Linwood Law can advise on the setting up of a family trust, and related issues to do with succession planning and asset protection.
We have set up and continue to administer many family trusts, including gifting, the sale of further assets to the trust, re-settlements and variation of trusts. We can also advise on residential care subsidies or loans.
Updates to the Trusts Act 2019
If you are involved with Trusts in any capacity, you may have heard about the Law Commission’s review of the law regarding Trusts. The concepts and terminology used in the old Trust laws were quite dated difficult for the average person to navigate. The review aimed to give Trustees and Beneficiaries a better idea of their rights and obligations under Trust law. After considering the review New Zealand Parliament enacted the Trusts Act 2019. The law takes effect on 31 January 2021, giving ample time for Trustees and Beneficiaries to get a grasp on the changes and the impact these changes will have on their role. We have provided a brief summary of the new provisions below:
Extension of life time of Trust
Under the previous law, the maximum length of a Trust’s life was limited to 80 years. This limit has now been extended to 125 years
In the Act, Trustee duties fall under one of two categories:
- Mandatory duties: these duties apply unconditionally and Trustees are obliged to abide by them
- Default duties: these duties apply unless they are modified or excluded by the terms of the Trust
There are five mandatory Trustee duties and ten default Trustee duties.
Mandatory Trustee Duties:
- The duty to know the terms of the Trust
- The duty to act in accordance with said terms
- The duty to act honestly and in good faith
- The duty to act for the benefit of Beneficiaries or to further the permitted purpose
- The duty to exercise powers for a proper purpose
NB: If you are a Trustee, it is extremely important to familiarise yourself with these duties and what they mean, as you are under legal obligation to follow them
Default Trustee Duties:
- General duty of care
- The duty to invest prudently
- The duty not to exercise power for the Trustee’s own benefit
- The duty to consider exercise of power
- Duty not to bind or commit Trustees to further exercise of discretion
- Duty to avoid conflict of interest
- Duty to act impartially
- Duty not to profit
- Duty to act for no reward
- Duty to act unanimously
NB: While these duties may be modified or excluded, the circumstances under which such modifications are exclusions can occur are limited by the Act.
Rights of Beneficiaries
- Generally speaking, there is a presumption that Trustees will disclose Trust information to Beneficiaries of the Trust.
- They must provide this information pro-actively, i.e. without an explicit request from the Beneficiaries, at regular intervals.
- The Trust may refuse to provide Beneficiaries information for a number of reasons provided in the Act e.g. the age of the Beneficiary or the context of the request. However, any refusal must be weighed carefully against the right of the Beneficiary to access the information
Because of the presumption mentioned above, Trustees are required to engage in stringent record-keeping. The Act stipulates the nature of the information that Trustees must keep, as well as the length of time for which it must be kept.
Where to from here?
You may have some further questions about your role as a Trustee. If you want to seek legal advice about what these changes mean for you specifically, call 03 3892121 or contact one of our Trust team members below.
NB: Please note that the above is a general overview of the topic and is not advice. Every situation is different and would require advice tailored to the individual.