The New Face of Trust Law in New Zealand
A key purpose of the Act is to make trust law clear and accessible to trustees and beneficiaries.
Some of the notable changes to existing trust law include:
- There is a presumption that trustees must advise every beneficiary of the “basic trust information” being:
- that they are a beneficiary of the trust;
- who the trustees are and their contact details;
- advice regarding any changes of trustee; and
- that as a beneficiary they have the right to receive a copy of the trust deed and further information about the trust.
- This is a positive obligation on trustees that applies even if the beneficiary has not requested any information about the trust.
- There is a second presumption that trustees must on request by a beneficiary disclose further trust information (such as financial statements, distribution documents and potentially the settlor’s wishes but not trustees’ reasons) within a reasonable period of time.
- Both of these presumptions can be rebutted by trustees in certain circumstances after considering various factors set out in the Act. While the factors largely reflect existing law, trustees will need to actively consider their disclosure obligations in an ongoing manner. It is likely that the increased awareness around disclosure of information to beneficiaries will result in an increase in requests for trust information.
Retaining Core Trust Documents
- Every trustee must keep a copy of the trust deed and any variations.
- At least one trustee must keep the other core trust documents including details of the trust assets and liabilities, financial statements, contracts entered into by the trust, records of trustee’s decisions and any settlor’s memorandum of wishes.
- Trustees are subject to various duties under the existing law, however the Act divides trustees’ duties into five mandatory duties and ten default duties.
- The mandatory duties cannot be changed or excluded by the trust deed, and impose a duty on all trustees to know the terms of the trust, act in accordance with those terms, act honestly and in good faith, for the benefit of beneficiaries and exercise trustees’ power for proper purposes.
- The default duties can be changed or excluded by the trust deed. They cover such duties as the duty to invest prudently, not to exercise the power for their own benefit and a requirement to act unanimously.
- The duration of a trust has been extended from what is effectively currently 80 years to a maximum of 125 years. However, this is subject to the terms of the trust deed. Therefore if an existing trust deed states the duration of the trust is 80 years from the date of the deed, then this will not be automatically changed by the Act. There may be some instances where it is appropriate and possible to extend the duration of existing trusts to 125 years.
- A Trust Deed may allow a trust dispute to be determined by alternative dispute resolution (ADR).
Age of Majority
- The age majority for the purpose of a trust under the Act is 18.
- The changes to trust law are likely to increase awareness and transparency for beneficiaries but also increase administration requirements and responsibility for trustees. We recommend that existing trusts are reviewed and in certain circumstances it may be appropriate that existing trusts are varied, resettled onto a new trust or wound up.
We will be contacting our trust clients individually to provide further advice. However, if you have any questions about the new Act, please contact us.
The above information is of a general nature only. The information contained in this document does in no way constitute legal advice and all readers should contact a law firm for advice relating to your specific circumstances.
About Victoria Pfahlert
Victoria is a member of our Trusts and Estates Team. She assists clients with complex trust and estate matters, including trust restructures and estate administration.