New Zealand’s Trust Act: what changes?

The new Trusts Act 2019 (the Act) has modernised the existing trust law framework in New Zealand, providing better guidance to trustees in the exercise of their profession through the codification of a series of mandatory duties, most of which will take effect from 30 January 2021.

Specifically, the codification of trustee’s duties falls into two categories:

1. Mandatory duties that can’t be modified or excluded by the terms of the trust deed, including:

• Knowledge of the terms of the trust;
• Acting in accordance with the terms of the trust;
• Acting honestly and in good faith;
• Acting for the benefit of the beneficiaries;
• Exercising trustee’s powers for a proper purpose.

2. Default duties, which the trustee will have to comply with unless they are modified or excluded by the trust deed. Those include:

• Exercising reasonable care and skill in the trust administration;
• Investing prudently;
• Not exercising their power for their own benefit;
• Considering how their powers are exercised;
• Avoiding conflicts of interest;
• Acting impartially between beneficiaries;
• Not profiting from the role of trustee;
• Acting unanimously with other trustees.

Before 2021, trustees will need to revise their trust deeds in order to assess whether they include some violation of the rules regarding mandatory duties, and, if that were the case, promptly and adequately modifying the deeds in order to make them compliant.  

The Act intervenes also on substance requirements such as the new mandatory retention of all ‘core documents’ for the duration of the Trust (including core documents of previous trustees in cases of retirement of those and appointment of a new one).

Finally, the Act introduces a disclosure obligation in order to ensure that beneficiaries have appropriate basic information such as:

• the fact that a person is a beneficiary of the trust;
• name and contacts of the trustees;
• appointment, removal and retirement of a trustee;
• the right of the beneficiary to request a copy of the terms of the trust or trust information.

As a result, trustees will need to review the terms of their trusts to assess who the beneficiaries are and whether the terms of the trust can and should be amended to adjust the class of beneficiaries.

SOURCE: www.legislation.govt.nz