You may have heard the new Trust Act 2019 (“the new Act”) has recently been passed and comes into force on 30 January 2021. The Act applies to existing and new Trusts. If you have a Trust or are a Trustee, it’s really important you know about and understand these recent changes and how they affect you.
The recent changes make trust law more accessible to the stakeholders: Settlors, Trustees and Beneficiaries. The underlying principles of the new Act are to ensure Trusts are administered correctly and in a way that avoids unnecessary cost and complexity.
Trustees’ duties were not set out in the Trustee Act 1956. The new Act clearly sets out Trustee duties and categorises them into mandatory duties (the minimum standard you can expect from your Trustee) and default duties.
The mandatory duties cannot be contracted out of and will always apply to Trustees, no matter what the Trust Deed says. The new Act has expanded Trustees duties, by adding the duty to know the terms of the Trust Deed.
The default duties set out in the new Act can be excluded or modified by the Trust Deed, however if they are not excluded or modified, they will apply to the Trustees. In essence, the new Act raises the standard of care to which trustees will be held accountable for in the future. Gone are the days of a rubber-stamping trustee. Trustees intending to offer their services in the future should be taking measures to ensure they are prepared to operate under the higher standard of care required by the new Act. If not, they should be exiting their trusteeships before the new Act comes into force.
Disclosure to Beneficiaries
One of the more controversial aspects of the Act is disclosure obligations to beneficiaries. Trustees must make available to every Beneficiary the following basic Trust information:
- That the person is a Beneficiary;
- The name and the contact details of the Trustees;
- Details of appointments and removal of Trustees as they happen (whether requested by the Beneficiary or not); and
- Beneficiaries shall have the right to request a copy of the Trust Deed or other Trust information.
In the past, Trusts in New Zealand have been afforded great privacy. Under the new Act Trust privacy will be more exposed to challenge by Beneficiaries. The purpose of this is to allow Beneficiaries the opportunity to ensure the Trust is being managed properly and in accordance with the terms of the Trust Deed. There are still some circumstances where the Trustees may be able to withhold Trust information or refuse to furnish Beneficiaries with Trust information but only in exceptional circumstances. It is advisable that Trustees seek expert legal advice before deciding to withhold information or refusing to furnish Beneficiaries with Trust information.
There are other changes in the new Act which will make it easier to replace an incapacitated Trustee, increase the term of a Trust from 80 to 125 years, and lower the age of majority to 18 years.
Trusts are still an important part of estate planning and provide an excellent option for managing assets under the right circumstances. However, you will see the new Act has had a complete overhaul and it might be time for you to consider whether you wish to continue to be a Trustee or to have a Trust.
You do not need to make a decision alone and we can work with you to help you decide if a Trust is still the right structure for you.
If you have any queries, or would like more information on the impact the expected changes to this area of law may have on your affairs, please contact Wendy Hampton at [email protected].