The Trusts Act 2019 (the Act) has recently been passed into law and comes into force on 30 January 2021. The Act modernises trust law and clarifies the duties of trustees. Some of the key changes are outlined below:
Provision of Information to Beneficiaries
There is a presumption under the Act that trustees must make the following information available to every beneficiary:
a. The fact that they are a beneficiary of the trust
b. The name and contact details of the trustees
c. Details of each appointment and removal of trustees as it occurs
d. The beneficiary’s right to request a copy of the trust deed and trust information
There are grounds under the Act for withholding this information from beneficiaries, but they are limited. At this stage, it appears this information must be made available to most beneficiaries unless there are good grounds for withholding it.
If a beneficiary is under the age of 18, the information will need to be made available to their parent or guardian.
If you have concerns about being required to provide information (which may include financial information) to the beneficiaries of your trust, please contact us.
For some clients, it may be appropriate to consider removing certain people as beneficiaries of their trust if the trust deed permits. This may be the case for clients with older trust deeds, which often named a wide range of people, such as extended family members, as beneficiaries.
For other clients, it may be a matter of carefully managing the process of providing information to beneficiaries to avoid an expectation that they will benefit from the trust in the immediate future.
If you require advice about the disclosure of information to beneficiaries as it relates to your trust specifically, please contact us.
The Act makes it a requirement for at least one trustee to hold a full set of all trust documents. This includes up-to-date records of the trust’s assets and liabilities and a record of the trustees’ decisions (for example Minutes of all trust meetings).
In addition, every trustee is required to hold a copy of the trust deed and any document varying the trust deed.
We can assist with ensuring that you are ready to meet your obligations as trustees to hold a full set of trust documents. Please contact us if you wish to discuss this.
General duties of trustees
The Act codifies the duties that have evolved over the years through the courts. The basic duties contained in the Act are not new law, they are simply not well known or understood.
When the new Act comes into force, it can be expected that more beneficiaries will look to take steps to ensure that trustees are carrying out their duties under the Act. That being the case, trustees will need to be mindful of their mandatory and default duties under the Act.
Mandatory duties under the Act that cannot be excluded or modified by the trust deed are the duties to:
• Know the terms of the trust and act in accordance with the terms
• Act honestly and in good faith
• Act for the benefit of the beneficiaries
• Exercise trustee powers for proper purposes
There are also default trustee duties that apply unless expressly excluded by the trust deed. These include the duties:
• To exercise reasonable care and skill in administering the trust
• To invest the trust assets prudently
• To actively and regularly consider how the trustee’s powers are being exercised
• To avoid acting with a conflict of interest
• To act impartially toward all beneficiaries (this does not require trustees to treat all beneficiaries equally)
• Not to act for the trustee’s own benefit
• Not to profit from their trusteeship
• To act unanimously with the other trustees
Many existing trust deeds already limit the above default duties to a large extent. For example, most trust deeds prepared by this firm override the duty to treat beneficiaries impartially by specifically confirming that the trustees have a duty to prioritise the interests of the people who originally transferred the assets to the trust.
If you would like us to review your trust deed to confirm that default trustee duties are excluded or modified as appropriate for your situation, please contact us.
There have been changes to how trustees can protect themselves from liability for claims that might be made against them in their capacity as trustees.
If you are an independent trustee of a trust (i.e. a trustee who is not a beneficiary of the trust), now may be an appropriate time for you to take legal advice about the risk of personal liability you may face in acting as trustee. If you do decide to take legal advice, it would be usual for this to be paid for by the trust that you act for.
Delegation of duties of trustees
Trustees now have increased powers to delegate their duties as trustee for a limited time. The delegation enables trustees to appoint someone to act in their place in certain circumstances, including if they are out of New Zealand or temporarily physically or mentally incapacitated.
If you have questions or concerns about who would act in your place if you were unable to carry out your role as trustee for any reason, please contact us.
Please come and talk to us if you have any questions about the Trusts Act 2019 and what these changes mean for your trust.
For trusts where we act as independent trustee (either through one of our trustee companies or where a partner of the firm is appointed as trustee personally), we will be putting new requirements in place to ensure that we are meeting our obligations under the Act. These will include requirements for:
• The Trustees to meet at least once a year in person or by phone to review the position of the trust
• A full set of trust documents to be held at our offices
• The disclosure of information to beneficiaries to be carried out as required in accordance with the Act