Trust Law – What is New?
The Trusts Act 2019 (“Act”) is the result of the extensive review of trusts in New Zealand over a decade ago by the Law Commission. The intention of the Act is to modernise trust law in New Zealand making it more accessible for everyone.
The Act will apply to new and existing trusts, and it takes effect on 30 January 2021. Anyone involved with trusts will need to be aware of the main changes coming with the new Act which are set out below.
Duties of trustees
The Act divides trustee duties into mandatory and default duties. The mandatory duties for a trustee to be aware of include the duty to hold and retain core documents for the trust and the duty to consider regularly what information should be provided to beneficiaries.
Trustees are now to provide basic information about the trust to beneficiaries who are to be notified of the fact that they are a beneficiary, and that they are entitled to certain information about the trust.
The default duties for a trustee are optional duties, which can be modified or excluded only by the terms of the trust. Examples of default duties include the general duty of a trustee to invest prudently, to act impartially and to act for no reward.
For the most part, the duties contained in the Act already exist under common law. However, now that these duties have been codified into law, it raises the bar for trustees. And, such codification will make it easier for beneficiaries to hold trustees to account.
Other changes to the law under the Act include:
- the maximum duration of a trust is extended from 80 years to 125 years
- the age of majority for trust purposes is now 18 years rather than 20 years of age
- the use of alternative dispute resolution processes to resolve disputes
- the ability for trustees to remove an incapacitated trustee; and
- the restriction of the use of trustee exemption and indemnity clauses.
What do I need to do now?
The Act provides for a transition period until 30 January 2021 giving a lead-in time for those involved with trusts to become familiar with the new governance requirements and to review existing trust documentation.
Trustees should take action during this transition period to ensure they will be able to comply with the Act in 2021.
In particular, trustees should:
- ensure they are familiar with the terms of the trust
- consider if amendments to the trust deed are required
- check that core trust records are held
- consider what information is to be provided to beneficiaries
- review trustee practices for meetings and recording of minutes; and
- consider if the purposes for the trust are still relevant.
Should you wish to discuss the upcoming changes, please contact Gaynor McLean or Wayne Pearson