Trusts / Asset Planning
New Zealand law on trusts and their operation is changing. These law changes will take effect from 30 January 2021, when the Trusts Act 2019 comes into force. The new Act will repeal the Trustee Act 1956, under which most existing trusts have been settled.
The changes will apply to both existing and future trusts, and will affect those in the roles of settlors, trustees and beneficiaries. The changes are intended to simplify trust law and make it more accessible.
The key areas of change are:
1. Understanding the purpose of the trust
If you are already a settlor or trustee, now is the time to remind yourself of the purpose of the trust, and consider whether it is still fulfilling this purpose. Families, friendships, and circumstances can change. An outdated trust deed, or a trust that is no longer well administered, can create complications or be out of step with your current objectives. We can discuss these issues with you and ensure that your trust fits with your current circumstances. Alternatively, we can assist you to take steps to wind up a trust that is no longer required or create a new trust that is better suited to your plans.
2. A list of trustee duties
The Trusts Act 2019 sets out core principles of trust law and brings together in one statute a range of existing mandatory and default duties for trustees. Trustee duties include:
- having knowledge of the trust deed, the extent of trustee powers, and the use of investment powers;
- acting in good faith:
- acting impartially; and
- avoiding conflicts of interest.
The removal of an incapacitated trustee is also subject to new requirements.
3. Provision of information to beneficiaries
Trustees also need to provide information to beneficiaries about the trust, the property or funds it holds, and the administration of the trust. This obligation does not extend to the provision of reasons for trustee decision-making but does highlight the increased focus on record-keeping that will be a part of the new framework. It may also mean that beneficiaries will be entitled to receive some information that trustees have traditionally kept private.
4. There is a limit on trustee indemnity and exclusion of liability clauses
As part of the increased focus on trustee duties, the ability to limit or exclude liability will also be narrowed. Liability cannot be excluded for trustee dishonesty, wilful misconduct or gross negligence.
5. Lifespan of a trust increased to 125 years
The maximum life-span is changing from 80 to 125 years from the date a trust was created. This will not increase automatically for trusts already in existence, but can be varied, depending on the terms of the current trust deed.
6. The default age of majority is changing from 20 years to 18 years
This means unless you specify a different age in the trust deed (or your will) a person will be taken to have reached adulthood on turning 18 years old, rather than the present 20 years old.
How can we help you?
If you do not already have a memorandum of wishes setting out guidance for the trustees of your trust, this is an opportunity to create such a document. Or you can ensure that an existing memorandum aligns with your current wishes.
We also recommend that when making a trust or reviewing an existing trust, you consider reviewing or making a will in tandem with your trust arrangements. This will ensure both documents are consistent.
Trustees need to be clear about the purpose of the trust, the terms of the trust deed, and the nature and value of trust owned assets and liabilities. They also need to be aware that record-keeping remains of central importance should a beneficiary ask for information, or if there is a future challenge to the validity of the trust or trustee decision-making.
We appreciate this is a time of changing circumstances and uncertainty for many. Please contact us to discuss any queries you have about your personal legal documents so we can assist you to ensure that these documents are appropriate for your situation and plans. We look forward to hearing from you if we can be of assistance.
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