The Trusts Act 2019 comes into force on 30 January 2021 and is the first major Trust reform in New Zealand in almost 70 years. The aim is to make the law more accessible and easier to understand. Most of the changes relate to Trustee obligations and strengthening the ability of beneficiaries to hold Trustees to account.
If you have a Family Trust, or are involved in a Trust in some way, you must make yourself familiar with the provisions of the Act and ensure your Trust is compliant.
The main provisions of the Act provide clarity about:
The Act provides for both mandatory and default duties. Mandatory duties can’t be modified or excluded by the Trust Deed; Default duties can be. Any modifications or exclusions must be documented in the Trust Deed.
Retention of information:
Trustees are required to retain core Trust documents, such as the Trust Deed and any variations, minutes, accounts, and any other documents necessary for the administration of the Trust.
Disclosure of information:
The Act makes the presumption that Trustees must make ‘basic Trust information’ available to all beneficiaries and consider making ‘other Trust information’ available to beneficiaries upon their request. The Act sets out certain factors which the Trustee must consider before providing information that has been requested beyond ‘basic Trust information’.
Exemption and indemnity clauses:
Trust Deeds must not limit a Trustee’s liability or provide an indemnity for dishonesty, wilful misconduct or gross negligence.
Appointment and removal of Trustees:
Statutory powers for the appointment and removal of Trustees have been modernised and broadened to minimise the need to apply to the court.
Lifetime of a Trust:
Trusts can now have a lifetime of up to 125 years, subject to the terms of the Trust. Previously, this was limited to 80 years, so your Trust Deed may need to be updated.
Definition of a minor:
The age of minority has been reduced from 20 to 18 years old.
An alternative disputes resolution process is set out in the Act to allow for mediation and arbitration.
This article is brief and generic in nature and is no substitute for professional advice for your specific circumstances. If you’re unsure about how these changes may impact a Trust you’re involved in, get in touch for advice.
If you're thinking about resettling or winding up your Trust, our best advice is to touch base with both your lawyer and your accountant before you make any changes. Don't underestimate the tax consequences of your decision.