The new Trusts Act 2019 codifies, clarifies and modernises the existing law of trusts to make it more accessible and to facilitate better understanding and awareness.
There are also some significant changes introduced by the new Trusts Act that all trustees, settlors and others involved with trusts need to be aware of. Trustees should take the opportunity to review their trust deeds and their administration practices to ensure they comply with the provisions of the Trusts Act 2019 before it comes into force on 30 January 2021.
Some of these changes include:
Two categories of Trustee Duties –
- Mandatory Duties which cannot be modified or excluded by the terms of the trust deed; and
- Default Duties which may be modified or excluded by the terms of the trust deed.
Requirements for keeping core trust documents – every trustee must keep core trust documents such as the trust deed, variations of trust terms, trustee minutes and resolutions, record of assets and liabilities, contracts, accounting records, financial statements etc.
- If there is more than 1 trustee, then, every trustee must hold either the original or a copy of the trust deed and any variation of the terms of the trust AND must be satisfied that at least 1 of the trustees holds the other core trust documents AND that those documents or copies of them will be made available to the other trustee or trustees on request.
Disclosure of Information to Beneficiaries – there are two categories of information:
- Basic Trust Information – must be given to every beneficiary
- Trust Information – to be given upon request from a beneficiary
Trustees must give every beneficiary basic trust information which includes the fact that a person is a beneficiary of the trust and that they have the right to request a copy of the terms of the trust or trust information.
Trust Information means any information regarding the terms of the trust, the administration of the trust, or the trust property and information that it is reasonably necessary for the beneficiary to have to enable the trust to be enforced; but does not include reasons for trustees’ decisions.
However, before giving any trust information to a beneficiary, the trustee must consider a range of factors and if the trustee reasonably considers (after taking into account those factors) that the information should not be given to the beneficiary then the trustee may decide to withhold the basic trust information or refuse the request for trust information.
The trustee must regularly reconsider any decision to withhold basic trust information from a beneficiary.
Restriction on limiting or excluding a trustee’s liability or indemnifying a trustee in the case of gross negligence – most trust deeds contain limitation of liability and indemnification clauses that may contravene these restrictions. Such clauses should be reviewed and modified as necessary.
The maximum duration of a trust is increased from 80 to 125 years – consideration should be given as to whether the trust deed should be varied to take advantage of the longer trust period.
The age of majority is reduced from 20 to 18 years – the trust deed may be modified to raise the age if majority (but not reduce it). Consideration should be given as to whether the trust deed should be varied to specify an age of majority greater than 18 years.
Importantly, the new Trusts Act gives greater transparency to beneficiaries and promotes more rigorous administration by trustees. This should prompt all settlors and trustees to undertake a thorough review of their trust and consider whether it is still fit for purpose.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Fahra Manning
fmanning@farry.co.nz
09 353 6678
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.