The much anticipated Trust Act 2019 (“the Act”) has now received royal assent as at 30 July 2019, and will come into force on 30 January 2021. Given it has been over 60 years since the last significant update to New Zealand’s trust legislation, this Act has been overdue for some time. Trustees and their legal advisors have a grace period until 2021 to ensure compliance with the new legislation. If you are a trustee, it is important to use this time effectively.
The Act was drafted to modernise and simplify the law, by combining legislation and a significant body of case law, as well as recognising how New Zealanders are using trusts in today’s social climate. The Act aims to provide clear, simple and accessible law – it clarifies trustee duties and ensures greater transparency for beneficiaries.
One of the key aspects of being a trustee is understanding the duties that you are required to perform. The Act includes the following mandatory trustee duties that cannot be excluded by the terms of a trust:-
- To know the terms of the trust
- To act in accordance with the terms of the trust
- To act honestly and in good faith
- To act for the benefit of beneficiaries
- To exercise powers for a proper purpose
The Act also specifies default duties that can be excluded or modified by the express or implied terms of a trust deed.
Another crucial aspect of the Act is that Trustees are personally required to keep copies of all core trust documentation for the duration of their trusteeship. For many trustees it is likely they have historically relied on their solicitors to hold all of those documents on their behalf – but they will now need to hold at least the trust deed and any variations of the trust deed themselves.
The Act states a presumption that trustees must provide basic information to beneficiaries (such as the fact that a person is a beneficiary, and the name and contact information of the trustees). In other words trustees are actively required to inform beneficiaries of the fact that they are beneficiaries – for many trustees this will be something they have not previously done. There is also a presumption that trustees must give beneficiaries trust information upon request. The rationale behind the presumptions is that it is only when beneficiaries have sufficient information that they can ensure trustees are complying with their duties. However, trustees must first consider whether the presumptions apply given the specific circumstances of the trust. In all likelihood, trustees will need to discuss this issue with their legal advisors before contacting any beneficiaries or replying to requests for information.
Finally, another important aspect of the Act is that it provides clear rules surrounding the appointment, retirement and the removal of trustees. In particular, there are now further options to remove and appoint trustees, without the need to apply for a Court Order. Notably, a trustee can be removed on the basis that he or she has lost capacity without involving the Courts.
If you are a trustee or you have a trust, we recommend you begin to familiarise yourself with these requirements and obligations. If you wish to discuss trusts and this new legislation, we would be happy to assist. Please do not hesitate to get in touch.
