Trusts are a popular mechanism in New Zealand for protecting and managing assets, and so the introduction into Parliament of the Trusts Bill will be of interest to many. In particular, if you are a settlor – someone setting up a trust and gifting property to it – you will want to be aware of the new disclosure obligations the Bill requires.
The Trustee Act 1956 has long been critised for being outdated, complex, hard to navigate and convoluted for everyday use. Quite simply put, the Act has not kept up with the way trusts operate and are administered today. The Trusts Bill 2017 will, when enacted, make trust law more accessible, clarify and simplify core trust principles and Trustees’ obligations, and preserve the flexibility of the common law to allow trust law to continue to evolve through the courts.
More specifically, the Trust Bill aims to improve the current law by:
As the Bill is still yet to have its first reading and undergo select committee review, it will be some time until the changes are enacted.
However settlors should be aware of the disclosure requirements that will arise once the Bill becomes law. These relate to the new duty the Bill imposes on trustees to pro-actively disclose certain core trust documents to beneficiaries. Trustees will be required to make reasonable efforts to actively notify all beneficiaries and every parent, guardian or property manager of a minor or incapable beneficiary of the following information:
The warning here with proactive disclosure relates to whom you as a settlor note in your trust deed as discretionary and final beneficiaries. From a practical perspective this is likely to result in the disclosure of trust information that you may not wish to reveal, the request for additional information than that required to be disclosed, the increased review of trustee discretions and ultimately, increased litigation.
It would therefore be timely to review your trust deed to see how the Trusts Bill may impact on your trust deed and the administration of your trust.
If you wish to know more on the Trusts Bill, we would be happy to discuss with you.