The Trusts Act 2019 is now a reality and will come into force on 31 January 2021. The Trusts Act 2019 will replace the Trustee Act 1956, applying to all existing and future trusts in New Zealand.
The Trusts Act 2019 is intended to make trust law simpler, more transparent and more accessible to the general public.
You are likely wondering – “How does this affect me?” Good question. If you are a trustee or a beneficiary of a Trust, this will impact you, because:
- As a trustee, there will be greater compliance requirements for the trust and all trustees will be required to contact beneficiaries and supply them with basic trust information.
- As a beneficiary, the trustees of any trust you are a beneficiary of will be required to notify you of that fact and provide you with basic trust information.
Below is a summary of the key provisions in the Trusts Act 2019:
- Extends the life of a trust to 125 years, currently limited to 80 years.
- Sets out compulsory duties for trustees, which cannot be changed. These are:
– A trustee must know the terms of the trust.
– A trustee must act in accordance with the terms of the trust.
– A trustee must act honestly and in good faith.
– A trustee must deal with trust property for the benefit of the beneficiaries.
– A trustee must exercise the trustee’s powers for a proper purpose.
- Sets out optional duties for trustees, which can be changed in the trust deed. These are:
– A trustee must exercise the care and skill in administering a trust that is reasonable in the circumstances.
– When investing, a trustee must exercise the care and skill that a prudent person of business would exercise in managing the affairs of others.
– A trustee must not exercise a power directly or indirectly for the trustee’s own benefit.
– A trustee must consider actively and regularly whether the trustee should be exercising one or more of the trustee’s powers.
– A trustee must not bind or commit trustees to a future exercise or non-exercise of a discretion.
– A trustee must avoid a conflict between the interests of the trustee and the interests of the beneficiaries.
– A trustee must act impartially in relation to the beneficiaries and must not be unfairly partial to one beneficiary or group of beneficiaries.
– A trustee must not make a profit from the trusteeship of a trust.
– A trustee must not take any reward for acting as a trustee, but this does not affect the right of a trustee to be reimbursed for the trustee’s legitimate expenses and disbursements in acting as a trustee.
– If there is more than one trustee, the trustees must act unanimously.
- If any of the optional duties for trustees are changed in the trust deed, the advisor must point this out to the settlors.
- There is a limit on trustee exemption and indemnity clauses. The terms of a trust deed must not limit or exclude a trustee’s liability for any breach of trust arising from the trustee’s dishonesty, willful misconduct, or gross negligence.
- Trustees must keep all trust information and documents stored for the life of the trust.
- Trustees must make available to every beneficiary or representative of a beneficiary the basic information relating to the trust, which is:
– the fact that a person is a beneficiary of the trust; and
– the name and contact details of the trustees; and
– the occurrence of, and details of, each appointment, removal, and retirement of a trustee as it occurs; and
– the right of the beneficiary to request a copy of the terms of the trust or trust information.
- There is a presumption that a trustee must give a beneficiary or the representative of a beneficiary the trust information that person has requested within a reasonable time, unless certain provisions apply.
- New requirements for the compulsory removal of a trustee. The person who has the power to appoint and remove trustees must use that power to remove a trustee if that trustee loses capacity and there is no other person able to affect the removal.
If you have any questions or concerns about how the Trusts Act 2019 might affect you, please contact our Trust Law Team.