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Trusts Act 2019: Key law changes

Trusts Act 2019: Key law changes

Published in February 2020

The enactment of the Trusts Act 2019 marks the first time in over 65 years that any modifications to New Zealand’s trust legislation have been made. Taking full effect in 2021, it will play a hand in the way in which your trust currently is managed and administered.

The purpose of the Trusts Act 2019 is to modernise Trust Law and provide trustees and beneficiaries with a more accessible, clearer understanding of their core legal rights and obligations. Some key changes you need to be aware of include:

Enhanced Trustee Duties:

In your capacity as Trustee, your legal obligations and duties under the Trusts Act 2019 are enforceable by the Courts. Amongst other duties, the new Act has codified your core obligations as mandatory duties and default duties.

 

Mandatory duties (legally binding)

  • Duty to know the terms of the trust
  • Duty to act in accordance with the terms of the trust
  • Duty to act honestly and in good faith
  • Duty to act for the benefit of the beneficiaries or to further the permitted purpose of the trust
  • Duty to exercise powers as trustee for proper purpose

 

Default duties (can be altered under your trust deed)

  • Duty of care
  • Duty to invest prudently
  • Duty not to exercise power for your own benefit
  • Duty to consider exercising of power
  • Duty not to bind or commit trustees to a future exercise (or non-exercise) of discretion
  • Duty to avoid a conflict of interest
  • Duty of impartiality
  • Duty not to profit
  • Duty to act for no reward
  • Duty to act unanimously
  • Duty to alert the settlor to a modification or exclusion of any default duty

 

Disclosure obligations to Beneficiaries

Another major feature under the new Trusts Act 2019 is a positive requirement for trustees to advise beneficiaries of their status as beneficiary and their legal right to request further information about the trust. The Act provides a framework for the assessment of what information trustees are obligated to provide upon such request.

Document Keeping

The new Act also requires that each trustee is to keep core documents of the trust for the duration of their trusteeship, so far is as reasonable. The exception to this obligation is if the trustee is satisfied that at least one of the trustees holds the documents, and that copies will be made available on request. When a trustee’s trusteeship ends, they must pass on the core documents of the trust to at least one replacement or continuing trustee.

What now?

The requirements set out under the Trusts Act 2019 will apply to new trusts and existing trusts. While these changes do not take effect until January 2021, there is a lot that you will need to consider as trustee before the Act takes effect. A meeting to discuss the state of your trust sooner rather than later is therefore the best step towards ensuring compliance.

Please note that this document is by way of information only. It is not exhaustive and is not intended to be relied upon as legal advice.



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