Trusts Act 2019 brings in sweeping changes
The Trusts Act, which comes into force in January 2021, represents the biggest shakeup of the law in over 60 years.
With an estimated 500,000 family trusts in operation, New Zealand has one of the highest per-capita rates worldwide. And so changes to the legislation is big news.
Here’s an overview of the new Trusts Act and the main changes.
For the first time, the new law sets out how trustees should perform their obligations. These duties are divided up into mandatory and default duties.
Mandatory duties include:
- Trustees must know the terms of the trust.
- They should only act in accordance with those terms.
- Trustees must be honest and act in good faith for the trust’s beneficiaries.
There are also several optional obligations known as default duties which include:
- A general duty of care.
- The requirement to invest prudently.
- A duty to act impartially and not to use trustees’ powers for their own benefit.
Beneficiary disclosure obligations
The most significant change in the law is the requirement for trustees to make available 'basic trust information'.
Basic information includes names and contact details of trustees along with any changes including retirements or new appointees. The Act also sets out the information trustees need to keep and for how long.
Trustees do have some discretion over what to disclose. However, they can only refuse to do so after considering the 13 factors listed in the Act. These include confidentiality obligations and the effect releasing information might have on family relationships.
Implications for existing trusts
The law applies to all trusts already in existence. So, if you are a trustee, then you need to ensure your trust is administered in line with the new requirements.
Now is also an excellent opportunity to review whether the family trust is still relevant. Trusts are most often used in estate planning, creditor protection, or to keep specific assets or property such as a farm in the family for future generations.
However, the new compliance requirements will increase time and administration costs. And so, the trust may no longer be cost-effective or the best option.
The new law will introduce significant changes. There are lots of issues to think about, so before making any decisions, make sure you get specialist legal advice.