Trusts Act 2019
Coming into force in January 2021
The new Trusts Act 2019 (the Act) will affect you if you are a trustee of a trust AND if you are a beneficiary of a trust. It will also affect all trusts currently in existence and those made in the future.
What does it mean for me?
You will be most affected if you are a trustee as trustees must now provide beneficiaries with basic trust information and comply with mandatory trustee duties. If you are a beneficiary of a trust you should be provided with basic trust information and you have the right to request more information about the trust that you are a beneficiary of.
Most Trust Deeds will need to be amended to comply with the new Act and, as a trustee, you need to ensure that you understand your new obligations. At Walden Legal we are able to offer you practical advice on your new obligations and review your trust requirements generally.
The main changes in the new Act
Trustees must now give every beneficiary of the trust, the following basic information:
The fact that a person is a beneficiary of the trust.
The name and contact details of the trustees.
The details of each appointment, removal, and retirement of a trustee as it occurs.
The right of the beneficiary to request a copy of the trust deed or further trust information.
Trustees must give beneficiaries any further trust information they request within a reasonable time unless one of the exemptions to disclosure apply.
Trustees must keep all trust information and documents stored for the life of the trust.
Trustees, particularly professional trustees, used to be able to limit their liability. While this is still possible to an extent, no trustee can limit or exclude their liability for any breach of trust arising from dishonesty, wilful misconduct, or gross negligence.
The new Act contains a list of trustee duties which are compulsory. These are as follows:
A trustee must:
Know the terms of the trust.
Act in accordance with the terms of the trust.
Act honestly and in good faith.
Deal with trust property for the benefit of the beneficiaries.
Exercise the trustee’s powers for a proper purpose.
The new Act also contains a list of optional trustee duties which you can opt to include in your trust deed or not. These duties include that the trustees exercise prudence and skill in their decision making, that they avoid conflicts between beneficiaries and trustees and that they act unanimously.
The new Act extends the life of a trust to 125 years (currently limited to 80 years).
What do I need to do now?
If you are trustee of an existing trust you will need to amend your trust deed to bring it up to speed with the new legislation before January 2021. You will need to ensure you understand your obligations under the new Act and what you need to do to remain compliant.
Ahead of amending your trust deed you should review the intention and purpose of your trust and ensure that it is still fit for purpose. Many of the reasons for establishing trusts in the past are far less relevant now and winding up or terminating your trust may be a lot simpler and more cost effective for you in the long run than continuing with your existing trust. I would encourage you to speak to us or your lawyer well ahead of January 2021 to work out what option is best for the trust.
If you are a beneficiary of a trust you are entitled to receive basic trust information. However, this right is not without restriction and trustees are entitled to withhold trust information if they have reasonable grounds for doing so (details of which are outlined in the Act). In addition, as a beneficiary you can be required to pay the trustee’s costs in providing you with the information you request.
If you would like to discuss any aspect of this further please feel free to get in touch with Libby Sinden at Walden Legal, libby@waldenlegal.co.nz.