New Trusts Act 2019 – Frequently Asked Questions by our clients
The Trusts Act 2019 (Act) comes into force on 30 January 2021 and makes a number of changes to trust law in New Zealand. It will have an impact on existing and new trusts.
Some of the key changes include; the introduction of five mandatory trustee duties that cannot be contracted out of; 10 default trustee duties that can be modified by the trust deed; obligations on trustees around the storage of trust documents; a presumption of disclosure of basic trust information to beneficiaries; the life of a trust has been extended from 80 years to 125 years and the age at which someone can inherit, receive distributions or hold a position in a trust has been lowered from 20 to 18. We have had a number of clients contact us with questions on the implications of the new Act and what it will mean for them.
Q: I set up my trust before 30 January 2021, does the Act still apply to me?
Yes. The Act will apply to all trusts in New Zealand. The extent the Act will aﬀect your trust will depend on the terms of the trust deed
Q: Should I get rid of my trust?
Not without first obtaining professional advice and considering the purpose of the trust. Many of the provisions of the Act are simply bringing together existing rules and duties into one piece of legislation. The introduction of the Act itself, is not necessarily a reason to get rid of your trust.
Q: Is it worth paying for a review of my trust now?
Yes, it is worthwhile consulting your lawyer for a review of your trust. The terms of each trust deed are diﬀerent and what applies to one trust may not apply to another. A review will establish if your trust is fit for purpose, if it is still necessary, if any amendments are required and will provide you with information on how to continue managing your trust if you wish to keep it.
Q: Does the new Act change my role as a trustee?
The extent of any changes on your role as trustee will vary depending on the terms of your existing trust deed. The Act imposes five mandatory duties that cannot be excluded or modified by a trust deed. It also includes ten default duties which automatically apply unless expressly excluded by the trust deed. We recommend you undertake a review of your trust deed to determine the extent the default duties will apply.
The obligations around providing information to beneficiaries and the storage of information are new and it is important you understand and comply with these obligations.
Q: Can I get out of any of these obligations as trustee under an existing trust?
This will depend on the terms of your trust deed. You cannot contract out of the mandatory duties, however you may find that the existing trust deed already amends a number of the default duties. If there is a power of variation included in the trust deed you may be able to vary the terms of the trust deed to amend the default duties.
Q: I am a beneficiary of a trust, how is the Act relevant to me?
The Act favours beneficiaries in terms of access to trust information. It contains a presumption that beneficiaries must be given ‘basic trust information’, including notice that they are a beneficiary of the trust, the details of the trustees and that they can ask for other trust information. There is a further presumption that trust information is disclosed to beneficiaries if requested. This information may include details of the trust property and the terms of the trust. The purpose of these presumptions is to give beneficiaries suﬀicient information to enable the terms of the trust and the trustees’ duties to be enforced against the trustees.
Before the trustees disclose information to beneficiaries, there are a series of factors they must consider which are set out in the Act. If after considering these factors, the trustees reasonably consider the trust information should not be provided they can withhold this information. Trustees will need to be careful they comply with the Act’s obligation of disclosure.
Q: Can I remove beneficiaries from my trust?
The answer to this depends on the terms of the trust deed and circumstances of each case. There is no ‘one size fits all’ answer as diﬀerent trust deeds allow and prohibit certain actions in this regard. There may be options to exclude beneficiaries, however trustees need to be careful that they are exercising their powers lawfully. We are happy to review your trust deed and advise you on how best to proceed.
Q: I use a professional trustee, will there be a cost increase in running my trust?
We expect to see an increase in all professional trustee costs following the Act coming into force. The duties and obligations on trustees are more onerous and professional trustees will be looking to recover the cost involved in meeting these obligations.