TRUST ACT 2019 – NEARLY HERE!
Posted by Joseph Jang on December 8 2020 in News
The new Act comes into full force on 30 January 2021, its timely to remind you of its application and the importance of understanding the provisions of that Act and how it may affect your trust and its administration. You can read a copy of the Act online by clicking here.
One of the main reasons the new Act was put in place is to make trust law more accessible. This means that the affairs of your trust will be open to more scrutiny by the beneficiaries as well as fellow trustees. And consequently, it is now easier for beneficiaries to hold trustees accountable if the trust’s affairs are not properly managed.
One of the most significant changes brought about by the new Act, is that it introduces a new presumption that trustees will give all beneficiaries so-called ‘basic trust information’.
The ‘basic trust information’ that will have to be provided is:
- the fact that a person is a beneficiary of the trust
- the name and contact details of the trustee(s)
- the details of, changes of trustees (appointment, removal, and retirement) as and when those changes occur
- the right the beneficiary has to request a copy of the terms of the trust or other trust information.
For a beneficiary younger than 18 years, it is sufficient that disclosure is made to that beneficiary’s parent or guardian.
Ideally, necessary disclosure of the basic trust information to beneficiaries should be completed by the end of January 2021. The trustees must thereafter regularly review whether the basic information should be made available to beneficiaries. The new Act sets out factors which the trustees can take into account in deciding whether to give the information or not. Trustees must keep written records of when information was made available, what information was made available and to which beneficiary. Should trustees decide not to make information available, they must keep written records as to the reasons why they decided not to make the information available.
The new Act also introduces mandatory and default duties for trustees.
The mandatory duties that must be performed by the trustees and cannot be excluded or even modified by the trust deed are as follows:
- to know the terms of the Trust i.e. read and understand the Trust Deed
- to act in accordance with the terms of the Trust
- to act honestly and in good faith
- to act for benefit of beneficiaries or to further permitted purpose of trust
- to exercise powers for proper purpose.
The default duties, which apply unless modified or excluded by the trust deed are the duty:
- of general care
- to invest prudently
- not to exercise power for own benefit
- to actively and regularly consider exercising the trustees’ powers
- not to bind or commit Trustees to future exercise of discretion
- to avoid conflict of interest
- of impartiality
- not to profit
- to act for no reward
- to act unanimously.
Unless default duties are varied or excluded by the trust deed, they must be performed by the trustees. Although some of these duties may already be varied or excluded by the existing terms of your trust deed, it is important that you review the trust deed carefully to ensure that any desirable modifications and exclusions are carried forward and enforceable under the new Act. If they are not, you may need to vary your trust deed.
So, what to do now?
It is a good idea for the trustees to think about and decide whether the trust is still serving its original purpose, whether the trust needs to be varied or even wound up. If you decide to keep the trust, ensure that, as trustees, you understand what is required from you under the new Act and ensure that you regularly review the trust and record the administration thereof.
If you have any questions regarding the Act and your trust, please contact us. Our team at Shieff Angland is happy to provide you with advice on the Act and how it may affect your trust. We can also assist you with the ongoing administration of your trust should you require. If you want to discuss these implications on your directorship, or have any questions, please contact us.
John Kearns | Partner | John.Kearns@shieffangland.co.nz
Kellie Bright | Special Counsel | Kellie.Bright@shieffangland.co.nz
Joseph Jang | Solicitor | Joseph.Jang@shieffangland.co.nz
This paper gives a general overview of the topics covered and is not intended to be relied upon as legal advice.