The Trusts Act 2019
The Trusts Act 2019 (the Act) comes into effect on the 30th of January 2021. It replaces the Trustee Act 1956.
The purpose of the new Act is to restate and reform Trust Law in New Zealand, by: -
(a) Setting out the core principles of the law relating to express Trusts; and
(b) Providing for default administrative rules for express Trusts; and
(c) Providing for mechanisms to resolve Trust related disputes; and
(d) Making the law of Trusts more accessible.
The Act includes a description of the key features of a Trust to help people understand their rights and obligations, that includes: -
Ø Defining a trust as:
“A structure where a trustee holds and deals with trust property for the benefit of people who are described as beneficiaries for a permitted purpose and the trustees are required to act in the best interests of the beneficiaries.”
Ø Stating that a sole trustee cannot be a sole beneficiary of a trust.
Ø Increasing the maximum life of a trust from 80 years to 125 years.
Ø Setting the minimum age you have to be in order to hold a formal trust role as 18 years old.
The Act also contains mandatory and default Trustee duties, which are designed to help Trustees understand their obligations. Mandatory Trustee duties cannot be modified or excluded by the terms of the Trust Deed and include: -
Ø The duty to know the terms of the trust.
Ø The duty to act in accordance with the terms of a trust.
Ø The duty to act honestly and in good faith.
Ø The duty to act for the benefit of beneficiaries or to further the permitted purpose of a trust.
Ø The duty to exercise powers for a proper purpose.
Default Duties – There are default Trustee duties, which can be modified or excluded by the terms of the Trust Deed, these duties include: -
Ø The general duty of care.
Ø The duty to invest prudently.
Ø The duty not to exercise a power for a trustee’s own benefit.
Ø The duty to consider the exercise of a power.
Ø The duty not to bind or commit trustees to future exercise of discretion.
Ø The duty to avoid a conflict of interest.
Ø The duty of impartiality.
Ø The duty not to profit.
Ø The duty of a trustee to act for no reward.
Ø The duty to act unanimously.
The Act contains requirements for managing Trust information and disclosing it to Beneficiaries. The act sets out what information Trustees must keep and how long documents must be kept. Each Trustee must keep the core documents.
It is important that all people dealing with Trusts, whether they be Trustees or Beneficiaries, become familiar with the Trusts Act 2019.
The introduction of the Act is also a good time to review Trusts and to ensure that they are “fit for purpose”.
If you need advice about the effects this may have on your Trust in particular, please get in touch with us to discuss.
Jeff Walker, Director