” (as defined in the Act). These include, among other documents, the trust deed and any variations, as well as documents relating to the assets, liabilities, income and expenditure of the trust.
Beneficiary access to basic trust information
Following recent case law relating to beneficiary access to trust information, the Act now creates a presumption that trustees must provide “basic trust information” to every beneficiary of the trust. The basic trust information includes:
- the fact that a person is a beneficiary of the trust;
- the name and contact details of the trustees;
- details of changes to trustees; and
- the right of the beneficiary to request trust information.
However, before providing the information the trustee can consider (after taking into certain factors detailed in the Act) whether the presumption does not apply and if so, the trustees can refuse to provide the information to beneficiaries.
Trust Period extended
Previously trusts could last for a maximum of 80 years from the date of the trust deed. The Act increases that maximum period to 125 years.
Where to from here
If you are considering setting up a trust or if you are a trustee of an existing trust, you should contact one of our trust lawyers Wendy Dewes, Lesley Grant, or Joanne Davies to discuss how the Act will affect you and what changes may be required to your existing trust.